Bitcoin L2s and Ordinals are gaining traction, and many new users have recently discovered Stacks, a quick guide for new users.
Stacks focuses on unlocking the Bitcoin economy, imagining a system similar to Solana but using BTC as the asset.
Project History: The Stacks mainnet was launched in early 2021, using a Bitcoin-powered consensus mechanism. The project is undergoing a major upgrade called Stacks Nakamoto, bringing it closer to Bitcoin L2 (more details below). Builders in the Stacks ecosystem are BTC believers who want to build everything with BTC as an asset.
There are three main reasons why Bitcoin Layer 2 is important:
1) Bitcoin L1 cannot scale to a billion users. We saw high fees on BTC L1, with fees increasing 100x, making it difficult for an average user to pay $40 in fees for a $100 BTC transaction. Fees on L2 are much cheaper and they increase Bitcoin’s effective bandwidth. L2 is like building a new highway next to a congested highway.
2) Bitcoin L2 allows developers to build any application with BTC that they can build with Ethereum or Solana. Looking at the various non-BTC ecosystems, it's clear that there are use cases that have clear product-market fit, such as being able to collateralize ETH or SOL to obtain stablecoin loans, or having a native DEX to trade ETH/SOL. Bringing proven use cases to BTC is obviously desirable.
3) Bitcoin L2 makes L1 tools like DLC (Discrete Logarithmic Contract) more useful. Users can participate in certain Stacks contracts through DLC without requiring BTC to leave the L1 chain, for example, participating in liquidity pools without requiring BTC to leave L1. (BTC will only move to L2 when a user is liquidated.)
Roadmap for 2024: Stacks is a very decentralized ecosystem. The working group in the open source ecosystem has summarized some highlights for expectations in the first half of 2024, including:
1) The Stacks Nakamoto upgrade is scheduled to launch before the Bitcoin halving. This will bring fast (5 seconds) block speeds to Stacks, a significant improvement over the 10-30 minute block speeds currently tied to Bitcoin L1, and improve the security (reorg resistance) of Stacks to Bitcoin 100% of the hash rate.
2) sBTC may be released as the second hard fork after Bitcoin halving, making "BTC on L2" possible. What is unique about sBTC is that it is secured at the consensus level. There are proposals to use it directly as Gas on Stacks. Additionally, the open network of sBTC signers may be the largest and most decentralized set of signers at the launch of Bitcoin L2/Anchor (current estimates based on signer pool performance and signer interest).
3) Stacks supports WASM. Ongoing WASM work not only accelerates Clarity (security language) contract execution, but also opens the door to support other languages such as Rust.
