Subnets will also be able to further decrease block times by exploring the tradeoff between decentralization and speed without compromising the Stacks base layer
The base L1 Bitcoin layer was not designed to optimize for composability and therefore it is bulky and inefficient to use for more complex applications.
from a more technical perspective, the halving is going to be a massive narrative within the crypto community and many large investors will soon be searching for ways to position their investments to benefit from this event. BTC is the obvious candidate.
Stacks, in its current form, is not a traditional L2 in the sense of an Ethereum L2.
Having its own set of validators is necessary to add flexibility on top of the current state of Bitcoin L1 but does forfeit certain trust assumptions of L
Namely, censorship resistance is inherited from the Stacks signers while reorg resistance is inherited from Bitcoin L1.
From a technical standpoint Stacks is set to undergo a transformational upgrade, titled Nakamoto, later this year that will facilitate the development of more traditional crypto application types like Opensea and Uniswap to exist on the Bitcoin network through Stacks
Nakamoto will give rise to subnets, which will support other codebases such as EVM and Solidity, solving another major sticking point for ecosystem development.
Unlike many tokens, the STX token has real value accrual.
Stacks runs on a Proof-of-Transfer system that works somewhat similarly to Proof-of-Work.
The currency they use to bid is BTC and this BTC goes to STX stakers who commit their STX to the network
. This creates a system where miners do the work of validating transactions, but do not keep all the rewards, some instead get distributed to STX holders through the BTC bids from the miners.
This creates a real BTC yield for STX stakers (currently 7% yield link) that importantly is correlated with activity on the network.
As activity grows and the blocks are worth more, the BTC bids from the miners will also increase and with it the real yield that accrues to STX stakers.
ETH is worth ~$200B and the combined FDV of all L2’s in the Ethereum ecosystem (both private and public) we estimate is approximately $60B.
Bitcoin is worth ~$480B and the combined value of the L2 ecosystem is solely STX, which is currently trading at a ~$1B FDV. The ETH to ETH L2 ratio is ~3.33 while the BTC to BTC L2 ratio is ~480
. It makes sense that the Ethereum ratio would be lower. Ethereum is better suited to being a composable base layer and therefore the aggregate value that sits on top of that would rationally be worth more as a proportion than something like Bitcoin, which is not purpose-built to be a composability, layer and has much less built on it currentl
However, the fact that the BTC ratio is ~144x higher shows the scale of the opportunity if the Bitcoin community emphasizes this effort and technical improvements make it more feasible
. It does not seem unreasonable for this ratio to move from 144x to 14.4x as the Bitcoin effort progresses and is better understoo
This alone would represent a 10x for STX
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