BBAMM
Bitcoin Based Automated Market Maker
Introduction
This document outlines a Bitcoin Based automated market maker.
Digital assets that are stored in a BBAMM liquidity pool which are able to be traded against by traders.
Liquidity providers store digital assets in a liquidity pool by depositing proportionate BRC-20 tokens into a given liquidity pool, based on Ticker, where liquidity providers take on price risk and are compensated with trading fees.
Technical Requirements
-
Indexer: Library which fully implements the specification of brc-20 rolling up transaction proofs into human readable format for UI consumption. -
Pool ManagerLogic based intermediary that uses input data to release signatures which are used to call Swap and Deposit functions. -
ObserverInstance of historical price and liquidity data of a given tick position.
Key Considerations
- Immutable: Supply and max per mint is immutable after the first deployment
- First is First: Naming space is limited to 4 digits with "First is first" approach
- Supply: Fractional relationship of Satoshis to Bitcoin must be represented in token reward paring.
Rationale
There needs to be a Bitcoin native way to swap BRC-20 tokens without an order book.
A protocol interface that users can employ to swap or add liquidity.
Definitions
| Term | Description |
|---|---|
| BRC-20 | Created in March 2023, BRC-20’s are fungible tokens compatible with Bitcoin |
| BTC-20 | BTC-20 enables BRC-20s to be used in defi by making them compatible with a BTC familiar |
| Inscribe | The process of attaching data to individual satoshis. This information is stored within the Witness Data of the Transaction, meaning that all inscriptions are On-Chain. Ordinal inscriptions may also be referred to as Digital Artifacts |
| Position | An instance of liquidity defined by upper and lower ticker and the amount of liquidity contained therein |
| Liquidity | Digital asset positions that are stored in a BBAMM pool contract, and are able to be traded against by traders. |
| Spot Price | The current price of a token relative to another within a given position |
| Swap Fees | The fees collected upon swapping which are rewarded to liquidity providers |
| Pebble | Satoshi pegged familar |
Methods
| Method | Description |
|---|---|
| Deploy | Deploy a pool based on a given ticker position (e.g. BTC-ORDI) using pay & inscribe |
| Swap | Transfer a balance of BRC-20 token, receive a balance of BRC-20 token |
Protocol
This proposal introduces a Bitcoin Based Automated Market Maker, enabling trustless swaps of BRC-20 tokens.
Deploy Inscription process that creates new position of BRC-20 tokens, locked in a vault against liquidity backing.
Swap An inscription event which enables the swaping of two BRC-20 tokens.
The protocol remains compatible with BRC-20 functionality that includes deploy, mint and transfer.
Swap
A Spot Price is established based on the vaulted amount of lower ticker (e.g. ordi) divided by the
the vaulted upper ticker amount (e.g. BTC-20)
When swapping from a BRC-20 token (selling for Bitcoin) the receiving token ticker is PBBL (a satoshi familar representing 1/100,000,000 Bitcoin)
You must compose PBBL into BTC-20 in order to swap 1:1 for Bitcoin.
Strategically, it makes sense to create PBBL liquidity positions.
The liquidity provider receives fees in PBBL.
Validation
A valid Swap is required to transfer a balance. Validity can be determined by the following:
A valid Deploy function is required to establish a BBAMM liquidity position.
A valid transfer based on Spot Price is required to swap against the deployed liquidity position.
Changelog
Version 0.1 - May 16, 2023