The Bitcoin blockchain itself cannot support smart contracts and sophisticated apps, so to use BTC in a decentralized app, users must first move their BTC in and out of other Bitcoin layers that offer fully expressive smart contracts and decentralized applications. To do that, users go through a “peg,” in which:
A user deposits their Bitcoin (“pegs in”)—we’ll get back to where they deposit in a moment, that’s important.
A user receives a synthetic asset corresponding to the exact amount they deposited. This new asset is programmable and can be used in various Web3 apps.
A user can withdraw all or some of the Bitcoin they deposited (“pegging out”) at any time by burning (destroying) the corresponding amount of that synthetic asset. If they traded that synthetic asset to someone else, then whoever bought it could redeem the corresponding amount of Bitcoin through the same process.
Simple enough, but today there is a fundamental issue with pegs. They are not decentralized. They require a custodian, someone (or a group of someones) to process the peg-out and send BTC back to the user’s BTC address.
In other words, you have to trust a centralized entity. That could be a licensed trust company like BitGo (behind wBTC on Ethereum) or a federation of trusted signers to process peg outs (like RSK and Liquid, other Bitcoin layers). But there hasn’t been a way to do this in a secure and decentralized way. In using a Bitcoin peg, you sacrifice the decentralization and security that makes Bitcoin appealing in the first place.
That is, unless you have a decentralized peg. Meet stacks :
sBTC is the first decentralized, non-custodial Bitcoin peg that allows Stacks smart contracts to write back to the Bitcoin blockchain.