Bitcoin Writes: sBTC Q1 Recap

Dear Bitcoiners,

2024 has been off to an electric start. With Bitcoin Spring fast approaching, seeds that were planted during the bear market are beginning to bear fruit and we are starting to see the flowers bloom.

This newsletter breaks down the most important updates across the Stacks ecosystem and why they matter. There’s a lot happening, so let’s dive in.

🔥 Nakamoto Public Testnet is Live

The Nakamoto public testnet was a major milestone achieved on March 25th, 2024. This release enables developers and Signers to test Stacks block production before mainnet activation.

The Nakamoto upgrade includes changes Stacks consensus, requiring Stackers to run validator nodes to confirm new Stacks blocks. This is an essential part of the system’s liveness and we are already seeing signers join the testnet.

What’s next: The Nakamoto upgrade will be rolled out in phases with a series of planned releases over the next two months. The chart below provides a summary of what users can expect in each upgrade.

Upcoming Milestones:

1. Mainnet Instantiation: April 15-29

   • The PoX-4 contract is shipped while the Nakamoto rules remain inactive. This phase allows signers to register on mainnet without contributing to Consensus.

2. Mainnet Activation: May 15-29

   • The Nakamoto rules activate enabling the full set of Nakamoto features including Signer-based functions, fast blocks, and Bitcoin finality.

Takeaway: The Nakamoto upgrade is fast approaching and core developers across the ecosystem are working to ensure a timely and secure rollout.

✍️ The Stacks Ecosystem Welcomed 8+ New Signers

Signers have a strategic role in the Stacks ecosystem, validating Stacks blocks and in the future, processing sBTC deposits and withdrawals.

In Q1, we were thrilled to offer a best-in-class group of Signers to the network. This included both institutional and indie validators alike. These Signers joined an exceptional group that includes Figment, Xverse, Ryder and others that are preparing for launch. Read more on this latest Signer cohort here.

Why it matters: Stacks aims to have the largest validator set of any Bitcoin L2, ensuring that Stacks remains the most decentralized layer to build Bitcoin applications.

🔐 BitVM Offers Huge Potential for Bitcoin Layers

BitVM was introduced in late 2023 by Robin Linus. It offers major potential improvements to BTC bridge and sidechain designs, bringing greater expressivity to Bitcoin without requiring changes to Bitcoin’s consensus.

The Stacks ecosystem has formed a new BitVM Working Group and is expected to invest more than $2 million on BitVM research and development over the next 12-18 months. For further reading, Hiro does a great job breaking down the impact of BitVM on Stacks and sBTC.

TLDR: BitVM changes the trust assumptions from an M-of-N honest majority to a 1-of-N security model, requiring only one honest participant. This enables optimistic-bridging functionality on Bitcoin. Combined with certain covenants, BitVM could significantly improve trust-minimized BTC bridge designs.

It’s worth noting that BitVM is still early in its development and the first BitVM bridges aren’t expected until 2025. Despite this, it is clear that BitVM has catalyzed a new wave of interest in Bitcoin development and it’s thrilling to see the evolution of this technology.

Takeaway: We want to ensure that sBTC remains at the cutting edge of trust-minimized bridge designs and can evolve as new technological breakthroughs emerge in the future. For now, BitVM doesn’t impact the sBTC rollout strategy, which is projected to be released a few months after Nakamoto. The sBTC Working Group will share more details on the sBTC roadmap in the upcoming weeks.

🧱 Liquid Stacking Emerged As a Powerful New DeFi Primitive with $100M+ TVL

Liquid Stacking is emerging as a critical building block of Bitcoin DeFi.

It allows users to earn native yield through Stacking while allocating their assets to other DeFi protocols. Since its launch, Stacking DAO has seen impressive growth — it recently surpassed $100M Total Value Locked. This provides greater liquidity for projects like Bitflow, Zest, and Arkadiko which have been quickly launched new products using stSTX.

What’s next? I expect the Liquid Stacking wars to heat up in the coming months. LISA, a project by ALEX, has already partnered with Ryder and Xverse to grow their liquid stacking commitments. Also, Papaya has taken a novel approach that will also include staking for sBTC. It’s worth closely watching this space to see how these projects develop.

🏆 Ecosystem Wins

• ALEX Secures $10 Million in Latest Funding Round Led by Spartan Capital

• Digital assets investment firm Franklin Templeton gives a March 2024 update on Stacks: The Nakamoto Upgrade.

• Arkadiko announces Arkadiko 2.0, introducing a complete vault overhaul, liquid stacking collateral, redemption mechanism, and more.

• Velar's automated market maker launches on Stacks mainnet

• Bitflow surpasses $45M TVL, bolstered by stSTX trading

• Stacks, the leading Bitcoin L2, hits 1M unique wallets

Concluding Thoughts

I would be remiss not to include mention of the first spot Bitcoin ETF approval in the US. This milestone established Bitcoin as a mainstream asset, with institutions such as BlackRock, Fidelity, Bitwise and Ark among issuers that have received over $11 billion in net inflows since January 11th.

That’s good news for Bitcoin layers like Stacks. More institutional demand for Bitcoin will ultimately find its way into startups and protocols throughout the Bitcoin ecosystem. As a result, Stacks is well positioned to capture this demand, ushering in new ways to make Bitcoin a productive asset.

This year is off to a great start. We’ve got a lot of work ahead and several tailwinds at our backs. If you’re looking for a signal to start building on Bitcoin, now is the time.

Andre