Dec 11•6 min read
3 Reasons Why Stacks Is The Best L2 solution For Bitcoin
The past few weeks have been an eye-opener for many people in the Bitcoin community, myself included. Bitcoin transaction fees have exploded higher without warning, much to the chagrin of hardcore Bitcoin maximalists who have a specific view about what Bitcoin should be used for.
There has been increased interest from institutional and retail investors because of the pending approval of a Bitcoin ETF. Are these people out there trying to front-run the decision by the SEC? Sure, but this doesn’t explain the sustained increase in transaction fees.
The main reason why fees have stayed consistently elevated is because of ordinal inscriptions and BRC-20 mints on-chain. There has been so much activity on a chain that Bitcoin's transaction fees were higher than Ethereum's last month.
As of 12-12-23, 47 million inscriptions have been created on-chain, and the fees generated so far have been 3,536.8980 Bitcoin!
This equates to roughly $146 million in fees paid to the miners in Bitcoin. This should be considered good for Bitcoin, right? Blocks are full, and fees are being paid. As a Bitcoiner, what else could we want?
If you have been on Bitcoin Twitter lately, you understand there are two distinct camps in Bitcoin right now. You have the pro-ordinals Bitcoiners like Udi Wertheimer and Trevor Owens and the anti-ordinal Bitcoiners like Max Keiser, Guy Swann, or Luke Dashjr.
Pro-ordinals Bitcoiners believe that innovations such as ordinals and BRC-20 should be happening on Bitcoin because they bring economic activity back to the oldest and most secure blockchain in existence today. The anti-ordinal crowd believes that oridnals are nothing but spam and is clogging up the network, thus making it harder for Bitcoin to be used for everyday purchases.
Both sides have arguments about why they think they are right, and I am not about to offer an opinion. Both sides can agree on the fact that transaction fees have materially increased and are most certainly going to rise as a diverse new group of people come into Bitcoin in the next 12-24 months.
I think it’s starting to dawn on many Bitcoin maximalists that on-chain Bitcoin isn’t going scale to 8 billion people on Earth and that there is an acute need for L2s that can take some of this fee pressure off of Bitcoin. L2s, like the lightning network, have a role to play but come with their own tradeoffs and trust assumptions, namely opening and closing channels in a high-fee environment and custodial issues.
I believe Stacks is best positioned to help Bitcoin achieve the mission of hyperbitcoinization for the following reasons.
Secured By Bitcoin
What makes Stacks unique and the best L2 solution is that Bitcoin secures it. After 100 blocks, which is roughly about a day's worth of transactions, Stack transactions achieve Bitcoin finality, so to reverse Stack transactions, an attacker would have to reorg the Bitcoin blockchain as well. This isn’t happenin’.
This type of security guarantee will attract new users and massive amounts of Bitcoin capital to the Stacks ecosystem as people learn about this fact.
Nakamoto Upgrade Will Boost Transaction Speed
If you have used Stacks recently, you understand that transactions on Stacks can take a while to confirm. Right now, transactions tend to settle between 10-30 minutes, which feels like an eternity sometimes, right? With the Nakamoto upgrade, transaction speeds will be reduced to 5 seconds!
This is achieved using two types of blocks: a fast block and a settlement block.
A fast block will be produced every 5 seconds, containing new contract calls, new transactions, and other fast blocks.
A settlement block will be produced at every Bitcoin block but contain no new transactions. It will settle the recent sequence of fast blocks.
Five-second transaction speeds will make Defi on Stacks faster and easier for users to put their Bitcoin capital to work.
Bridge Bitcoin Into Stacks Ecosystem With sBTC
Another exciting development happening on Stacks, along with the upcoming Nakamoto upgrade, is sBTC. When sBTC is fully deployed on Stacks, users can “peg-in” their Bitcoin into the Stacks ecosystem and have a 1:1 Bitcoin equivalent on the Stacks network represented as sBTC.
Having the ability to peg-in in chain Bitcoin and use its value in applications such as decentralized Bitcoin lending and Bitcoin-backed stablecoins is a big freakin deal, in my opinion. While most people are perfectly fine with Hodling and not touching their BTC bags, some will want to put some of their Bitcoin capital to work to earn a yield. Dapp on Stacks are being created to meet this upcoming demand. Dapp such as those listed below will incorporate sBTC when released. This is just the tip of the iceberg, in my opinion.
In addition to pegging in and putting your Bitcoin capital to work, you can peg out and get your on-chain Bitcoin back, all in a non-custodial, decentralized manner. No other Bitcoin sidechain can claim to do that.
Additionally, sBTC will be a game-changer and will become the primary way that Bitcoin moves around the Bitcoin ecosystem as a way to reduce transaction fees. In the future, sending on-chain transactions is going to be exorbitantly expensive.
One could imagine a situation where on-chain Bitcoin is pegged into Stacks, a user sends an sBTC transaction for a fraction of the cost of on-chain, and the receiver gets sBTC and pegs out back into on-chain Bitcoin. In this situation, Stacks become the transfer rail of Bitcoin.
Closing
I could go on and on about Stacks, but I think I will stop here. Overall, I believe that Stacks will be absolutely critical to turning Bitcoin from an asset that you buy and hold into an asset that can be used to build society and promote prosperity all over the globe. Without Bitcoin, there are no Stacks, and without Stacks, Bitcoin can’t achieve its mission to upend the fiat monetary system and return power to the people.
If you want to learn more about Stacks, check out the Stacks whitepaper!
https://gaia.blockstack.org/hub/1AxyPunHHAHiEffXWESKfbvmBpGQv138Fp/stacks.pdf
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