With dApps and smart contracts, will Stacks be Bitcoin’s entry into Ethereum’s turf
Bitcoin-focused DeFi has long been in the works, to take advantage of its decentralized network. Recently, Stacks co-founder and data scientist Muneeb Ali stated,
“Bitcoin apps and contracts always sounded like good ideas in theory. The only thing that has changed now is that Stacks is making them real.”
Stacks was introduced as a layer-1 blockchain to make Bitcoin programmable, opening doors to dAPPs and smart contracts. In a recent Twitter exchange, Ali agreed that “building financial tooling and primitives around Bitcoin is harder.”
He further stated that it is because of the non-existing functionality for smart contracts on Bitcoin. Something, that Vitalik Buterin has also pointed out in the past. The very function on Ethereum lets it rule the DeFi roost while commanding over $152 billion from the entire $223 billion Total Value Locked (TVL) in the sector, at press time.
However, Ali made two major comments. Firstly, layer solutions can replace the necessity of forks and, Secondly, he stated,
“It doesn’t make sense for Bitcoin to have full smart contracts at the base layer so core developers are not interested in the idea.”
There is no need to fork or change Bitcoin to enable apps & contracts.
(Faketoshi might not like this.) pic.twitter.com/xhMpeW8EY0
— muneeb.btc (@muneeb) October 18, 2021
Despite the difficulty, according to Ali, DeFi on Bitcoin is not entirely impossible. He cited examples like “BTC swaps, BTC state changes through contracts,” etc. that open up these avenues. However, the inability to make changes to Bitcoin is considered both a pro and a con.
Stacks uses a Proof of Transfer (PoX) consensus mechanism over Bitcoin’s Proof of Work chain. Therefore, transactions on Stacks are verified on Bitcoin. In return, holders can earn Bitcoin through ‘Stacking’. This means,
“It is designed so that builders can benefit from Bitcoin’s properties without modifying Bitcoin itself.”
In terms of programming, Stacks uses Clarity smart contracts while Ethereum is built on Solidity. Additionally, Stacks also incorporate the ‘burning’ functionality of Ethereum differently. In a recent podcast, Ali explained that people had a very negative reaction to Bitcoin burn considering it’s valuable. Therefore, Ali and his team thought,
“What if, instead of the Bitcoin being burned, they’re being recycled and directed to some party…”
Considering “Bitcoin has insane hash power,” miners do not convert electricity and computing power to earn block rewards and transaction fees.
In terms of competition, Ali stated that the ‘biggest difference is the unique connection that Stacks house with Bitcoin.’ Bitcoin VC Alyse Killeen had also recently commented on Bitcoin DeFi in an interview with Blockworks. She said,
“Bitcoin presents a really interesting sort of foundation. That’s because of the type of decentralization that exists in Bitcoin…”