Growing the Bitcoin Economy: The Road to sBTC

Update: This post is out of date as of December 2023. Please refer here for an update on technical milestones and release timelines for sBTC.

Editor’s Note: The following blog post is by the sBTC Working Group Lead Andre Serrano. The sBTC Working Group is an open group focused on successfully delivering a programmable Bitcoin asset to market to unlock a thriving Bitcoin economy.

TLDR:

• The sBTC Working Group’s mission is to expand the Bitcoin economy. Providing a solution wherein Bitcoiners can participate in native DeFi (and other) apps in a decentralized way is a major step toward activating that economy.

• sBTC enables these applications via smart contracts that effectively write to Bitcoin, unlocking $450B+ of capital for productive use.

• sBTC is powered by Stacks, with years of distributed systems R&D to expand Bitcoin utility.

Below are the major activities and milestones the working group is pursuing to make sBTC a reality. For regular updates on our progress, subscribe to Bitcoin Writes.

sBTC Basics: How to Unlock Bitcoin DeFi

Bitcoin is a tool for empowering individuals and communities to take ownership of their money and financial data. It provides self-sovereignty and economic freedom for millions of people around the world.

Bitcoin is also the most decentralized, secure, and durable blockchain that exists today. Due to the principles of the Bitcoin ecosystem, it optimizes for simplicity and decentralization at the base layer, which makes it an ideal settlement layer for transactions. Bitcoin is, by design, relatively slow and does not natively provide fully-expressive smart contracts needed to build sophisticated applications.

That’s why we’re working on sBTC, a 1:1 bitcoin-backed programmable asset that will enable users to put their Bitcoin to work in a secure and decentralized way. sBTC provides smart contracts that write to the Bitcoin base layer and allow trust-minimized movement of Bitcoin in and out of Bitcoin layers.

You can learn more about the vision and design of sBTC in the white paper. In this blog post, we’ll outline the major activities and milestones we are pursuing to achieve it.

Phase 1: Laying the Foundation

Timeframe: 0-6 months

Milestone: Testnet Activation and Developer Release

• During Phase 1, we will launch a minimum viable product of sBTC on Testnet. We will also deploy a developer release to Mainnet and Testnet that will allow us to get early and iterative feedback on the sBTC design from users and invite innovation from partners in the Stacks ecosystem.

Objectives:

• Conduct user research including product validation and requirements gathering.

• Develop strategic partnerships to expand the use cases for sBTC and ensure it is widely available at launch. Integrations include:

  1. Exchanges, custodians and stacking pools

  2. Oracles

  3. Stablecoins

  4. Institutional

• Recruit founders to Bitcoin DeFi. Bitcoin DeFi has a large addressable market with minimal existing competition. We believe this is an attractive value proposition for entrepreneurs to build new applications. If you’re building in this space, reach out to Stacks Ventures for details on funding opportunities in the ecosystem.

• Community education and early adoption. The focus is on helping developers get acquainted with early test versions of sBTC. Educational content will be developed with the goal of educating developers to be ready to use, build and adopt sBTC.

Success Criteria:

• Testnet is activated allowing us to get early feedback from developers.

• Business case is scoped inclusive of regulatory considerations, security requirements, and ecosystem & customer feedback.

• Clearly defined brand positioning for sBTC with targeted audiences and use cases appropriately scoped.

• Foundational partnerships are on track to be available at launch.

Phase 2: A First-class User Experience for Bitcoin

Timeframe: 6-12 months

Milestone: sBTC Mainnet Activation and Nakamoto Release

• During Phase 2, the community will vote to activate the Nakamoto release, which adds important capabilities that enhance the power of Stacks as a Bitcoin layer. In addition to activating sBTC on Mainnet, this release would enable transactions secured by Bitcoin finality and faster Stacks transactions between Bitcoin blocks.

Objectives:

• Security audits complete to provide further scrutiny of the codebase and implementation.

• Expand partnerships to increase accessibility and liquidity for sBTC. The focus will be on converting partnerships initiated in the previous phase and ensuring they are prepared for launch.

• Hackathons for ecosystem growth. During this phase we will seek to accelerate user activity in sBTC by hosting hackathons and supporting teams building decentralized applications.

Success criteria:

• High user confidence & trust in the security of the system. Users feel safe to wrap in their BTC.

• Flagship apps are available at launch. Users have options to earn a yield on their BTC, use as collateral to borrow stablecoins against, and instantly swap in and out of BTC.

Phase 3: A Thriving Bitcoin Economy

Timeframe: 12-24 months

Milestone: Scalability

• During Phase 3, our focus will shift to scalability in order to handle increased usage and traffic. Subnets are being explored as a potential path forward. There is also an active R&D effort to integrate rollups with the Stacks layer, which would enable sBTC to be used directly in sovereign rollups on Bitcoin.

Objectives:

• Build a flywheel app ecosystem to further expand the Bitcoin economy.

• Developer focused education intended to drive sBTC adoption among builders will continue throughout this phase and remain a constant priority.

Success criteria:

• Network growth and adoption: sBTC is the largest and most widely available decentralized Bitcoin protocol on the market

• Seamless app experience: decentralized apps provide users with frictionless ways to connect their Bitcoin wallet and with a single transaction earn yield, get stablecoin liquidity, or buy a .btc domain name.

Bitcoin is No Longer “Just a Rock”

We foresee a future where Bitcoin isn’t just “digital gold” — sitting idly with no productive use — but becomes a settlement layer for the digital economy. sBTC will further improve the functionality and accessibility of Bitcoin in DeFi. If we are successful, it will significantly upgrade the experience for users and developers and has the potential to unlock $450B+ in capital.

Here’s how to get involved:

• Follow along on our progress in Bitcoin Writes, a weekly newsletter update.

• Entrepreneurs building in this space, reach out to Stacks Ventures for details on the accelerator and funding opportunities in the ecosystem.

Acknowledgements: Thank you to Kaitlin Pike, Mitchell Cuevas, Igor Sylvester, Brittany Laughlin and Elena Giralt for reviewing this post. Also thanks to the Stacks Core Developers and working group contributors who made this possible.