The Bitcoin whitepaper is now over a decade old and Bitcoin as a system has been up and running continuously since January 3, 2009. Much has happened in the crypto world since then, including of course the launch of Ethereum and more recently a series of new general and specialized basechains (including several in the USV portfolio: Algorand, Arweave, Filecoin, Flow and Helium).
What has been oddly absent is a lot of innovation on top of Bitcoin. There has been some activity, such as the Lightning network, but it is trivial compared to the innovation that has been taking place on top of Ethereum enabled by Ethereum’s powerful smart contract system.
People have attributed the paucity of innovation to a lack of Bitcoin functionality, in particular the very restrictive Bitcoin scripting language. That has, on occasion, resulted in criticism of the Bitcoin coredevs for not moving more aggressively. The cordevs have pushed back saying that the basechain needs to remain simple and so slow and steady is the way. And with Bitcoin still accounting for about 60% of the value of all crypto assets they may have a point. This has led to the appearance of wrapped Bitcoin, which are BTC that can be used inside the Ethereum ecosystem.
But is there another way? A way to bring smart contracts more directly to Bitcoin without needing changes in the core? This is the promise of Proof of Transfer (PoX). PoX is an approach for securing a new chain through the security provided by an existing chain. Pox allows the new chain to directly access the state of the underlying chain. The rewards for participating in a PoX system are earned in part in the native currency of the underlying chain.
The first chain to implement POX is Stacks 2.0, the latest version of the Blockstack chain, which derives its security from Bitcoin. This means that participants in the Stacks 2.0 consensus earn BTC. And Stacks 2.0 has direct access to Bitcoin state and can trigger logic in Clarity smart contracts through changes in Bitcoin state. Clarity itself provides important innovations, such as being decidable for dramatically increased security and assured performance.
In addition to its technological innovations, Stacks 2.0 also represents a major legal milestone. It is the first time a crypto asset that launched through a public securities offering is undergoing a process of decentralization. The Stacks ecosystem now consists of the participants in the PoX consensus (miners and stackers), the Stacks Foundation, a growing number of supporting companies including Hiro, Daemon Technologies, Freehold and New Internet Labs, as well as numerous projects built on top of Stacks, such as Pravica (encrypted/decentralized video chat), Swapr (a decentralized exchange with proofs of liquidity), and DualX (yields on crypto buy options).
Stacks 2.0 is feature and code-complete on Testnet as of yesterday. The Mainnet launch is scheduled for January 14, 2021 to allow for thorough testing, as well as exchange integration. At USV we are excited to support the launch of Stacks 2.0 through participating in the consensus algorithm.
Disclosure: USV is a major holder of STX tokens and also owns equity in Hiro.