Blockchain project Stacks has published a whitepaper showing how to make Bitcoin fully programmable using a new digital asset called “Stacks bitcoin” (sBTC).
Think of a six-digit gorilla avatar. Bitcoin’s simpler scripting language limits what Bitcoin developers can create on the platform.
Stacks, an existing smart contract platform, wants to break through these limitations by introducing a new Bitcoin-derived digital asset, sBTC (pegged 1:1 with Bitcoin). You can convert back to Bitcoin (BTC) in no time.
“Bitcoin is, by design, a relatively slow, fully expressive and smart
The contract you need to build sophisticated applications,” says the white paper. “Thus, faster and more sophisticated applications should be built outside the base layer. Bitcoin’s layer enables this.”
read more: Smart Contract Platforms: Past, Present and Future
The term “layer” is Stacks’ jargon for systems outside of Bitcoin’s base layer, such as sidechains, which are secondary blockchains that interact with the primary blockchain. In the whitepaper, Stacks will act as a Bitcoin sidechain powered by both sBTC and STX (Stacks’ native token).
The project claims in its white paper that its Bitcoin sidechain could unlock “hundreds of billions of dollars” in Bitcoin DeFi.
According to Stacks co-founder Muneeb Ali, the concept is still in the implementation stage and will be formalized under Stacks Improvement Proposal (SIP) 21.
“Voting has taken place and implementation has begun,” Ali confirmed in an interview with CoinDesk. This will be the next major release. My best guess is probably 8-9 months from now. ”
How sBTC works
The current Stacks protocol uses a consensus mechanism called “proof of transfer” (a way for computers to agree on the state of the network), allowing anyone to become a miner or “stacker”.
Miners earn STX rewards by mining Stacks blocks, but must first post Bitcoins to get mining privileges. That bitcoin is then distributed as a reward to stackers holding copies of the stack ledger. Stackers also need to lock the STX for a period of time to gain stacking privileges.
In the proposed sBTC peg system, users send regular bitcoins to a stacker-controlled wallet (a process called “pegging in”). This action creates an equal number of sBTC that can be used by smart contracts on the stack.
To get Bitcoin back (“pegging out”), users put sBTC back into their wallets. Stacker then signs these peg-out requests and returns an equivalent amount of bitcoin to the user. This also prompts her Stacks protocol to write his corresponding sBTC.
“It’s a completely trustless system. It’s a protocol,” says Ali. “We have a dynamic set of signatories that have financial incentives to become signatories and sign peg deals.”
Bitcoin sidechains are nothing new. Bitcoin infrastructure company Blockstream published a whitepaper on sidechains in 2014 and now has a fully functional sidechain federation called Liquid.
Earlier this month, Layer 2 Labs raised a $3 million seed round from angel investors to develop another flavor of Bitcoin sidechains: Drivechain.
Read more: Bitcoin developer Layer 2 Labs raises $3M to bring DriveChain to network
Additionally, Bitcoin developer Ruben Somsen is working on “Spacechain,” which he describes as “Bitcoin’s one-way fixed sidechain.”
So what new innovations will sBTC bring to sidechain conversations? Ali argues that the sBTC model is unique in that anyone can become a miner or stacker. He sees using STX to motivate stackers to sign pegout requests as a distinct advantage, but alternative projects tend to avoid using altcoins such as his STX like the plague .
“It’s a trade-off,” explains Ali. “The trade-off with Liquid is that users have to trust his Blockstream and his friends, the Federation. [STX] There is no company in the middle. So you can choose either. you can’t have both.