Overview

Disclaimer: here

Welcome to the Relics Initiative, an effort to enable rune-compatible liquidity bootstrapping and AMM swaps on Bitcoin L1.

Our technical implementation closely follows the current Runes protocol, with the goal of merging it into the Runes codebase.

If the Runes community does not reach a consensus on implementing these features, we will open-source the full protocol under the name "Relics Protocol" (⟁), allowing the Bitcoin community to experiment with advanced liquidity bootstrapping and rune-compatible AMM functionalities.

The importance of liquidity bootrapping and AMM swaps

On EVM chains and Solana, Automated Market Making (AMM) protocols offer a seamless way to trade fungible tokens on-chain, with most tokens directly bootstrapping AMM liquidity at launch.

However, the two major fungible token standards on Bitcoin, BRC-20 and Runes, currently lack in-protocol support for similar liquidity mechanics. As a result, they trade more like NFTs, requiring each trade to involve a buyer actively accepting a seller's listing, and vice versa.

While this approach may be sufficient for large-cap tokens listed on centralized exchanges with market makers, it introduces challenges for medium and smaller tokens. These tokens struggle to bootstrap reasonable liquidity, and trading them involves a lot of friction.

With the Relics Initiative, we aim to empower the Runes community to bootstrap AMM liquidity for both existing and new Runes.

Runes AMM swap

Our implementation introduces AMM liquidity pools to the Runes protocol, enabling users to create liquidity pools for a Rune, which holds both the respective Rune and another Rune as the Base Rune. The Base Rune can be freely chosen, but it is generally advisable to select one of the most liquid Runes with CEX listings as the Base Rune.

The Base Rune serves a similar role to WETH on Uniswap, acting as the base currency for most liquidity pools. When a user sells into a liquidity pool, they receive the Base Rune of that pool. Since this Base Rune is likely to be the base currency for many other liquidity pools and usually trades on a CEX, users can utilize it to swap into other pools or exchange it for stablecoins via CEX listings.

If the AMM liquidity feature is integrated into the Runes codebase, we anticipate the emergence of wrapped BTC tokens and stablecoins directly as Runes. This development could eliminate the need for CEX listings for many Runes, making the protocol even more robust by allowing users to swap against WBTC or USD stablecoins without relying on a centralized exchange (the WBTC and stablecoins would rely on centralized providers though).

Liqudity Bootstrapping

Even with the availability of AMM swaps, there must be incentives and mechanisms to encourage liquidity into the pools. Our implementation addresses this need by offering

• customizable LP fees for liquidity pool creators and

• enabling liquidity bootstrapping during the minting of Runes.

Customizable LP fees

Liquidity fees should provide sufficient incentives for certain Runes liquidity pools, particularly the "high volume" pools (e.g., "Stablecoin <--> WBTC" pools). The fees for these pools offer economic incentives without exposure to the extremely volatile profile associated with newly created tokens.

Mint liquidity bootstrap

As demonstrated on Ethereum, Solana, and other chains in recent years, bootstrapping meaningful liquidity for tokens is nearly impossible without integrating liquidity bootstrapping into the launch process. While some communities and teams manage to increase liquidity post-launch, this is an exception and will primarily apply to the largest existing Runes.

To address this, our implementation includes an option to launch new Runes in a Mint Mode that automatically bootstraps liquidity. In this mode, users "pay" for each mint with the chosen Base Rune, which is then automatically added to the LP pool. Once the mint is successful, the liquidity pool opens, allowing users to start swapping.