Recently, the hottest term in the Bitcoin ecosystem is 'methane'. It is the first fairly minted token released under the new Alkanes protocol, and its market cap has surpassed $6 million, meaning each METHANE is now worth over $60. I asked some Bitcoin players who participated in the minting, and they indicated that the minting cost varies significantly. If calculated at a cost of $5 per token, the returns from minting METHANE have already increased more than tenfold.

In the context of a once quiet Bitcoin ecosystem, how did the new protocol Alkanes suddenly emerge?

Protocol background

The predecessor of the Alkanes protocol was actually called Protorunes, which means 'programmable runes', and it was founded by the same team. Last year, Protorunes briefly attracted attention in the Bitcoin ecosystem when runes were quite popular.

The founder of the protocol, @judoflexchop, is also the Chief Technology Officer of the Bitcoin wallet Oyl Wallet. Although this wallet doesn't have a large user base, it is quite well-known within the Bitcoin ecosystem, as can be understood from its funding:

On March 8, 2024, Oyl completed a $3 million Pre-Seed funding round, led by Arca, with participation from Foresight Ventures, Arthur Hayes' family office Maelstrom, Domo, UTXO Management, Taproot Wizards CEO Udi Werthheimer, Kanosei, and FlamingoDAO.

Due to Arthur Hayes' involvement, the Oyl wallet quickly gained recognition in the Bitcoin ecosystem. In the middle of last year, Oyl launched a Bitcoin NFT project called 'Airheads'. Although it sparked quite a controversy due to its high minting price, the project's price performance indicates it was a 'failure'. However, recently, due to the popularity of the Alkanes protocol, its price has surged nearly threefold.

Although everyone is in the wallet business, in the Bitcoin ecosystem, the major wallets are actually not just about wallets. Wallets like OKX, UniSat, Magic Eden, and even the subject of this article, Oyl, are involved in various other businesses in the Bitcoin ecosystem besides wallets, while Xverse's scope is relatively more 'focused'. Speaking of Oyl, they not only create wallets but also launched a Bitcoin RPC called 'Sandshrew', in addition to the Alkanes protocol.

Now, Oyl is fully promoting the Alkanes protocol, and even their official Twitter name has been updated to include Alkanes, clearly indicating they are fully committed to this new project.

Reasons for the explosive popularity of Alkanes

Alkanes is an emerging Bitcoin asset protocol that draws inspiration from the Rune Protocol's 'Runestone' structure, but has made stronger improvements in scalability and smart contract support. Its predecessor, Protorunes, shares some similarities with the Rune Protocol but has innovated in terms of flexibility and openness. One could say that the Rune Protocol and 'Runestone' structure are akin to a closed iOS, while Protorunes and Alkanes are more like open-source Android.

Protorunes is somewhat similar to the Rune Protocol's 'Runestone' structure, but Protorunes allows any developer to create their own asset protocol based on its data format and identify it via protocol ID. This enables developers to customize asset protocols as needed without having to rebuild an indexer. This flexibility brings great convenience to developers.

The 'Runestone' of the Rune Protocol is a data structure in Bitcoin transactions that contains indicators of whether transactions involve rune operations, and indexers parse based on this data. Protorunes extends this concept, allowing for customizable protocol specifications and parsing via protocol ID.

Some things, like Ethereum's modular chain, indeed make things much simpler. For developers, they can directly use the tools provided by Oyl without having to create their own indexer.

In terms of implementing smart contracts, before the resurrection of OP_CAT, basically, one could only do things like transaction storage of contract data and off-chain index execution without any major breakthroughs.

Apart from technical reasons, there are mainly two reasons this protocol can be popular. The first is that it has received strong support from local inscription players. Currently, the group with the strongest purchasing power in the Bitcoin ecosystem is this group of local inscription players. This group is quite special; for instance, meme coins from Solana have little significance in the Bitcoin ecosystem, but gaining recognition from these local inscription players is very challenging. Once inscriptions become popular, the speed of spreading in WeChat groups can be incredibly fast and has a very strong driving effect.

If you search for the word 'Alkanes' on Twitter, you'll find that most of the promotional content comes from locals, and the founder of the protocol has also expressed gratitude to the Chinese community in Chinese on Twitter. The early minting tool in the Bitcoin ecosystem, iDclub, was also created by locals.

The second reason is that the team behind this protocol has some background, and their disclosed plans go beyond just creating an asset protocol to drive traffic to their wallet. In fact, they also plan to develop AMM, BTC staking, stablecoins, MEV tools, and trustless ZK bridges, essentially building a BTCFi ecosystem around this protocol.

The whole logic is quite straightforward: an asset protocol supporting smart contracts, with applications built around it. If a team without background makes such claims, it’s really hard to convince people. After all, in the Bitcoin ecosystem, people still carry some pain from the failure of Atomicals; major projects need to be handled by mature teams to be reliable.

Protocol leader

METHANE is the first fairly minted token under the Alkanes protocol, with a market cap of about $6 million. Alkanes translates to 'alkanes' in English, while METHANE translates to 'methane'; hence players also mention BUTANE and HEXANE, although these two currently have a market cap of only about $250,000 each.

DIESEL is the first token officially launched and deployed under the Alkanes protocol, with a market cap of approximately $12.6 million. The mechanism of this token is quite unique, with a fixed total of 1,562,500 coins, of which 28% is allocated to the team, while the remaining 72% will be produced block by block with each Bitcoin block, with the output halving according to Bitcoin's halving schedule. For each block, the transaction with the highest miner fee will receive the DIESEL output for that block. In summary, DIESEL is minted once per block, and only one miner can mine it each time. Currently, ordinary players basically cannot participate in the minting; scientists automatically monitor miner fees and directly provide higher bids.

Because METHANE is fairly minted, the distribution of holders and chips is relatively healthier and is fully circulating, so now on social platforms, the popularity of METHANE far exceeds that of DIESEL. If we only look at social volume, many people might feel that METHANE is more like the leader. As for DIESEL, the future development has not been disclosed too much by the officials. Thus, METHANE is more favored at the community level, while DIESEL relies on official background and potential for the future.

Conclusion

This protocol is still in its early stages, and many wallets have not yet caught up with asset support for it, so it's best to use Oyl Wallet for asset interactions, as it can better ensure the safety of assets.

From the perspective of success factors, this protocol has basically gathered the key elements of new asset protocols in the Bitcoin ecosystem—'mainnet assets', 'fair minting', and 'support from locals', along with 'smart contracts' and narratives at the ecological level. It still stands out against the backdrop of a relatively quiet Bitcoin ecosystem. I hope it can continue to build and go further in the future.