Recently, a new phenomenon called Ordinals, known as NFTs on Bitcoin reignited interest in Bitcoin and got people wondering - what else is possible and is this the start of something bigger? In this episode of Blockcrunch, Jason was joined by Muneeb Ali to answer that question.
Read our notes below to learn more.
Stacks
Ali and his team's thesis is that Bitcoin L1 has a lot of interesting properties like decentralization, durability, and simple systems.
The mainnet launch of Stacks happened in 2021.
Stacks are designed in a very decentralized way.
Last year, there are major upgrades that the open-source developers worked on. Mostly on the dimensions of high speeds.
The version of Stacks that went live in early 2021 has its own security measure.
One of the biggest changes in Nakomoto's release is that security measures actually change to Bitcoin hash power.
Stacks wouldn’t be called Bitcoin L1.
Stacks is a Bitcoin Layer.
L2 has a very important property that if someone moves their assets from L1 to L2, people should be able to withdraw them without relying any aspects on the L2.
The Stacks versions upgrade wouldn’t qualify as an L2 because it has everything else but there is a group of decentralized signers that needs to sign on the peg out of the request when withdrawing BTC.
Path to becoming 1st SEC-approved Token Offering
There’s a bunch of Computer Scientists on the team.
The SEC-qualified offering is a really big disclosure.
Ali and the team hope that legal cost overhead will comedown.
They also hope that those disclosures will be helpful.
Ali’s team built the initial technology but independent miners launched Stacks.
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History of Bitcoin and Blockchains
Between 2017 to 2023, Ali and Ryan Shea were building on Bitcoin L1.
They were building applications, protocols, and a domain name system that is still alive today.
The stacks project started in 2017 when there was a collective realization in the Bitcoin community and in the journal industry that Bitcoin L1s are not going to scale.
Lightning started in 2017. They focused on peer-to-peer network payments.
Stacks started in 2017. The idea was to have full smart contracts.
In the era between 2013 to 2016, the Bitcoin community, culture, and vibe were different from today.
A lot of experimentation happened, counterparty started the first NFTs in Bitcoin L1.
It is very hard to program Bitcoin.
The counterparty never reached mainstream adoption.
Ethereum start taking off in 2017 and people started building other L1s.
Ethereum gained the attention of a lot of the developer mindset.
Ordinals Drawing Attention back to Bitcoin
Ordinals are the first data point that proves the Bitcoin thesis.
Instantly there was something that clicked with people that an image that is stored on the Bitcoin L1 forever is more valuable.
Bitcoin capital is valuable because it is decentralized, durable, and indestructible.
Developers are coming back to Bitcoin.
Ordinals are the best thing that happened to Bitcoin in the last 5-6 years.
Ordinal Theory is very intellectually interesting, it starts to sequence Satoshi.
If the Satoshi is unique then they can inscribe something using that Satoshi.
Ordinals are like a graph that exponentially grow, and Taproot is being used.
Any transactions that happen on Bitcoin L1 the Stacks can read it.
Why Some Bitcoin Maxis hate Ordinals
The main opinions that are heard in the Bitcoin community that get amplified by podcasts or Twitter spaces basically mostly come from non-technical people.
Non-technical people that came into Bitcoin very recently viewed Bitcoin as money and celebrated when something fails.
Bitcoin is a decentralized Network. Everyone is free to do whatever they want to do.
Bitcoin blocks become more efficient.
Ordinals Use Cases
Encryption is just a way of writing data.
Ordinals are a little bit different from NFTs because the image is literally on-chain.
Ali’s theory is that most of the valuable NFTs will find their way and integrate on Ordinals.
The floppy disks during the 90s are like the encryption using Ordinals and a smart contract is responding to it.
Bitcoin is like an indestructible hard drive and people are feeding programs.
Stack Token
The native token is an incentive for miners who are producing the blocks.
It is also an incentive for decentralized groups of signers who peg out transactions.
Bitcoin over other Ecosystems
Lightning did some sort of compromising. It says that it is an open network, a peer-to-peer network but because it didn’t have a token it is not going to have a chain or ledger.
People either ended up with a federation where they can have full execution environments and no token or they don’t have full execution environments but it’s a peer-to-peer network where they can do simple things that Bitcoin encrypts allow.
Bitcoin still remains the dominant capital base.
Ordinals benefits Stacks
L1 has to get enough usage.
Bitcoin fees are going to go up.
A lot of use cases will come to Bitcoin.
The activity that is happening on Bitcoin L1 is very complementary.
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