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Runes Protocol: Hype Fades as User Engagement Declines in Bitcoin Ecosystem

User engagement has taken a nosedive following a period of heightened anticipation surrounding the launch of the Runes protocol, which some hoped would replicate Solana’s thriving meme coin ecosystem.

Activity within the Bitcoin Runes protocol has noticeably slowed over the past week, indicating a struggle to gain significant traction among users despite an impressive debut last month. Runes builds upon the Ordinals protocol, aiming to make transactions even more cost-effective and rapid. Ordinals involve embedding data into the Bitcoin blockchain by incorporating references to digital art within small Bitcoin-based transactions.

Amidst much anticipation, Runes went live after Bitcoin’s fourth halving on April 20. Data from Dune Analytics reveals that within its initial 10 days, the protocol saw over 85,000 token issuances and generated more than $3 million in fees.

However, over the past fortnight, all metrics, including fees, new Runes, and user activity, have plummeted by over 50%. Since May 1, only around 5,000 new Runes have been issued, resulting in just under $100,000 in fees.

At its peak, Runes dominated transactions and fees across the broader Bitcoin ecosystem, accounting for up to 80% of all network activity. Now, that figure has dwindled to 20%. It’s essential to note that this decline coincided with a general market downturn marked by decreasing Bitcoin prices and sluggish growth in alternative tokens, potentially impacting sentiment towards innovative technologies.

Tailored for meme enthusiasts and daring traders, Runes garnered substantial attention on social platforms ahead of its launch. Creator Casey Rodamor aimed to position it as a protocol ripe for meme coin trading and “degen” traders. Some industry insiders anticipated that the protocol would emulate the thriving meme coin landscape on blockchains like Solana and Base, which likely fueled interest and speculation on obscure memes.

PUPS, a Runes token, emerged as a significant player, skyrocketing from under $10 million in capitalization to over $150 million in less than a week, garnering support from notable traders like BitMEX founder Arthur Hayes.

Before the protocol’s introduction, several NFT collections and tokens were launched on Ordinals and even Ethereum, with each vying to transition over and become the dominant collection post-launch. This flurry of activity propelled Bitcoin-based NFTs above other collections on leading platforms like Ethereum and Solana, with tens of millions exchanged in an otherwise limited non-fungible token market.

Despite optimism, skeptics remain cautious, suggesting that while Runes may contribute to building the Bitcoin ecosystem, there are still significant challenges ahead. Ho Chan Chung, head of marketing at CryptoQuant, emphasized the fundamental differences between UTXO-based blockchain networks like Bitcoin and smart contract-based networks, highlighting the hurdles faced by Bitcoin Layer 2 projects in winning the narrative battle.

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Disclaimer: Not Investment Advice

it’s crucial to understand that the information provided here is not to be construed as investment advice. The crypto market is dynamic and highly speculative, and decisions should be made based on thorough personal research and consideration of individual risk tolerance. Always consult with financial professionals and conduct your own due diligence before making any investment decisions. The intention of this exploration is to present insights and trends, not to provide specific investment recommendations.

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