> For the complete documentation index, see [llms.txt](https://gategamefi.gitbook.io/gate-gamefi-white-paper/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://gategamefi.gitbook.io/gate-gamefi-white-paper/iii.-technical-foundations/how-does-runes-protocol-work.md).

# How does Runes Protocol work?

The purpose of the Runes Protocol is to create and monitor unified tokens (fungible tokens) on the Bitcoin network more easily. Homogeneous tokens mean they are interchangeable, similar to banknotes of the same denomination in your wallet.

Similar to BRC-20, Runes will use Bitcoin and pay fees in Bitcoin to create new tokens. However, the main difference between Runes and BRC-20 is that Runes, like Bitcoin, uses a UTXO (Unspent Transaction Output) model – as opposed to the account model used by some Layer 1 blockchains like Ethereum .

The UTXO model represents the amount of cryptocurrency a person has available to spend. This model is important in tracking ownership and decentralized transactions on the Bitcoin network, helping to ensure the transparency and safety of the system.

<figure><img src="/files/ueeq7ewdeldwLDGHZENy" alt=""><figcaption><p>utxo model</p></figcaption></figure>

Many in the Bitcoin community believe that the UTXO model is superior, and one of the reasons Ethereum has scalability problems is due to its use of an account model. Casey Rodarmor himself, founder of Runes Protocol, also believes that the UTXO model is superior, because while other token standards tend to rely on off-chain data, Runes is completely on-chain. of Bitcoin.

With Runes, the issuer creates tokens and sets a limit on the number of tokens one can issue in a single transaction. This way, token creators as well as the community of future buyers have an equal opportunity to access and purchase tokens at the same time, ensuring fairness and transparency in the distribution process.


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