Stacks Creator Ali Calls Bitcoin 'Apex Predator' as Development Flourishes on OG Blockchain

Muneeb Ali, the co-creator of Stacks and Princeton-educated computer scientist who's now CEO of the Bitcoin-focused development firm Trust Machines, spoke with CoinDesk's Jenn Sanasie on the flurry of development and layer-2 building now taking place on the original blockchain.

AccessTimeIconFeb 28, 2024 at 12:00 p.m. UTC

There's a buzz around Bitcoin these days, and it's got as much to do with the development taking place on the original blockchain – once seen as a sleepy and ultra-conservative ecosystem compared with Ethereum, and its higher frequency of upgrades and greater programmability – as with the newly approved spot bitcoin ETFs that have pulled in billions of dollars from investors.

Bitcoin the cryptocurrency is in the midst of a powerful rally, headed for a sixth straight monthly gain, its longest such streak in three years. With a market capitalization of $1.12 trillion, bitcoin (BTC) accounts for roughly half the value of all cryptocurrencies; put another way, it's worth as much as all other digital assets combined.

But it's the newfound spirit of development that's got engineers and programmers including Muneeb Ali, CEO of Trust Machines and co-creator of the Stacks project, suddenly hitting the talking circuit. Top blockchain tech podcasts are airing episodes about the prospects for Bitcoin layer-2 networks, analysts are scurrying to assess the potential, NFT-like digital art on Bitcoin are fetching tens to hundreds of thousands of dollars, and there's even a new venture-capital fund to plunk down money into Bitcoin DeFi projects.

CoinDesk's Jenn Sanasie interviewed Ali, who has a Ph.D. in computer science from Princeton University, about the flurry of activity, and what he sees as the real breakthroughs that are making it all possible, and what he expects to come of it all. He also spoke about the Stacks project's much-anticipated Nakamoto upgrade, tipped to drastically improve the speed.

The interview was transcribed by Bradley Keoun and lightly edited for clarity.

What are you watching in the news these days?

Ali: One of the news items recently that caught my eye was a recent funding round of EigenLayer. So they raised around $100 million from A16Z. I think the thing that interests me about that particular protocol is that it's looking at capital that's locked on ETH and trying to find interesting use cases for it. How can you reuse the locked capital? And I'm very interested in seeing these types of primitives evolve around Bitcoin as well.

We know that Bitcoin is sort of like the apex predator. Like it's the pristine asset. And these types of concepts coming to Bitcoin could be much more significant because Bitcoin is a trillion dollars in capital. And we are just seeing the start of people locking their BTC capital into smart contracts running on L2s and so on. And I think if we can provide people with increased flexibility, where they could lock BTC in a contract, but then potentially reuse it in other interesting ways, obviously it comes with risks and all.

EigenLayer is a really hot topic lately, really exciting project that everyone is talking about. How difficult would it be to bring something like this to Bitcoin, and what kind of timeline would we be looking at to see this kind of development in the Bitcoin ecosystem?

Ali: I think the main difficulty in bringing these types of protocols to Bitcoin has always been at the L2 infrastructure layer. So there are two parts to it. One is, what's the consensus mechanism for the L2? Is it really secured by Bitcoin? That's work that, for example, Stacks has done with the Stacks Nakamoto launch, where your transactions are secured by 100% of Bitcoin hashpower. And the second thing is how secure it is to move your BTC from L1 into L2.

And over there, Stacks has done some work with sBTC, but other projects like BitVM actually reduced the trust assumptions significantly. So I think we're making progress on both those two sort of like critical infrastructure points. Once that's done, and I think we are very close, Stacks Nakamoto launch is only a few months out at this point, then I think the developers can program anything that they want within the L2 environment. So that's sort of like the exciting part, that once these infrastructure challenges are behind us, I think we can unlock a lot of creativity by developers using BTC as the asset.

For so long, Bitcoin was an ecosystem that was relatively unchanged, right? Sitting here in 2024, talking about these developments, how does it feel to be sitting here and talking about Bitcoin evolving at such a rapid pace?

Ali: I think that's definitely interesting. I would say that from where I stand, it definitely took longer than I expected. For example, I mean, we knew that ecosystems outside of Bitcoin can move faster, they can take more risks, and they can innovate faster as well. But you can sort of watch some of those experiments and the stuff that's working out. For example, one clear example would be stablecoins. At this point, we know stablecoins work. They have clear product market fit, people want them, people want to use them, then these primitives would come to Bitcoin. I think the coming-to-Bitcoin part was slower than we anticipated, but it definitely feels good that it's finally happening. And I think Ordinals and Casey [Rodarmor], they deserve a lot of credit. Like, I do think when Ordinals started, that was sort of like the spark where

Bitcoin culture started changing, the amount of developers and capital coming into Bitcoin started changing. And then some of the OG projects like Stacks and others who are already working, I think they got some sort of a fresh fuel on the fire as well. And people saw that, look, a lot of this stuff is already built or almost there, and now developers are getting really excited about it. So I think in some ways, I'm glad that we took the slow and steady approach, that we're still around to see the innovation coming back to Bitcoin, and I think that's an exciting time to be here.

Let's talk a little bit more about Stacks. You mentioned the Nakamoto upgrade that's coming up soon. Talk to me about your focus for Stacks as we move further into 2024 and what we can expect from the upgrade.

Ali: As Bitcoiners, we definitely have a different set of values. There is definitely much more long-term thinking. There's definitely aversion to taking needless risks. So I think the Stacks L2 project basically represents a lot of that. For example, a lot of R&D work went into designing really safe programming languages. Similarly, on the consensus side, a ton of work went into reusing Bitcoin's hash power as much as possible, or reusing Bitcoin security as much as possible. I think it definitely shows that long-term thinking. So the Nakamoto launch has been in the works, I would say at this point, almost like two years. And a lot of challenges, frankly, were operating as a decentralized ecosystem. Again, going back to the ethos of Bitcoin, the Stacks L2 ecosystem itself is heavily decentralized. I think there are like 10-plus different entities that are contributing to some of the core software and there are like 20 or more outside of that as well. And sometimes there is a lot of overhead and challenges in functioning as a decentralized ecosystem, but I think it's better for the long-term health as well. So with the Stacks Nakamoto, things are finally coming together and maybe the timing would work out as well. A lot of devs are excited about doing the launch of Nakamoto, which is basically a much faster L2 that is secured by 100% of Bitcoin hashpower.

And so people are looking forward to that increase in speed and functionality. But the timing might be very interesting because right now it's scheduled for approximately when Bitcoin halving is happening. And I think that would be sort of interesting because Bitcoin, there's a lot of attention on Bitcoin during the halving time. And if the major L2 is doing a launch around the same time, I think that'd be very exciting.

I'll be on the edge of my seat waiting for that. Let's talk a little bit about Bitcoin scalability. Layer 2s are really meant to solve some of the scalability challenges with the network. Talk to me about if that's happening, what still needs to happen.

Ali: Let's say that at a rough approximation, you know, 100 million people use Bitcoin. I think the numbers are off, depending on, like, what data set you use, but let's say approximately it's 100 million people right now. To get to a billion people, we know for sure that it's not going to happen on the Bitcoin L1. Like there's basically no way, right? Like if they wouldn't be able to own a UTXO on-chain. So we absolutely need these L2 solutions.

And one of the things that has changed in the last one year is that, before, the Bitcoin community was sort of putting all of the scalability eggs in the same basket, which was Lightning. And don't get me wrong, Lightning is amazing. I think some of the companies there have done groundbreaking work. They're growing, they're actually getting more nodes online. But interestingly, over the last one year, this sort of attitude has shifted to, Let's try all sorts of experiments as L2s. And this is something that happened with Ethereum. We see almost like 10 to 20 big projects. But in terms of experiments that people tried, it would probably be 100 or 200 or more. And some of them didn't work out. Some of them became bigger projects with more traction, more capital, more developers, and so on. And now we are beginning to see that with Bitcoin. There's obviously Stacks and Rootstock, which are the more OGs. But there are a fresh batch of new L2s coming up. That is very, very exciting.

Because what happens is you let the free markets try different designs, and then people are tweaking things. They're trying different iterations and remixes of different ideas. And the probability that at least a few of them are going to work is actually much, much higher than putting all of your eggs in the same basket. So I think with that happening, my confidence level that we will have some L2s that are actually sort of working out commercially in the market and taking a lot of load off of Bitcoin L1, where the experience is great, people can do fast, cheap transactions and infrastructure sort of goes in the background. That's like where we want to be, where Bitcoin infrastructure is just in the background, it's reliable, people just can do fast, cheap payments and it sort of works all the time. And I think with these new experiments, I think some of the L2s would definitely be able to deliver on that.

Ordinals have really revived the NFT narrative. And it's interesting that that came from the Bitcoin ecosystem. Do you think that we're going to see some of that traction that we saw with Ethereum come over to Bitcoin?

Ali: I'll separate out the two things here. One about Ordinals. I'm of the view that usually when something finds product market fit, there is like one core property that sort of stands out and people just get it, right? Often it's like something very simple. For the case of Bitcoin as money, it's 21 million coins. It's as simple as that. People know that there only ever will be 21 million coins, and it's durable, it's not gonna change, and people get it. It's a very simple thing. And if you look at Ethereum, they've tried very complicated arguments around ultrasound money and how, you know, supply is changing and this and that, and that complicated thing is actually not working. The simple, there will only be 21 million coins is actually what's working in the market.

Same with NFTs when I look at it. Yes, there are many other factors, but just the fact that with Ordinals, the image is literally on the chain. And it's not on any chain, it's on Bitcoin, right? We know that Bitcoin is going to be around. I think that one property just stands out. Like people just feel that, you know, this is real, this thing is never gonna disappear, and my digital art is now stored forever. And that's it. Like I think that's the base level property. And then there are obviously other things around it that are leading to a lot of sort of interest there. And I think with Bitcoin DeFi, which is the main thing that gets enabled by L2s, we'll again see these simple primitives. For example, one I can think of is a lot of people don't want to sell their Bitcoin. So a very simple primitive could be, Hey, don't sell your Bitcoin, but lock it in a decentralized way and get some liquidity. Take a stablecoin loan. Again, a simple concept that a lot of people get, and they can start using it. I think that's how you start getting a lot of product market fit.

And now coming to your second question, I do think that in the overall industry right now, there's a lot of capital and developers who have the model that there will be some alt L1 like a Solana or something else, they're going to start eating on Ethereum's market share. I think there's some truth to it. Solana is gaining a lot of traction and it's popular in developers and so on. But I think what the market is beginning to see right now is that there's a much bigger category, which is Bitcoin L2s, because these Bitcoin L2s can match the alt L1s or Ethereum head-to-head on every single feature. It could be speed, it could be expressivity, and so on, but they can match it. And I think that could potentially be a much bigger market simply because of the fact that they're not starting from zero. Like whenever you launch a new project, you're sort starting from zero in terms of how much capital there is in that ecosystem. When you launch a Bitcoin L2, you're launching something on top of a trillion dollars of capital, right? So I think there's a much easier path to that capital getting deployed and Bitcoin L2s as a category growing. So I do think they're going to start giving Eth L2s some competition, but even like Eth L1 might start seeing competition coming from Bitcoin L2s, which is something that I don't think a lot of people are talking about.

Besides Stacks, what Bitcoin L2 are you watching? What Bitcoin L2 is doing something very innovative that you're keeping your eye on?

Ali: The landscape right now, what it looks like is, uh, there are the big four, which is Stacks, Rootstock, Lightning and Liquid. And they're all sort of, very different, right? Liquid is a federation. Lightning is mostly for payments and a peer-to-peer thing. I think Rootstock and Stacks would qualify as, what the Ethereum or Solana developers expect from an L2. Right? So those are the two bigger ones.

And then there are new experiments coming. I think Babylon is one. They're doing something very interesting with enabling Bitcoin to be locked at the L1 level and you're sort of like participating in proof-of-stake on other chains. I think that's a very interesting model. Some people have worked on things called Spiderchains, which are, again, interesting. The common trend there is trying to reuse BTC capital. They can't take Bitcoin capital and participate in becoming a validator on an L2 or some other ecosystem out there.

And I'll come back to the project that I'm very, very excited about, which is BitVM. It's not something that is a L2 itself, but it's a fundamental building block that can enable other L2s that can even potentially use like ZK-style roll-ups. But more importantly, I think BitVM helps the bridges, like the bridges between the L1 and the L2s. I think we are maybe like a year out from seeing it really working out in production. But now that we have a path that doesn't require any changes to Bitcoin L1, like that makes it very, very realistic and practical. Like before that a lot of people would rightly criticize that if your L2 requires changes from the Bitcoin L1, you're probably never going to get those changes. But with BitVM, or the work that we're doing with sBTC, we don't require any changes from Bitcoin L1. So I think that becomes a much more pragmatic, practical solution that people know. It's going to ship, it's going to work. And I think that just changes the game.

A lot of folks are interested in Bitcoin now because of the approval of the spot bitcoin ETF in the U.S., but what do you think needs to happen to get a mainstream audience more interested in some of the other facets of the Bitcoin network?

Ali: I look at spot ETFs as bitcoin's use as a digital gold, or a store of value, like you're passively, sort of like, holding your Bitcoin. And I think for the mainstream users, one thing I'd love to see is more wallets like Leather or Xverse. These are kind of like next-generation web wallets for Bitcoin. They have big built in support for L2s. And I think they can expose people to actively using their Bitcoin. So in my mind, the model is that if you're using Bitcoin on the L1, maybe you have a hardware wallet, you're doing self-custody, or you just buy through an ETF. That's sort of like the store of value digital gold use case. But when you're using your Bitcoin in a wallet like Leather or Xverse, which is like a modern web wallet, then you're doing interesting things with it. You might be able to swap against a stablecoin or purchase an Ordinal or an NFT, or participate in some smart contracts. And that's, I think, the more and more users that we see that are using Bitcoin in that modern way, I think that could be very exciting because once you like use it, you can almost like touch and feel it and then you get the idea of like how powerful this technology is versus just passively holding.

Edited by Bradley Keoun.


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Jennifer Sanasie

Jennifer Sanasie is an anchor and producer at CoinDesk. She is a seasoned journalist, entrepreneur, and Web3 enthusiast who has made a significant impact in various industries.

Bradley Keoun

Bradley Keoun is the managing editor of CoinDesk's Tech & Protocols team. He owns less than $1,000 each of several cryptocurrencies.