Crypto degens have a new – and, if all goes according to plan, faster, cheaper and safer – way to trade Runes, the Bitcoin ecosystem’s answer to memecoins.
An automated-market maker (AMM) for the Runes protocol is being deployed on Stacks. It’s the first AMM for such tokens on that Bitcoin layer-2 network. The AMM went live on Wednesday, following the unveiling of Stacks’ native BTC-backed asset sBTC on Tuesday.
The teams behind decentralized exchange (DEX) Bitflow Finance and Bitcoin bridge Pontis developed the AMM, a tool that facilitates trading through algorithmic means to improve liquidity. They announced the project Wednesday.
The Runes protocol is a standard for issuing fungible tokens on Bitcoin, building on the work of Ordinals, which allowed data to be inscribed on small denominations of BTC, thus making each one unique and potentially valuable. In the same way that Ordinals could be considered a means of creating the Bitcoin equivalent of NFTs, Runes could be considered a venue for creating memecoins.
Runes launched in April, coinciding with Bitcoin’s fourth halving event, and spurred a flurry of activity, paying 78.6 BTC ($8.18 million) in fees in the 90 minutes after the halving took place.
However, less than a month later, this excitement waned considerably, with fees dropping more than 50%.
Bitflow’s aim is for its AMM to to help Runes scale and address some of the shortcomings holding it back such as slow transaction speeds, high fees and sniping of pending transactions. Sniping is when users exploit the time lag in which a transaction is waiting to be added to a Bitcoin block, by removing them from the waiting room, then adding them back in with their own signature and a higher fee attached.
Bitflow is harnessing Stacks’ Nakamoto upgrade. Stacks is one of several layer-2s that aim to allow smart contracts and other decentralized finance-related functions using Bitcoin as a base layer.
Stacks activated its Nakamoto upgrade in October. It is designed to speed up transaction times considerably by decoupling the L2’s block production schedule from Bitcoin’s.
“Another key feature that Nakamoto unlocks is Bitcoin finality,” Bitflow said. “After a transaction is confirmed, reversing it is at least as hard as reversing a Bitcoin transaction.”
Bitflow is using the Bitcoin bridge Pontis to allow trading between BTC and Runes. Each trade is recorded in one Bitcoin block, which usually takes 10 minutes, and one Stacks block, which takes between five and 10 seconds.