Nov 13•5 min read
sBTC: The Backbone Of The Emerging Bitcoin Economy
Welcome back to my blog! I am continuing my series on exploring the Stacks ecosystem and giving you a hands-on look at what it looks like to use the various Dapp that have been created on it. Today, I wanted to talk about the upcoming release of sBTC, what it means for the Stacks protocol, and how it will improve user experience overall. So let’s dig in, shall we?
What Is sBTC Exactly?
In a nutshell, sBTC is a synthetic token of the underlying asset, which in this case is Bitcoin. What sBTC is doing is creating a wrapper for Bitcoin in the same way you can wrap Bitcoin on Ethereum. Instead of having Bitcoin’s value being transferred to Ethereum, with the development of sBTC, Bitcoin value can stay in the Bitcoin ecosystem. In a nutshell, sBTC is a representation of Bitcoin’s value on the Stacks network, hence the s before BTC.
An obvious question to this is if wBTC already exists and is functioning out in the wild, why do we need yet another token? This is a good question, and I will attempt to answer it right now. Wrapped Bitcoin, at the end of the day, is still an ERC-20 token on Ethereum, and that comes with all the trust and centralization issues that have plagued the protocol for years. Why risk your Bitcoin on Ethereum when you don’t have to?
Stacks is a much better platform to deploy your Bitcoin capital. The protocol is secured by Bitcoin, decentralized, and has a community of active builders who improve Stacks daily. The Nakamoto release that should be out sometime next year is poised to speed up transaction times from the standard 10 minutes of a Bitcoin block all the way down to mere seconds.
This will be a game changer for Stacks and, ultimately, Bitcoin. It will make Bitcoin a lot more flexible and give people who want the ability to deploy their Bitcoin in different ways instead of giving up custody or leaving the Bitcoin ecosystem.
I firmly believe that Stacks will serve as the plumbing for the Bitcoin ecosystem. Think about it for a second. If you have been around Bitcoin for a while, you know every time there is a run-up in price, transaction fees go through the roof! We saw this when ordinals hit the scene, and we are seeing it again with the anticipation of a Bitcoin ETF approval by the SEC. Take a look at the fees in the mempool right now.
Need For Speed!
I even have a personal note to add here. I made a transaction using a low fee of 2 sats /vB recently, yea I know it's not the brightest idea; two weeks later, it’s still in the mempool, just hanging out. I don’t see that sucker being confirmed any time soon. This issue is only going to get worse as adoption picks up. I am fairly well versed in Bitcoin, and I made this silly mistake; now imagine a newcomer to the space and they do the same thing; this will probably turn them off to Bitcoin very quickly. Imagine a business trying to save on fees on a Bitcoin standard, and they send a low-fee transaction and have their transaction stuck in the mempool for days or weeks on end. Probably not going to fly with a whole lot of businesses that have to manage profit and loss like a hawk.
Businesses will want faster transaction speeds, and sBTC can provide it. Imagine two businesses on a Bitcoin standard. Company A needs to send Bitcoin to Company B in a cost-effective and expedited fashion. They have two options. Option 1 is to send Bitcoin on layer 1 with high fees that may be cost-prohibitive, or option 2, which is to peg-in their Bitcoin into the Stacks ecosystem, send sBTC to company B in seconds, and then Company B pegs-out the Bitcoin out of Stacks and receive layer 1 Bitcoin in seconds and for a much lower cost, and all in a trustless manner with now middleman custodian. It’s like magic but better!
This is what businesses expect now and will come to expect on a Bitcoin Standard. In addition to faster transaction times, people will want to do things with their Bitcoin like:
Trustless, Bitcoin-collateralized stablecoin loans
On-chain, undercollateralized BTC lending
Trustlessly deploy BTC to earn BTC yield
Payments
and more!
These types of financial tools are in demand and will be created on Stacks.
Overall, sBTC is a big freakin deal and is something that everyone in the Bitcoin space should be paying attention to. A lot of Bitcoin maxis hate Stacks because it has a token or for having a premine, but it doesn’t matter. Like it or not, Stacks is here to stay and is poised to help spur the adoption of Bitcoin. As always, I urge everyone to do their own research before making any financial decisions.
Here are some resources that you can use if you would like to learn more about sBTC
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