Stacks, an open-source smart contracts firm for the Bitcoin layer, has just released two papers proposing a trustless movement of Bitcoin across decentralized applications and Web 3. 

The first paper features the release of a token called sBTC. The second paper discusses the Nakamoto release, an upgrade to Stacks.

What is sBTC?

According to Muneeb Ali, the co-founder of Stacks, sBTC is “a trustless two-way Bitcoin peg.” He likened the proposed token to assets pegged to Bitcoin, such as wrapped Bitcoin (WBTC) and Liquid Bitcoin (L-BTC). The difference is that sBTC has “no custodian or federation.”

The papers are by 3 working groups (with some anonymous contributors!) and have no listed authors.

First paper proposes sBTC a trustless two-way Bitcoin peg. Think WBTC (Ethereum) or L-BTC (Liquid) but no custodian or federation!

Read the sBTC paper: https://t.co/Om44mMtr3w

— muneeb.btc (@muneeb) December 14, 2022

Bitcoin is not natively designed to support smart contract functionality for sophisticated decentralized applications (dApps). Instead, it was created to serve as a peer-to-peer electronic cash system.

As revealed in the first whitepaper, sBTC is designed to keep a 1:1 peg to the price of 1 BTC. The peg mechanism will not require a centralized authority or a pre-determined group of entities for the functionality.

“The peg mechanism operates in a decentralized manner by a permissionless, open-membership group of dynamically changing actors that are economically incentivized and can start or stop contributing to the peg functionality as they please,” the whitepaper stated.

The sBTC token will live on the Bitcoin layer created by Stacks, a layer-2 (L2) network different from the original Bitcoin layer-1 blockchain. 

Once the token is created, it will become possible to deploy smart contracts enabling decentralized Bitcoin lending, stablecoins backed by Bitcoin, and several others. Its creators, Stacks and other contributors, expect that it will generate hundreds of billions of dollars of BTC.

An Upgrade to Stacks’ Bitcoin Layer

Bitcoin layers are created to extend the use cases and improve the performance of Bitcoin in such a way that the base layer (L1) is not affected. Stacks has designed its Bitcoin layer to host its proposed sBTC token.

In its latest proposals, Stacks stated in its second whitepaper that it will conduct an upgrade of the Bitcoin layer in 2023. This upgrade is called the Nakamoto release.

The company expects this upgrade to bolster the speed and security required for transferring funds across Bitcoin blocks.

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