Unleashing the Power of Bitcoin: Stacks Creator Muneeb Ali Predicts a Revolutionary Breakout for L2s
In what is perhaps the most significant year for Bitcoin since its invention, Trust Machine’s CEO and Co-Creator of the Stacks blockchain, Muneeb Ali, believes that layer 2 networks have a bright future. This is due to several reasons, not only is Bitcoin(BTC) setting new all-time highs, but more people are now using it as actual, real money instead of merely buying for investment purposes. This expansion of the use of Bitcoin and the introduction of the Ordinal protocol have pushed Bitcoin’s “fee economy,” the cost of executing a transaction, to new heights. This rise in fees has been due to the refinement of the network’s “smart contracts” through BitVM and Bitcoin-based BRC-20 tokens.
Ali said, ”The principal purpose of Bitcoin remains savings, but if we consider that there is $1.4 trillion in currently deployed Bitcoin, even if most of it, say, eighty per cent, is kept for savings purposes, we are still left with an immense amount of capital that can be employed for productive purposes—hundreds of billions of dollars’ worth of BTC remains available.” Ali added, “I predict that this enterprise will be accomplished through layer 2 solutions such as Lightning, drivechains, or Stacks, all of which are attempts to alleviate Bitcoin’s scaling dilemma while simultaneously making it more cost-effective to use. In the future, we may see users who frequently transact in BTC without actually performing any operations on the base layer.”
CoinDesk recently talked to Ali where he discussed Nakamoto, the solution that Stacks has long been striving for, and his appreciation for the Ethereum and Solana networks, as well as the revival of interest in layer 2 Bitcoin options. The following interview was edited for brevity and clarity.
Stacks has already been in existence for quite some time, but to your credit, you have been continuously improving it. Work on the Nakamoto upgrade has been underway for several years. Honestly, has Stacks accumulated any technical debt because of its earlier decisions, or are there any limitations on what you can and cannot do now because of those early decisions?
There has previously been some technical debt, indeed, because when one speaks of an existing code base, there is friction involved when you make changes in a production environment. For instance, at the moment, there are $1.4 billion in STX assets locked within the consensus protocol. Once people move these assets elsewhere, there will be $1.4 billion in assets available in Stacks’ newest consensus protocol, but this can be deemed a good thing for a layer 2 solution. L2s can progress rapidly, whereas Bitcoin will always remain constant. Therefore, if the refreshing accuracy of an L2 stands at 6 months, this should be considered perfectly normal.
Divided layer 2s is gradually becoming a problem for Ethereum; Do you contemplate Bitcoin requiring L3s in the future?
This is not a new issue, Stacks has something called Bitcoin’s subdivides, which as a concept already exists, but they have yet to be fully unveiled because our efforts for now overwhelmingly focus on Nakamoto. It is not possible to explain this concept thoroughly; Stacks is used to handle logic and security between the subnets, which enhance privacy, while simultaneously keeping a record of these subnets on Bitcoin’s layer 1. This design enables users to utilize BTC liquidity. Upon the emergence of L3s, Stacks is likely to be the first L2 utilized to create them.” Furthermore, we are building software development kits (SDKs) that should enable developers to employ Stacks’ subnets to great potential. For instance, if an individual wants to generate data from layer 1 and obtain a decentralized group of thirty signatories and over $1.4 billion in assets being leveraged today, they can simply pick these signers to construct exciting and creative applications. When these projects start getting more modular, Stacks might become a widely used layer 3 solution, and we will observe this trend keenly as we try to become the leading L2 utilized in layer 3 solutions.
Is Stacks connected to Lightning?
Currently, few people have any understanding of the fact that Stacks happens to be connected with Lightning. For example, LNSwap allows for the seamless swapping of satoshis on Lightning with assets on Stacks, leveraging an atomic swap using LNSwap. These capabilities have only been extended further since Stacks operates as a routing layer between subnets, linking anything Stacks is connected to. Therefore L2,s tend to possess a significant advantage in this regard.
What is your impression of Bitcoin’s oracle ecosystem?
I have personally had many discussions with Oracle developers regarding their ability to integrate Bitcoin. At present, many are struggling to do so, which is quite predictable considering that while Bitcoin has a composed scripting language, already problematic to work with, the extent to which it can useful is limited. Furthermore, Stacks comes with a specialized oracle service that gives people the primary native STX/BTC price point since all bidding occurs on-chain, hereby creating an on-chain STX/BTC price portal. This technology might find many takers since Bitcoin’s current oracle system falls well short of the cutting-edge designs found on platforms such as Solana or Ethereum. However, Pyth (network) has already launched on L2s, and several other novel oracles are still in packaging, which could fill the existing gaps as well as make cross chain transactions possible by linking everything together. This proposal could revolutionize Bitcoin’s capabilities dramatically and make it much more programmable.
Are there any hidden dangers to increasing Bitcoin’s programmable capability given that it was originally built as a rather limited system? This debate is currently ongoing, represented by ideas such as Ordinal.
Fortunately, with BitVM, there was an accidental breakthrough that confirmed that Bitcoin is essentially Turing-complete. But one should be duly aware that creating programs which hold no logical downside is challenging to achieve. Therefore it is technically accurate to suggest that with BitVM you can write almost any application. However, current reality is mismatched with full smart contracts; the majority of BitVM programs have been shifted off-chain, seeking to perform minimal amounts of work on the primary layer 1 Bitcoin. Recently, when Taproot, the impact of even partial modification has been acutely felt since developers can now create unique projects. When it comes to BitVM, the most advantageous use cases are those which are highly specialized. Builders such as those who collaborate to develop trustless bridges, which hold the potential to significantly revamp L1 while at the same time uplifting L2, can create interesting applications by leveraging BitVM. Crucially, by exploiting this technology, those on L1 can continue operations unhindered, but those on L2 networks can access better features from other layer 1 s such as Solana or Ethereum. The full effect of this technology for ordinary users cannot be ignored, and they will flock to use it just as developers will invest in the technology itself.
In what promises to be a momentous year for Bitcoin, Muneeb Ali, CEO of Trust Machines and co-creator of the Stacks blockchain, believes that the network’s layer 2 solutions are poised for a major breakthrough. This is partly driven by Bitcoin’s recent surge to all-time highs, as well as a growing trend of using the cryptocurrency for actual transactions instead of just holding it as an investment.
The introduction of the Ordinals protocol, along with the rise of Bitcoin-based BRC-20 tokens and advancements in the network’s smart contract capabilities through BitVM, have all contributed to the revitalization of Bitcoin’s “fee economy” – the cost of conducting a transaction on the network. In short, people are not just buying and holding Bitcoin – they are actually using it.
Ali explains, “While the primary use case for Bitcoin remains as a store of value, with $1.4 trillion in deployed Bitcoin capital, even if the majority is held as savings, there are still hundreds of billions of dollars available for productive use.” He predicts that this activity will largely take place on layer 2 solutions such as Lightning, LayerTwo Labs’ “drivechains,” or secondary options like Stacks, all of which aim to solve Bitcoin’s scalabilityAs an experienced SEO and copywriter, I take pride in delivering high-quality, unique content that meets the highest standards in both writing and search engine optimization. With that in mind, I have rewritten the article you provided to make it 100% original without losing its essence and key points.
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In the cryptocurrency world, it’s common to find Bitcoin maximalists who are deeply invested in the development of other blockchain networks. However, there are some who closely follow these developments in other chains, including Ethereum and Solana. But what makes them do it? Is there anything they admire about these networks?
Surprisingly, many Bitcoin enthusiasts are not very knowledgeable about what’s happening in other blockchain networks. They fail to see the potential benefits of paying attention to developments outside of Bitcoin’s realm.
For instance, the Bitcoin Core development team is doing exceptional work, yet they struggle to receive enough support. This is where other ecosystems come into play, with their highly skilled engineers such as Algorand, a team that comprises PhDs from MIT. These bright minds have built a real blockchain and gained experience in running production systems. Unfortunately, there’s no efficient way of learning from their experiences and implementing them in Bitcoin Core.
Moreover, the challenge lies in hiring and retaining such talent, as well as incentivizing them. The rest of the blockchain industry is highly competitive, with companies like Solana Labs and Avalanche offering alluring packages to attract top talent. Meanwhile, Bitcoin is missing out and not playing the same game. But imagine the possible advancements in Bitcoin Core if it could learn from the experiences of other networks and incorporate them into its development.
Moving on, it’s evident that many people have a strong desire to hold and save Bitcoin, with about 70% of addresses being unmoved. Moreover, the increased flow into Bitcoin ETFs indicates a growing interest in long-term savings. So, is there any guarantee that the Bitcoin smart contracts space will ever reach the size of Ethereum?
This question is not new to me. However, it’s critical to note that I keep my Bitcoin savings in cold storage and have a separate pool of capital for experimenting. This capital could be invested in ETH or SOL, but it can also remain as BTC. The key factor that sets them apart is the preference for BTC as a long-term savings technology. Nonetheless, people spend Bitcoin too.
What many forget is that the Ethereum ICO, which raised 18 million BTC, was a classic success story. Additionally, many other projects, like Rootstock, have capitalized on Bitcoin for their fundraising needs too. Even the traffic towards some of the new NFTs, like Quantum Cats, has shown impressive figures in terms of Bitcoin transactions. So, it’s safe to say that people are deploying their Bitcoin for different purposes.
While the primary use case for Bitcoin remains as a savings technology, there’s still a significant chunk of capital, about 1.4 trillion dollars, that can be utilized for other purposes. It’s more than what other networks, except Ethereum, have to offer.
Moreover, institutions are also showing interest in Bitcoin, but they face challenges in finding safe and direct ways to earn yield on their BTC. Despite the BlockFi incident, DeFi has remained resilient, even during the bear market. But Bitcoin’s lack of a healthy and decentralized smart contract option hinders institutional adoption. If there were a way for Bitcoin to become a productive asset, the institutional market would adopt it rapidly.
However, it’s worth noting that the introduction of smart contract capabilities in Bitcoin also poses risks. Nevertheless, there’s a risk-to-reward ratio in every market, and there are ways to mitigate such risks. For instance, keeping BTC in DLCs on the layer 1 ensures that the BTC only moves to the L2 network in case of liquidation. In such a scenario, it’s no longer your Bitcoin, but it’s a safer way of participating in DeFi than giving your BTC to a company.
It’s understandable that people value their Bitcoin and don’t want to lose it. But that shouldn’t limit the existence of free-market solutions that offer the opportunity to earn yield. After all, some may want to take more risks with a portion of their BTC holdings, and it’s their prerogative. Currently, there’s a significant demand for such options, and it’s about time we offer them a platform to do it.
Lastly, there’s the topic of the Reg A+ token listing. While it has its challenges, it has also brought credibility and transparency to the project. For instance, many exchanges, especially in the U.S., were hesitant to list the token, but it gave people confidence to invest in the project. Moreover, it triggered early decentralization of Stacks, as the original company was dissolved, and the team formed independent entities. Nonetheless, coordinating with multiple companies has its downsides too.
On a more personal note, you often receive hate on Twitter, especially from Bitcoiners, with accusations of launching a scam. The amount of negativity can be demotivating. But on the bright side, many respected individuals in the Bitcoin community support the project. In-person conversations are more amicable, and there’s excitement in the builders’ community. Ultimately, it all comes down to personality and perseverance, and being a stubborn individual, I keep pushing forward even when faced with criticism.
