Bitcoin Rune Riding the Halving Wind, Overseas Mining Industry Welcomes Good News

Source: Jishi Communication

Abstract

Runes are improved on the basis of inscriptions, which facilitates the direct deployment of assets in Bitcoin UTXO. In our report "BRC-20: Innovation and Breakthrough from BTC Gene", we have analyzed and introduced the Ordinals protocol (inscriptions). This is a technical protocol that assigns a unique number to each satoshi (the smallest indivisible unit of Bitcoin). Inscriptions have brought about a phenomenal explosion in the Bitcoin network ecosystem. Runes are improved on the basis of inscriptions, that is, homogeneous tokens are issued based on UTXO on the Bitcoin network. Figuratively speaking, it is an etching technology, just like the Chinese word "Runes". The token assets deployed by the Runes protocol intuitively record information on the Bitcoin chain: that is, they are written into the OP-RETURN field of Bitcoin UTXO (unspent output).

The launch of Runes has led to a boom in Bitcoin chain transactions, and transaction fees have grown rapidly. Since its launch at 8:09 on April 20, the proportion of Bitcoin chain fees generated by Runes activities on that day was 57.7%, while previously the Bitcoin chain fees were mainly traditional Bitcoin transfers. For block 840000, the fee generated is 37.626 BTC, which is more than 10 times the mining incentive (3.125 BTC)!

After the inscription, the rune is expected to drive the rapid growth of Bitcoin chain fees again, which is good for the computing power mining industry. For the Bitcoin mining industry, income comes from blockchain incentives (3.125 BTC per block after halving) and Bitcoin transfer fees. After the incentive is halved, the Bitcoin network transfer fee becomes a key variable. Whether the Bitcoin ecosystem can be active is related to the income elasticity of the mining industry (of course, another variable is the rise and fall of Bitcoin prices). We believe that Bitcoin Rune is expected to bring another Bitcoin ecological phenomenon after the inscription, enhance the activity of the Bitcoin ecosystem in the Web3.0 system, and further promote the growth of chain fees, which is good for the mining industry.

Investment advice. We believe that the development of the Bitcoin Rune ecosystem is good for the Bitcoin mining industry, including computing power mining stocks and mining machine stocks. Computing power mining stocks include: MARA, BTDR, BTBT, DGHI, IREN, RIOT, BITF, CLSK, HIVE, WULF, BTCM, ARBK, BTOG, MIGI; mining machine manufacturer: CAN.

Risk warning: Blockchain technology research and development is not as expected; regulatory policy uncertainty; Web3.0 business model implementation is not as expected

1.When Bitcoin was halved, Rune was launched, driving the popularity of on-chain transactions

Bitcoin was successfully halved, and Rune was officially launched. At 8:09 on April 20, 2024, BTC successfully completed the fourth halving at block height 840000, and the mining reward for each block of the Bitcoin network was halved from 6.25 BTC to 3.125 BTC. At the same time, Bitcoin Runes were officially launched at block height 840000. In less than two days (April 21), Runes brought about a rapid increase in Bitcoin chain fees. The launch of Runes is expected to bring another hot spot to the Bitcoin ecosystem.

Runes are improved on the basis of inscriptions to facilitate the direct deployment of assets in Bitcoin UTXO. In our report "BRC-20: Innovation and Breakthrough from BTC Genes", we have analyzed and introduced the Ordinals protocol (inscriptions), which is a technical protocol that gives a unique number to each Bitcoin satoshi (the smallest indivisible unit of Bitcoin). Inscriptions have brought about a phenomenal outbreak of the Bitcoin network ecosystem. Runes are an improvement on inscriptions - issuing homogeneous tokens based on UTXO on the Bitcoin network. Figuratively speaking, it is an etching technology, just like the Chinese word "Runes". The token assets deployed by the Runes protocol intuitively record information on the Bitcoin chain: that is, writing it into the OP-RETURN field of Bitcoin UTXO (unspent output).

The launch of Runes has led to a rapid increase in Bitcoin chain fees.Since its launch at 8:09 on April 20, the proportion of Bitcoin chain fees generated by Runes activities on that day has accounted for 57.7%, while previously the Bitcoin chain fees were mainly traditional Bitcoin transfers. For block 840000, the fees generated were 37.626BTC, which is 10 times more than the mining incentive (3.125BTC)!

Following the inscription, the rune is expected to drive the rapid growth of Bitcoin chain fees again, which is good for the computing power mining industry. For the Bitcoin mining industry, income comes from blockchain incentives (3.125BTC per block after halving) and Bitcoin transfer fees. After the incentive is halved, the Bitcoin network transfer fee becomes a key variable. Whether the Bitcoin ecosystem can be active is related to the income elasticity of the mining industry (of course, another variable is the rise and fall of Bitcoin prices). We believe that Bitcoin runes are expected to bring another phenomenal development event of the Bitcoin ecosystem after the inscription, enhance the activity of the Bitcoin ecosystem in the Web3.0 system, and further promote the growth of chain fees, which is good for the mining industry.

2. Investment advice: Pay attention to cryptocurrency-related sectors

We believe that the development of the Bitcoin Rune ecosystem is beneficial to the Bitcoin mining industry, including computing power mining stocks and mining machine stocks.

Computing power mining stocks: MARA, BTDR, BTBT, DGHI, IREN, RIOT, BITF, CLSK, HIVE, WULF, BTCM, ARBK, BTOG, MIGI;

Mining machine manufacturers: CAN.

3. Risk warning

Blockchain technology research and development is not as expected: The blockchain-related technologies and projects at the bottom of Bitcoin are in the early stages of development, and there is a risk that technology research and development will not be as expected.

Uncertainty of regulatory policies: The actual operation of blockchain and Web3.0 projects involves a number of financial, network and other regulatory policies. At present, the regulatory policies of various countries are still in the research and exploration stage, and there is no mature regulatory model, so the industry faces the risk of regulatory policy uncertainty.

Web3.0 business model implementation is not as expected: Web3.0 related infrastructure and projects are in the early stages of development, and there is a risk that the business model implementation will not be as expected.

This article is excerpted from the report "Guosheng Blockchain | Bitcoin Rune Rises on the Halving Wind, Mining Industry Welcomes Good News" released by Guosheng Securities Research Institute on April 21, 2024. For details, please refer to the relevant report.