Bitcoin Halving Brings Rune Online, Igniting a New Hotspot in the Bitcoin Ecosystem
On April 20, 2024, at 8:09 am, BTC successfully completed its fourth halving at block height 840,000, reducing the mining reward per block from 6.25 BTC to 3.125 BTC. Simultaneously, Bitcoin Rune (Runes) officially went online at block height 840,000, and in less than two days (April 21), Rune brought about a rapid increase in on-chain fees in the Bitcoin network, potentially creating another hotspot in the Bitcoin ecosystem.
Rune is an improvement on the script, making it easier to deploy assets directly within the Bitcoin UTXO. In our report “BRC-20: Innovation and Disruption from the BTC Gene,” we analyzed and introduced the Ordinals protocol (script), which is a technical protocol that assigns a unique identifier to each satoshi (the smallest indivisible unit of Bitcoin). Script brought about a phenomenal outbreak in the Bitcoin network ecosystem. Rune, based on script, further improves upon it by issuing homogenized tokens on the Bitcoin network based on UTXO. In a figurative sense, it is an engraving technique, just like the Chinese word “Rune” implies. The token assets deployed by the Rune protocol intuitively record information on the Bitcoin chain by writing it into the OP-RETURN field of the Bitcoin UTXO (unspent output).
The launch of Rune has led to a surge in on-chain transactions in the Bitcoin network and a rapid increase in transaction fees. Since its launch at 8:09 am on April 20, the on-chain fees generated by the Rune activity accounted for 57.7% of the total on that day, surpassing the traditional Bitcoin transfer fees that dominated before. In the case of block 840,000, the generated fees amounted to 37.626 BTC, which is more than 10 times the mining incentive (3.125 BTC)!
Following the script, Rune is expected to once again drive rapid growth in on-chain fees in the Bitcoin network, benefiting the mining industry. For the Bitcoin mining industry, revenue comes from both blockchain incentives (reduced to 3.125 BTC per block after halving) and Bitcoin transfer fees. With the halving of incentives, Bitcoin network transaction fees have become a key variable. The vitality of the Bitcoin ecosystem is closely related to the income elasticity of the mining industry (of course, another variable is the fluctuation of Bitcoin prices). We believe that Bitcoin Rune is expected to bring about another phenomenal development event in the Bitcoin ecosystem after the script, enhance the activity of the Bitcoin ecosystem in the Web3.0 system, and further drive the growth of on-chain fees, which is beneficial to the mining industry.
Investment Recommendations: Focus on Cryptocurrency-related Sectors
We believe that the development of the Bitcoin Rune ecosystem is beneficial to the Bitcoin mining industry, including mining power stocks and mining machine stocks.
Mining power stocks: MARA, BTDR, BTBT, DGHI, IREN, RIOT, BITF, CLSK, HIVE, WULF, BTCM, ARBK, BTOG, MIGI;
Mining equipment manufacturers: CAN.
Risk Warning:
1. Unexpected delays in blockchain technology development: The underlying blockchain-related technologies and projects of Bitcoin are in the early stages of development, posing risks of unexpected delays in technology research and development.
2. Uncertainty in regulatory policies: The operation of blockchain and Web3.0 projects involves various financial, network, and other regulatory policies. Currently, regulatory policies in various countries are still in the research and exploration stage, and there is no mature regulatory model. Therefore, the industry faces risks of regulatory policy uncertainty.
3. Failure to meet expectations in the implementation of Web3.0 business models: Web3.0-related infrastructure and projects are in the early stages of development, posing risks of failure to meet expectations in the implementation of business models.
This article is excerpted from a report titled “Guosheng Blockchain | Bitcoin Rune: Benefiting Mining Industry Amidst the Halving Wind,” published by Guosheng Securities Research Institute on April 21, 2024. For more details, please refer to the relevant report.
