The Runes protocol, a Bitcoin-based funnel token standard, has announced major upgrades that introduce “agents” that enable automatic market makers (AMMs) directly at Bitcoin (BTC) Layer 1.
The development aims to enhance decentralized trading capabilities while maintaining the security and unreliable nature of Bitcoin.
Runes creator Casey Rodarmor announced the upgrade on March 20th. Agents use the “interactive transaction structure” mechanism to enable market makers to add liquidity to Runes AMM in unreliable ways.
This feature is designed to tackle the inefficiencies of Bitcoin-based token trading, such as “Batch Split” and “Mempool Front-Running,” which previously prevented seamless on-chain trading.
Enhanced Bitcoin defi landscape
The Runes protocol was originally developed to introduce phibre tokens into Bitcoin using a transactional output (UTXO) model that is not beyond that.
Unlike BRC-20, which relies on ordinal inscriptions and can lead to inefficient transaction batches, Runes aims to improve token efficiency while integrating natively with Bitcoin’s existing architecture.
The latest “agent” upgrade further extends Runes functionality by enabling AMM, a critical component of DEFI. AMMS instead uses a liquidity pool that allows traders to exchange assets in an automated way, encouraging token swaps without resorting to traditional order books.
According to Rodarmor:
“This upgrade will allow Runes AMM to seamlessly improve liquidity and reliability for market makers, and solve important issues in decentralized Bitcoin trading.”
Solving major trading challenges
Prior to this development, Bitcoin native AMM was mostly limited to L2 solutions such as stacks. Here, projects like Bitflow and Pontis launched AMM to address Bitcoin transaction speed and cost limits.
The introduction of agents into the main Bitcoin network is aimed at bringing similar capabilities to the base chain, taking advantage of industry-defined security and decentralization.
Market makers that provide liquidity to Runes AMM benefit from the reduced risk associated with centralized market establishment solutions, as their interactive transaction building methods ensure unreliable and transparent liquidity provisioning.
Furthermore, the introduction of agents will help alleviate issues like front-turning, where malicious actors leverage Mempool’s visibility to manipulate trade executions. By improving transaction integrity, Runes AMM can make decentralized transactions more efficient and secure.
Although the launch date for the Runes AMM Agent has not been confirmed yet, the upgrade represents a significant milestone in the expansion of Bitcoin’s on-chain financial infrastructure.
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