Runes Protocol One Year Later: From 90% of Bitcoin Fees to Under 2% - What Happened to Bitcoin Tokenization?
On April 20, 2024, two things happened simultaneously: Bitcoin completed its fourth halving, and Casey Rodarmor's Runes protocol went live. Within hours, Runes transactions consumed over 90% of all Bitcoin network fees. Nearly 7,000 Runes were minted in the first 48 hours. Transaction fees briefly exceeded block rewards for the first time in Bitcoin's history.
Eighteen months later, Runes account for less than 2% of daily Bitcoin transactions. Fees from Runes activity dropped below $250,000 per day. The protocol that was supposed to bring fungible tokens to Bitcoin in a clean, UTXO-native way appeared to have followed the same boom-bust pattern as every previous Bitcoin innovation.
But writing the obituary may be premature. Programmable Runes through the Alkanes protocol, native AMMs built directly on Bitcoin's base layer, and a maturing token ecosystem suggest the story is entering its second chapter rather than its final one.
The Launch: When Runes Dominated Bitcoin
Understanding where Runes stands requires understanding where it started.
Casey Rodarmor — the same developer who created Ordinals in January 2023 — proposed the Runes protocol in September 2023 as a cleaner alternative to BRC-20 tokens. His motivation was straightforward: BRC-20 created unnecessary "junk UTXOs" that bloated the network, required three transactions per transfer, and couldn't send multiple token types in a single transaction.
Runes fixed all three problems:
- UTXO-native design: Token data attaches directly to Bitcoin's existing UTXO model via OP_RETURN outputs, creating no junk UTXOs
- Single-transaction transfers: One transaction handles any number of Rune balance movements
- Lightning compatibility: Runes became the first fungible Bitcoin assets that could bridge to and from the Lightning Network
The launch numbers were staggering. Over 150,000 daily transactions at peak. A high-water mark of 753,584 transactions on April 23, 2024. Runes represented approximately 40% of all Bitcoin transactions in the weeks after launch, briefly outpacing ordinary BTC transfers.
Miners celebrated. The fee spike was the most profitable period since Bitcoin's early days, with Runes-related fees contributing tens of millions in additional revenue.
The Crash: 90% to Under 2%
The decline was as dramatic as the launch.
Timeline of decline:
| Period | Runes Fee Share | Daily Transactions |
|---|---|---|
| April 20-23, 2024 | 90%+ | 753,000 peak |
| Late April 2024 | 60-70% | ~400,000 |
| May 2024 | ~14% | Declining |
| Mid-2024 | 8.37% | ~150,000 |
| Late 2024 | 1.67% | Under 50,000 |
| Mid-2025 | Under 2% | Minimal |
By mid-2025, Bitcoin transaction fees overall represented only 0.65% of block rewards, and the seven-day average transaction count dropped to its lowest point since October 2023.
What caused the collapse?
1. The memecoin rotation. Runes' primary use case at launch was memecoins. DOG·GO·TO·THE·MOON and PUPS·WORLD·PEACE captured imaginations briefly, but memecoin traders are notoriously fickle. When attention shifted to AI agents, Ethereum memecoins, and Solana's Pump.fun ecosystem, capital followed.
2. User experience gaps. Despite technical superiority over BRC-20, Runes offered a worse user experience than Ethereum or Solana for token trading. Wallet support was limited. DEX infrastructure was primitive. The "etching" process confused newcomers. Ethereum and Solana's DeFi ecosystems were simply more mature.
3. No complex applications. Runes remained stuck at the "issuance + trading" level. Without lending, yield farming, stablecoins, or programmable logic, there was nothing to keep users engaged beyond speculation.
4. Bitcoin's conservative framework. Bitcoin's deliberately limited scripting language constrained what Runes could do. The protocol worked within Bitcoin's rules, but those rules weren't designed for a DeFi ecosystem.
BRC-20 vs. Runes: The Standards War
The Bitcoin tokenization landscape split into two competing standards, and the comparison reveals important lessons.
BRC-20:
- Created by pseudonymous developer "Domo" in March 2023
- Reached $1 billion market cap within months
- Indexer-dependent — tokens exist in off-chain indexes, not in Bitcoin's UTXO set
- Three transactions per transfer
- Limited to one token type per transaction
- Top tokens (ORDI, SATS) retained liquidity through centralized exchange listings
Runes:
- Created by Casey Rodarmor, launched April 2024
- UTXO-native — token data lives directly in Bitcoin's transaction model
- Single transaction per transfer
- Multiple token types per transaction
- Lightning Network compatible
- Technically superior but lower adoption after initial spike
The irony: BRC-20's inferior technology survived because centralized exchanges listed its tokens. ORDI and SATS maintained liquidity on Binance, OKX, and others. Runes' technical elegance mattered less than market access.
Both standards share a fundamental limitation: they're primarily used for memecoins. Without utility beyond speculation, neither has achieved the "Bitcoin DeFi" vision their advocates promised.
The Second Act: Alkanes and Programmable Runes
The most significant development in Bitcoin tokenization isn't Runes itself — it's what's being built on top of it.
Alkanes Protocol launched in early 2025, positioning itself as "programmable Runes." Founded by Alec Taggart, Cole Jorissen, and Ray Pulver (CTO of Oyl Wallet), Alkanes allows developers to inscribe smart contracts directly into Bitcoin's data layer using WebAssembly (WASM) virtual machines.
Where Runes and BRC-20 are limited to issuing and transferring fungible tokens, Alkanes enables:
- Automated Market Makers (AMMs)
- Staking contracts
- Free mints with programmable logic
- NFT swaps
- Trustless execution on Bitcoin's base layer
The numbers are early but promising. Since March 2025, Alkanes has generated 11.5 BTC in gas fees — outpacing Ordinals (6.2 BTC) but trailing Runes (41.7 BTC) and BRC-20 (35.2 BTC). The first Alkanes token, METHANE, surged from a market cap of $1 million to over $10 million shortly after launch.
Runes State Machine (RSM), proposed in June 2024, takes a different approach: adding Turing-complete programmability to Runes by combining UTXO and state machine models. RSM is expected to launch in Q2-Q3 2025, potentially becoming the next catalyst for Bitcoin tokenization.
Rodarmor's own upgrade came in March 2025 when the Runes Protocol introduced "agents" — an interactive transaction construction mechanism enabling AMMs directly on Bitcoin's Layer 1. This tackles two critical problems: batch splitting inefficiencies and mempool front-running.
The planned OYL AMM in 2026 will introduce native liquidity pools, eliminating manual order matching and enabling DeFi functionality comparable to Uniswap — but on Bitcoin.
The Survivor: DOG·GO·TO·THE·MOON
Among thousands of Runes tokens, one has proven remarkably durable: DOG·GO·TO·THE·MOON.
Launched on April 24, 2024, as "Rune Number 3," DOG distributed 100 billion tokens to over 75,000 Runestone Ordinal NFT holders with no team allocation — a genuinely fair launch in a space plagued by insider advantages.
Key milestones:
- Reached $730.6 million market cap during a November 2024 rally
- Listed on Coinbase, expanding access to 100+ million users
- Current market cap approximately $128 million (ranking #377)
- All-time high: $0.0099 (December 2024)
- All-time low: $0.00092 (January 2026)
DOG's trajectory mirrors the broader Runes narrative: explosive initial interest, significant decline, but persistent community engagement. It remains the most liquid and widely held Runes token, serving as a barometer for the ecosystem's health.
The 87% decline from peak to current levels looks brutal in isolation. But in the context of Bitcoin memecoins — where most projects go to zero — DOG's survival and exchange listings represent genuine staying power.
What Bitcoin Tokenization Needs to Succeed
The Runes experiment has exposed both the potential and limitations of Bitcoin as a token platform. For the ecosystem to grow beyond speculation, several things need to happen:
1. Infrastructure maturity. Wallet support must improve. As of early 2026, only a handful of wallets (Magic Eden, Xverse, Oyl) offer native Runes support. Compare this to the hundreds of wallets supporting ERC-20 tokens.
2. DEX infrastructure. The OYL AMM and Rodarmor's agents upgrade address this directly. Without liquid trading venues, tokens can't build sustainable ecosystems. The fact that BRC-20 tokens survived primarily through centralized exchange listings — not on-chain trading — reveals the infrastructure gap.
3. Real utility beyond memecoins. Stablecoins on Bitcoin, tokenized real-world assets, and DeFi primitives need to materialize. Alkanes provides the technical foundation, but applications must follow.
4. Cross-chain bridges. Runes' Lightning Network compatibility is an advantage, but bridging to Ethereum and Solana ecosystems would dramatically expand the addressable market. Several teams are building trustless bridges, with ZK-based approaches emerging as the most promising.
5. Developer tooling. Building on Bitcoin's limited scripting language is hard. WASM runtimes through Alkanes lower the barrier, but the developer experience still lags far behind Solidity or Rust on Solana.
The Bigger Picture: Bitcoin as a Token Platform
The Runes Protocol forced a fundamental question: should Bitcoin be a token platform at all?
Bitcoin maximalists argue that token activity clutters the network, inflates fees for regular users, and distracts from Bitcoin's core function as sound money. The April 2024 fee spike — when ordinary transactions became prohibitively expensive — validated these concerns.
Pragmatists counter that Bitcoin's security model is the strongest in crypto, and tokens benefit from that security. If fungible tokens are going to exist on blockchains (and they clearly are), better they exist on Bitcoin than on chains with weaker security guarantees.
The market has offered its own verdict: most token activity has migrated to Ethereum and Solana, where the developer experience and DeFi infrastructure are more mature. Bitcoin's token market peaked at approximately $1.03 billion for Ordinals and Runes combined, a fraction of Ethereum's multi-trillion dollar token ecosystem.
But the story isn't over. Alkanes, RSM, and native AMMs represent a genuine path to programmable Bitcoin. If the OYL AMM delivers on its 2026 promises, Bitcoin could support DeFi primitives that were impossible when Runes launched.
The pattern in crypto is consistent: early versions of protocols fail, second iterations improve, and the third generation achieves product-market fit. BRC-20 was the first attempt. Runes was the second. Alkanes and programmable Runes may be the version that finally makes Bitcoin tokenization work — not through hype cycles, but through real utility.
Conclusion
Runes Protocol's first year delivered a familiar crypto narrative: explosive launch, rapid decline, quiet building. The 90% fee dominance to under 2% collapse tells one story. The emergence of Alkanes, native AMMs, and programmable Runes tells another.
Bitcoin tokenization isn't dead — it's entering its infrastructure phase. The speculative excess of April 2024 is gone. What remains is a cleaner token standard (Runes over BRC-20), an emerging programmability layer (Alkanes), and a roadmap for native DeFi on the world's most secure blockchain.
Whether this infrastructure phase produces lasting value depends on execution. The protocol wars between Alkanes and RSM will determine which approach wins. The OYL AMM's 2026 launch will test whether Bitcoin can support real liquidity pools. And the broader question — whether developers and users choose Bitcoin's security over Ethereum's ecosystem — will play out over years, not months.
One year is too short to judge a protocol built on Bitcoin's deliberately slow-moving foundation. But the building blocks for Bitcoin's token economy are more sophisticated than they were at launch. The second act may prove more consequential than the first.
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