ERC20 Protocol and Its Potential Challenger: The Rise of the Runes Protocol

The ERC20 protocol of Ethereum, as the dominant token standard in the cryptocurrency field, has profoundly impacted the development of the industry. It has not only driven the success of the Ethereum public chain but also laid the foundation for the booming development of decentralized finance (DeFi), while opening up new avenues for decentralized fundraising and entrepreneurship.

However, with the continuous evolution of the cryptocurrency ecosystem, emerging public chains are seeking to replicate the successful model of Ethereum and striving to establish their own token standards. To achieve this goal, new public chains need to have a sufficiently large market capitalization to establish a solid position, while also needing to innovate in their token protocol to gain recognition from users and the community.

Among numerous competitors, the Runes protocol has gained significant attention due to its unique advantages, and it is expected to become a strong contender challenging the status of ERC20. The Runes protocol is built on the Bitcoin network, which provides it with a solid foundation, considering that Bitcoin accounts for nearly 50% of the total market capitalization in the cryptocurrency space.

Runes protocol integrates the advantages of BRC20 and ERC20 in its technical design. It utilizes the op_return field of UTXO to record information about token deployment, minting, and transfer operations. This design enhances Runes in terms of flexibility and efficiency. Compared to BRC20, Runes allows for more flexible token distribution methods, supporting both fair launches and team reserves and financing. In terms of transaction efficiency, Runes does not require additional inscription transactions, reducing network burden and user costs.

Compared to ERC20, Runes relies on the more stable foundation of the Bitcoin network. Although ERC20 has established significant advantages in terms of ecosystem and application scenarios, Runes, as an emerging protocol, has greater growth potential and room for innovation. In particular, Runes is compatible with the fair launch mechanism of BRC20, a feature that is currently attracting much attention in the cryptocurrency cycle.

Although ERC20 has achieved a rich variety of commercial applications relying on the Turing completeness of Ethereum, Runes is also expected to achieve similar functionality through Bitcoin Layer 2 solutions. It is reported that some leading Bitcoin L2 projects have indicated support for the Runes protocol, providing broader application scenarios for its assets.

The Runes protocol also demonstrates its flexibility and innovation in technical details. It supports various token deployment and distribution methods, including full control by the project party, completely fair launches, and a hybrid model of both. This design provides project developers with more options, helping to meet the needs of different projects.

Overall, although the ERC20 protocol currently still dominates, the Runes protocol shows potential to become the next generation mainstream token issuance protocol due to its close integration with the Bitcoin network, flexible design, and adaptability to emerging trends. As the cryptocurrency ecosystem continues to evolve, the performance of the Runes protocol deserves ongoing attention.