Runes AMM
Pricing model
Bound's AMM uses Concentrated Liquidity - a variation on the constant product formula (x*y=k) where LPs set a custom price range for their assets.
Concentrated Liquidity calculations are implemented in an EVM environment. When a user requests a quote, the AMM queries this EVM environment to determine the correct output amount.
OP_12 encoding
Every Bound AMM transaction encodes structured data using OP_12 - a Bitcoin Script opcode repurposed to carry AMM data in dust-value outputs.
Each OP_12 output encodes:
Transaction type - provide liquidity, swap, withdraw liquidity, collect fees, etc.
Input and output asset amounts
Token identifiers
Trading fee information
Price range (upper and lower tick, if applicable)
This approach enables fully on-chain AMM execution while remaining lightweight and efficient - no smart contract layer on Bitcoin required.
Transaction types
Bound supports 8 AMM transaction types:
Init Pool
Create a new pool and add initial liquidity
Add Liquidity
Add a new position to an existing pool
Swap
Exchange one asset for another
Withdraw Liquidity
Remove a position from a pool
Collect Fees
Claim accrued trading fees
Increase Liquidity
Add to an existing position
Migrate Pool
Move pool to a new address
Migrate Pool Init UTXO
Move pool init UTXO to a new address
Data Outputs & Unspendable UTXOs
Bound records certain protocol metadata directly on Bitcoin for transparency. Instead of using OP_RETURN, Bound derives a deterministic Bitcoin address from its message script and creates an output to that address. These outputs are intentionally unspendable.
You may occasionally see outputs similar to:
This is not a user wallet. It is a deterministic address generated from protocol's internal message script.
FROST Multisig
Bound validators use FROST (Flexible Round-Optimized Schnorr Threshold Signatures) for decentralized signing of Bitcoin transactions.
Key properties:
3-of-5 threshold - 3 signers required out of 5
Distributed key generation - no single party ever holds the full private key
Key management - signer keys stored in AWS Secrets Manager
Resilience - supports key refresh on leak, recovery on loss, signer replacement
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