The Edge Podcast - Can Stacks Scale Bitcoin? - Revelo Intel

The Edge Podcast – Can Stacks Scale Bitcoin?

In this episode of The Edge Podcast which took place on July 8, 2023, DeFi Dad and Nomatic from The Edge Podcast hosted Muneeb Ali from Stacks to discuss Bitcoin’s potential, rising fees on the Bitcoin network, Stacks as a true layer-2, and more! Read our notes below to learn more.

Background

DeFi Dad (Host) –  Host at The Edge Podcast, educator, and investor at 4RC

Nomatic (Co-Host) – Co-Host at The Edge Podcast and investor at 4RC

Muneeb Ali (Guest) – Co-creator of Stacks, a Bitcoin layer-2 (layer-2) and CEO of Trust Machines

Stacks –  a Bitcoin layer-2 that brings smart contract functionality to Bitcoin, without modifying Bitcoin itself

Muneeb Ali: Bitcoin’s Potential and Rising Fees

  • Muneeb Ali, co-founder of Trust Machines and the Stacks has an extensive experience in the Bitcoin industry and has built several protocols and apps on Bitcoin. He’s also a key character in George Gilder‘s book ‘Life After Google‘.
  • Muneeb started his journey into crypto as an engineer and computer scientist by training. His interest was primarily in Internet open protocols and large-scale distributed systems.
  • While he was building a co-working space, he and his co-founder became more interested in Bitcoin and started experimenting with it. This led to them creating a DNS system based on Bitcoin and realizing the potential of using the Bitcoin blockchain as a backbone for a truly decentralized internet.
  • Muneeb views Bitcoin as the most mature and stable crypto, which allows other ecosystems to be more experimental. He sees Bitcoin as having the potential to last long and being more decentralized.
  • Muneeb values Bitcoin’s immutability and its resistance to censorship, which are essential qualities for certain applications such as money and domain names.
  • He talks about the resilience of Bitcoin in the event of the shutdown of companies or organizations related to it. Unlike other cryptocurrencies such as Solana, Bitcoin’s existence and operation would not be affected by the disappearance of a single entity.
  • DeFi Dad believes the predictability and reliability of the Bitcoin network is what gives it its value.
  • Muneeb says that the rise in fees in Bitcoin network fees in 2023 reflects an increase in the use of the Bitcoin network. He says that the trend has been towards layer-2 solutions for scalability, as demonstrated by the rise of Ethereum’s layer-2s.
  • Muneeb says that Bitcoin was underpriced and underutilized for many years. He believes the spike in Bitcoin network fees in 2023 indicates that Bitcoin will be able to fund its own security in the future.
  • He suggests that there is currently a large amount of untapped potential in the Bitcoin market. He compares the relative amounts of capital in Bitcoin and Ethereum, and the relative sizes of their layer-2 markets.
  • Muneeb says that the small size of the Bitcoin layer-2 market represents an opportunity for developers and startups. He notes the move of some developers from Ethereum to Bitcoin.
  • Nomatic agrees with Muneeb’s assessment of the potential in the Bitcoin market. He also believes that the rise of Ordinals, a method for inscribing more data on the Bitcoin chain, has expanded the potential uses for Bitcoin.
  • Muneeb sees Ordinals as a new foundation for development on the Bitcoin network. He says that people are already using it to create domain name systems, archiving services, and token standards.
  • Muneeb says Ordinals will have staying power as it is being used to inscribe valuable assets on the Bitcoin chain. He suggests that the rise of layer-2 solutions will necessitate tools for moving assets between layers.

Understanding layer-2 in Bitcoin: Blockstream’s Introduction and Stacks as a True layer-2

  • Muneeb talks about the concept of layer-2 in Bitcoin and how it was introduced by Blockstream. He explains that if Bitcoin is moved from the main chain to something else, it is generally considered a layer-2. He mentions the concept of “true layer-2” which depends solely on layer-1 for security.
  • Muneeb recognizes the confusion around whether Stacks is a layer-2 for Bitcoin, explaining that it can meet one of the two criteria for being a true layer-2. He points out that the terminology can be confusing for the general public, who often use the term layer-2 to simply mean a layer on top of layer-1.
  • Muneeb says that while Stacks is not as secure as the Bitcoin network, it does offer certain advantages.
  • Muneeb says that one of the biggest bottlenecks in the growth of the Stacks ecosystem is the inability to easily move $BTC into it. He mentions that work is being done to speed this process up and make it more secure.
  • Muneeb talks about the speed of transactions in the Bitcoin network, which can be slow and unpredictable. He mentions that this could be a potential problem for DeFi users who are used to faster transaction times on other networks.
  • Muneeb says that the Stacks ecosystem is working on a solution to improve transaction speed and reliability, which he believes is crucial for building a successful DeFi ecosystem on Bitcoin.
  • Nomatic says the Stacks ecosystem has a planned release called Nakamoto for the end of 2023. This release will allow for the transfer of Bitcoin from layer-1 to layer-2 and will speed up the layer-2 performance time of stacks.
  • Nomatic asks Muneeb about the current state of Stacks and its popular protocols.
  • Muneeb mentions a popular smart contract called Proof of Transfer (PoX) where people lock up $STX and get $BTC from the consensus. He mentions that there’s $300 million locked in the PoX smart contract currently and it has generated around $100 million in $BTC over the last year.
  • He says that Bitcoiners want decentralized products and that can be achieved in a transparent manner through smart contracts. He says that the Stacks ecosystem uses a different language called Clarity which is safer and more precise.
  • DeFi Dad asks Muneeb about the functions of Stack’s $STX tokens within the Stacks ecosystem.
  • Muneeb says that $STX is used for gas payments and with the future upgrade, it will be used as financial collateral for keeping signers honest.
  • Nomatic asks Muneeb about the regulated token offering with Stacks and the recent news about tokens labeled as securities on platforms like Binance and Coinbase.
  • Muneeb explains that they wanted to be compliant and that the disclosures they made with the SEC helped in making the project more transparent and decentralized. He mentions the challenges that come with being decentralized, but he believes that it is necessary for operating in this industry.
  • DeFi Dad asks Muneeb about how DeFi users new to Stacks can get started.
  • Muneeb recommends the Hiro Wallet, D’CENT, and Xverse as wallets to use and mentions applications like Alex and an NFT marketplace called Gamma. He mentions that there are ways to swap into the stacks ecosystem through a feature called the Magic Bridge.

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Show Information

Medium: YouTube (Video)

Show: DeFi Dad – The Edge Podcast

Show Title: Can Stacks Scale Bitcoin?

Show Date: July 8, 2023