I am constantly looking for new projects that enhance the Bitcoin ecosystem. I’ve had my eye on two projects for the last couple of months and I’m ready to talk about them here in the newsletter. Both projects offer something unique to the Bitcoin ecosystem, and it’s not immediately obvious what that is, or whether or not they will end up working. Let’s dig into the discussion on Stacks (STX) and Sovryn (SOV).
Stacks
Stacks is a separate blockchain that has developed a novel consensus algorithm; proof of transfer. The entire premise of this blockchain is that it can inherit its security from the Bitcoin network directly. Stacks brings smart contracts to Bitcoin, thus allowing for many of the DeFi use cases to be built on the Stacks blockchain. Stacks works a bit like a proof of stake chain, except when you lock up your STX tokens you are “stacking” and earning Bitcoin. They have made use of the meme “stack bitcoin” or “stack sats” in a direct way here, giving their entire ecosystem and brand a boost.
Inherited Security Model
This is the claim that has caught my eye, because if this is possible and able to be consistently demonstrated by Stacks, then it means that Bitcoin can be used to secure any number of other applications as well. To break this down even further, it means that the world might only need a single proof of work blockchain to secure all transactions! I actually think there is something about other blockchain consensus mechanisms that need trying. One thing I like about Stacks is that it is novel, and still connected to Bitcoin. Stacks says, and I agree, that Bitcoin is something they can rely on for the future. So it makes sense to outsource the security of Stacks to the most reliable thing on earth.
Clarity Smart Contracts on Bitcoin
I’m going to try to avoid going too technical here; so stay with me. Ethereum, and most other blockchain smart contract platforms use a smart contracting programming language called solidity. Unfortunately, solidity has been victim to many scams in the 6 years it has been in use (including a $600 million hack earlier this week). Stacks uses a language called Clarity which is supposed to fix many of the vulnerabilities present within solidity.
Smart contracts written for Stacks are able to make, and broadcast bitcoin transactions on-chain, rather than using a peg like wBTC or BTCB. This is a huge security bonus as it means that you don’t have to trust any third parties with your bitcoin while using stacks. Unfortunately, clarity is not sufficiently battle-tested as it has only been in use for a couple of years. I eagerly await to see if clever hackers figure out how to take advantage of clarity smart contracts.
Sovryn
Sovryn is a Bitcoin sidechain. It was actually mentioned to me by a reader of the letter, so thank you! You know who you are.
I was very glad to see this project when I did because I think it solves a very lucrative set of problems for the scalability of bitcoin in the domain of DeFi. Their website and blackpaper are very well written and make a compelling case that Ethereum is bloated, and has reached its carrying capacity. An argument that I agree with. They simultaneously acknowledge that the DeFi development community built up around the Ethereum Virtual Machine (EVM) is substantial and cannot be ignored. As a result of this, they’ve built a very well-functioning Bitcoin sidechain with a built-in EVM.
This means that the smart contract ecosystem that makes up Ethereum can easily be copied, and ported over to Sovryn. The effort to do so is reduced as smart contracts are open-sourced.
Bitcoin at the Heart of Sovryn
You pay gas fees on Ethereum in ETH. You pay fees on Binance smart chain in BNB. You pay gas fees on Sovryn with rBTC, which is Sovyrn’s pegged version of Bitcoin. It trades at a 1:1 ratio with BTC. By doing this, they’ve placed the most widely held cryptocurrency at the center of their ecosystem. Furthermore, they’ve embodied much of what I would consider to be the general bitcoin ethos on their website. Freedom and sovereignty are centerpieces of their overall theme.
Much Potential in Sovryn
Sovryn is in the Alpha stages of its development. If you decide to explore Sovryn, you are doing so at your own risk. That being said, I have had 0 problems with any of the features I’ve used on their platform. I’ve bought their governance token (SOV), converted BTC to rBTC, and opened a small 3x margin position in their DEX. The biggest thing I think Sovyrn has going for it, is they get to piggyback on the development that takes place in all other ecosystems that use solidity and the EVM.
Total Interoperability
It is confusing to make sense out of all the different blockchains out there. I don’t think anyone truly knows how the entire ecosystem will turn out. It does however seem like we’re trending towards an ecosystem of total interoperability. Each chain becoming compatible with the next. The maximalists in the room may cringe, but I think other chains are here to stay. I also think that bitcoin will be at the very center of the economy, and so chains that build closer to bitcoin will have a competitive edge against the rest. I will continue to seek, and experiment with Bitcoin related projects as they come across my plate. If you see any, be sure to let me know!
Regards,
Keegan Francis
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