Bitcoin has three ways of carrying assets beyond plain bitcoin that people regularly confuse: inscriptions, BRC-20 tokens and Runes. Inscriptions attach arbitrary data such as an image to a single satoshi. BRC-20 is a fungible token convention built on top of inscriptions. Runes is a separate fungible token protocol that writes small messages into transaction outputs instead. All three run on Bitcoin without any change to its consensus rules, and they differ in where the data lives, how balances are tracked and how much block space they use.
Inscriptions: data attached to a satoshi
Inscriptions came out of the Ordinals protocol, launched in early 2023. Ordinal theory gives every satoshi a serial number based on the order it was mined and tracks it through transactions. An inscription places content, such as an image, text or code, inside the witness of a Taproot transaction and assigns it to a specific numbered satoshi. Whoever holds that satoshi holds the inscription. Witness data receives a weight discount introduced by SegWit, which is why storing content there costs less than storing it elsewhere in a transaction. Full background in Ordinals and Bitcoin NFTs Explained and SegWit and Taproot.
Each inscription is unique, which makes this the Bitcoin equivalent of an NFT.
BRC-20: fungible tokens written as inscriptions
BRC-20 appeared in March 2023, created by a pseudonymous developer known as domo. It does not add anything to Bitcoin. Instead it defines a convention: small JSON text inscriptions that say deploy a token with a given ticker and supply, mint a quantity, or transfer a quantity. The first token deployed was ORDI.
The important detail is that Bitcoin itself has no idea any of this means a balance. Balances exist only because indexers read every BRC-20 inscription in order and apply the rules. If two indexers disagree, two different balance sheets exist. Transfers are also clumsy, requiring a transfer inscription to be created first and then sent, so every move takes at least two transactions and leaves inscriptions behind on chain.
Runes: fungible tokens native to UTXOs
Runes was designed by Casey Rodarmor, who also created Ordinals, and went live at block 840,000, the April 2024 halving block. It skips inscriptions entirely. A Runes transaction carries a short encoded message, called a runestone, in an OP_RETURN output. The runestone can etch a new rune with its name, divisibility and supply terms, mint units, or move balances between the transaction’s outputs.
Because rune balances are attached to UTXOs, they move the way bitcoin itself moves. A single transaction can transfer them, they do not leave junk inscriptions behind, and the rules are simpler for an indexer to apply consistently. An indexer is still needed to read runestones, but there is far less room for interpretation than with BRC-20.
Side by side
Inscriptions: one unique item per satoshi, data in the witness, NFT-like. BRC-20: fungible, balances computed off chain by indexers from JSON inscriptions, two-step transfers. Runes: fungible, balances bound to UTXOs, data in an OP_RETURN output, single-transaction transfers.
Why this shows up in fee data
All three compete for the same block space as ordinary payments. Large inscription and token launches have produced sharp fee spikes, most visibly when Runes launched alongside the 2024 halving and pushed fees briefly to record levels. In the months that followed, activity fell back sharply, and this kind of demand now tends to arrive in bursts rather than as a constant. For anyone reading onchain data, a sudden jump in transaction count or fees with no matching rise in transferred value is often token activity rather than economic activity. See The Bitcoin Fee Market and Active Addresses Explained.
The ongoing argument
Supporters see these protocols as a source of fee revenue that matters for miners as the block subsidy shrinks with each halving. Critics see non-monetary data competing with payments and adding weight to the chain that every node must store. Both positions describe real effects, and the disagreement is about priorities rather than facts.
Common questions
Are Runes and BRC-20 tokens the same thing? No. Both are fungible tokens on Bitcoin, but BRC-20 is built from JSON inscriptions with balances computed by indexers, while Runes stores messages in OP_RETURN outputs and binds balances to UTXOs.
Do I need a special wallet? Yes. A standard Bitcoin wallet may spend the satoshis or outputs that carry an inscription or rune without realising it. Use a wallet that explicitly supports Ordinals and Runes.
Did Bitcoin need a fork for any of this? No. All three use existing transaction features. Inscriptions rely on Taproot, which activated in 2021.
Research and education only, not financial advice.
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