The Wolf Of All Streets - The Future Of Defi Is Being Built On Bitcoin | Muneeb Ali, Founder Of Stacks

Episode Date: September 30, 2021

Bitcoin’s is the world’s most trusted, secure, and reliable digital asset network. These attributes create challenges for developers trying to keep up with the parabolic innovation on other blockchains. In this episode, Muneeb Ali discusses the efforts being made by developers and the need to quickly pool their skills to improve the ecosystem around Bitcoin. He believes that everything being built on other chains can be integrated on Bitcoin, a more solid base for a free financial future. Muneeb Ali: https://twitter.com/muneeb

What's up, everybody? I'm Scott Melker, and this is the Wolf of Wall Street's podcast, where twice a week I talk to your favorite personalities from the worlds of Bitcoin, finance, trading, art, music, sports, and politics, basically anyone with a good story to tell. Now, among the main criticisms of Bitcoin are that it is slow and lacks the tools to participate in DeFi, dApps, and smart contracts. Today, we have the perfect guest to dispel these myths. Muneeb Ali is the co-founder of Stacks and CEO of Hero, where he is working full-time on building out countless tools to make Bitcoin competitive in the DeFi space and beyond. Muneeb Ali, thanks so much for coming on today. Thanks. Thanks so much for having me.

So DeFi and smart contracts are a robust ecosystem on Ethereum and other competitive blockchains. It's precisely what they're built to do, obviously. So first, why do we need these capabilities built on Bitcoin? I think that's a great question. So the way I look at it is everyone's excited about Bitcoin as sovereign money or Bitcoin as the most decentralized and secure store of value. But if you look at what's happening out in the market, yes, you can hold Bitcoin, but if you actually want to use it, you often have to go to centralized exchanges,

or you have to go to centralized lending parties. And basically, the infrastructure, the financial infrastructure around Bitcoin tends to be a lot more centralized, which I think actually goes against the ethos of Bitcoin. Bitcoin is decentralized sovereign money. And I think you should be able to use your Bitcoin in a fully decentralized way as well. And interestingly, the main difference there is literally the ability to have smart contracts. And I'm a computer scientist. I completely agree and see the reason why the Bitcoin designers wanted Bitcoin to be very secure and relatively simple

at the base chain layer. And they didn't want to open up the attack vector of like having a full kind of like a Turing complete programming language there. But that doesn't mean that these things cannot be built on top of Bitcoin or around Bitcoin and can bring this functionality

directly to Bitcoin, which is the best form of money. And I think the best form of money would attract a truly decentralized economy to emerge around it. And I think having smart contracts is a critical piece of enabling that type of economy. So what does that actually look like in practice? We all know what it looks like on Ethereum, Solana, all of these chains, the NFT boom and DeFi booms have been absolutely astounding. What does it actually look like on Bitcoin for the end user? Yes. I think what it looks like for the end user, let me actually dive a little bit deeper on the technical side over here, because I think the context would be very helpful in understanding

the various possibilities over here. So basically, what you should understand is Bitcoin has a scripting language. It's very limited. It's called Bitcoin script and it's limited by design. So it's not like some people think of that as like, it's just like a backwards type of script. It's not, like it is limited by design. And then if you look at the, if you want the full smart contract functionality, the options are you fork and change Bitcoin, which I think is no longer an option. Like the Bitcoin, like Bitcoin is valuable because it is durable and it doesn't change, right?

So we can all agree that there isn't going to be a massive fork of Bitcoin and you'll change the Bitcoin script language. Bitcoin script language is here to stay, right? So we can all agree that there isn't going to be a massive fork of Bitcoin and you'll change the Bitcoin script language. Bitcoin script language is here to stay, right? So if you have the Bitcoin script language, then there are two types of possibilities. One possibility is what I think Lightning is exploring, especially their projects within Lightning, like RGB, that give you some sort of off-chain type of smart contracts. And some people might be familiar with DLCs. Without getting into too much details there,

think of that as another form of an off-chain type of a smart contract. And a lot of Bitcoiners are very supportive of these ideas if you talk to them. But the detail that a lot of people don't realize is that both these concepts, DLCs, RGB, remain fairly limited because at the end of the day, they're limited by Bitcoin script. And because they're offline, off-chain, they require a lot of overhead and coordination to set up. Let's say I want to do a simple thing as a trade, like some sort of swap.

I'll have to first, in real life, coordinate with the person that I want to set up. Let's say, you know, I want to do a simple thing as a trade, like some sort of swap. I'll have to like first in real life coordinate with the person that I want to swap with and come up with like, you know, let's say in the case of DLCs, like come up with a hundred or whatever number of different possibilities and then broadcast a transaction at a certain point for a normal user, even for an advanced user of Bitcoin bitcoin it's like a non-starter the ux is a non-starter and you don't get the kind of global state like a uni swap right that is online anyone can plug into it and anyone can just perform a swap by just sending a transaction right because these things are like global networks and they are these building blocks of d5 and it's a so I think I want people to completely separate the off-chain type of potential smart contracts from the fully expressive smart contracts that we are seeing on Ethereum,

that we are seeing on Solana and Avalanche and all the modern blockchains. So this was the requirement that the Stacks project had, that we wanted to bring fully expressive smart contracts to Bitcoin. And given the limitations that you can't change Bitcoin, and with Bitcoin script, you will always have a limited type of off-chain system, that means that you have to add some sort of a layer, right? So now I'm switching to another potential solutions that a lot of Bitcoiners know about. They talk about side chains, space chains, like federated chains like Liquid and then RSK and so on.

So that's kind of like the only option available for bringing full smart contracts to Bitcoin. And over there, the question is really about how are you connecting to Bitcoin, right? Like what type of a consensus algorithm you're running? So in terms of RSK, they effectively do merge mining. So a subset of Bitcoin miners are also mining on RSK. And then you have some sort of a multi-site setup for the Bitcoin that is available on the RSK side.

And in terms of Liquid, it's a federated network, which is great. I love Blockstream, all the work that they're doing, but it's a federated network and we're trying to use a federated network. What Stacks is doing is a little bit of a different design point. It is a permissionless system, meaning that anyone can be a miner, which I think goes very well with the ethos of Bitcoin, that you want freedom, you want permissionless, trustless systems. Anyone can come and become a miner. And Stacks has a full smart contract language.

Anything you can build on Ethereum, you can build on Stacks. Maybe later on, I'll get into some of the technical details of what are the differences in that smart contract language, how it's more secure and so on. But interestingly, with this design, imagine that it's like a layer, it's like a smart contract layer. It has its own kind of like mining mechanism. Anyone can be a miner. And we have actually extended the Bitcoin proof of work and the consensus mechanism. So there's consensus between Bitcoin and the stack side, right? So the smart contracts, so the end result is that the smart contracts on the stacks layer actually have full visibility into Bitcoin, meaning that you can

do a pure Bitcoin transaction and the smart contract is going to respond to it. I could actually do a swap. This thing is live today. I could actually do a swap by doing a pure Bitcoin transaction, meaning that just like on Ethereum, you're doing an Ethereum transaction and you're trading ETH for something else. You could do that type of a swap directly in Bitcoin. And I feel like when this happened, my mind was blown, but I feel like a lot of even Bitcoiners don't realize that this functionality is available on Bitcoin today, such native swaps and all sorts of other things as well that I'm pretty sure we'll get into. Right. So in the past, if you wanted to go from Bitcoin to a stable coin, you had to go to a centralized exchange, something like that.

You had to obviously potentially KYC, AML, allow everyone to know you a centralized exchange, something like that. You had to obviously potentially KYC, AML, allow everyone to know you're doing that. And now you can natively swap those two assets directly in a decentralized manner. Exactly. Exactly. So that's the difference. So why does that matter? You're saying that maybe Bitcoiners don't understand it. Explain to people why that's such a huge innovation. Because I think if you look at the Bitcoin community, they deeply care about decentralization. They deeply care about owning kind of like their own sovereign money of Bitcoin. And they don't want to go through KYC. Like if you look at the type of criticism that's out there for wrapped Bitcoin, people would say, A, it's

issued on Ethereum that has different security properties then they want to they want to keep their bitcoin on bitcoin b they would say you have to go to kyc there is a custodial party in the middle and there might be tax consequences of doing just a bitcoin to wrap btc swap and then back right so so bitcoiners are kind of like hey not for me i'm happy with just holding my Bitcoin. But with this solution, you keep your Bitcoin as Bitcoin. You're not going through KYC. You're not going through any custodial parties.

And you can participate in an economy, which I think Bitcoiners are open to. So if you look at the trading volumes, just look at the BDC or USDC trading pair. I think it is something like $200 million of trading just on that pair any given day. And all that trading is happening on centralized exchanges. Whereas if you look at Ethereum, I know Bitcoiners like to criticize Ethereum a lot. Like I criticize it from a technical perspective myself, but you have to give credit that people who hold Ethereum have the option to just go and do a trade against a stablecoin on Uniswap, which is better from a purely decentralized ethos perspective. So those

types of features are welcome in the Bitcoin community. And so recently, USDC actually announced that they're working on issuing USDC on the stacks there, on the stack chain. And that effectively means that that $200 million of volume that's happening, if anyone wants to make that trade directly on Bitcoin, they would be able to do that. And that is just one of the applications enabled by stacks, right? Like the applications are limited just by the imagination of developers over here. And we can get into some of the other exciting things that are happening. Yeah, sure. I definitely want to touch on that momentarily. But first, this is very clearly exciting for a hardcore Bitcoiner. How do you translate that to the mainstream? Because one

could obviously make the argument that your average person just wants to do the easiest thing. They might not care so much about the core ethos of Bitcoin. They might not even care about the decentralization. So how do we make this being built on Bitcoin exciting to everyone? Yes, I feel like we should identify the potential and the things that people will get excited about, but then also identify what are the hurdles. I completely admit that right now,

Stacks is not as widely accepted even within the Bitcoin community as much as say Lightning, right? So I love, you know, the work that those people are doing. Elizabeth Stark has been a friend for years. And interestingly, there's something holding them on, right? And I think we can get into what that is. I would love to hear that because Lightning is always a year and a half away, right?

It's always 18 months away. So is Ethereum 2.0, by the way. So it's a shared criticism. Yeah, yeah, yeah. So I think, yeah, Lightning has shown some great growth recently. That's amazing. But from a culture perspective, from a Bitcoin culture perspective, I feel like a lot of Bitcoiners are very supportive of Lightning. They would use Lightning

as a look, we're going to have Lightning payments and things are going to be amazing and so on. But the average Bitcoiner today does not talk about smart contracts. The average Bitcoiner today does not talk about being able to do a decentralized exchange between Bitcoin and another asset or decentralized lending. Let's say you want to lend your Bitcoin and you never want to sell it, but you want to earn an interest on it in a trustless manner without going through a counterparty. That is something that is, again, very much in line with the ethos of Bitcoin. And one thing that I've noticed is that people tend to get hung up on gas assets, right? Because Stacks is a separate chain,

a separate layer that connects to Bitcoin, it has a gas asset and you need to use the gas asset to execute the smart contracts. For a lot of people, I think it's a, my theory is that it's a bad memory from the 2017 ICO days where there was almost like a DDoS attack on people where there were so many scammy projects coming online and everything had a token. Did they just have a natural reaction that whenever there is a token attached to anything, I don't want to know about it. And I feel like this is 2021 and the world has changed.

And there's so much innovation happening over there that if a gas asset actually means that the chain is permissionless, anyone can become a miner. It's not a federated system. And you get full smart contracts natively to Bitcoin, people need to open their minds to it and get over that mental hurdle that this is actually not that big of a deal. Well, that's what I want to ask about, because you made a great point. You said that the Bitcoin community, or at least partially, obviously, we don't want to be too general, they're dismissive of smart contracts. The question is, are they actually dismissive of smart contracts. The question is, are they actually dismissive

of smart contracts in the technology, or are they so triggered by Ethereum that that causes them to be dismissive of anything in the Ethereum ecosystem, even if it could easily be brought to Bitcoin? I think it's the latter, right? Where I can see this because I think, let me put it this way. I think if you were in the crypto industry in 2015, 2016, 2017, versus if you are a young entrepreneur and you joined last year,

I actually think there is a huge difference between their image of Ethereum and the image of Ethereum from somebody who was there in 2016 or 2015. Because you could actually question the type of technology that they were developing. And they've evolved a lot. Ethereum has always been very experimental and they would have things like the DAO hack and they would roll back the chain. Like those things happen, right? So people who've been in the Bitcoin industry like have the memory of all of that.

But I think what they're missing out on is that that technical stack has matured. It has evolved, right? Like they have actually attracted tons of users. They've actually attracted tons of developers more than anything else. And yes, there are problems and we can we can get into problems with ethereum but i don't think that's the topic of this podcast the the the interesting thing here is you cannot throw the baby with the battle right like you cannot just turn a blind eye to things that are

clearly good for decentralization clearly good for creating a healthy economy, like a decentralized economy, like a digital world. Imagine Bitcoin should be the default money that is being used in anything digital. If people are playing video games and they have a need for money in video games, it should be Bitcoin. If people are doing trading, like tons of trading online, if you want Bitcoin to become the reserve currency of the world, like do you want Ethereum to become the reserve currency of the internet? Like how can you ignore the use cases that are

happening online and the trading that people are doing online, the buying and selling and marketplaces that are emerging online, where Bitcoin is not playing a role at all right now. It's not even an option. There's no NFT marketplace on Bitcoin. There's no decentralized exchange on Bitcoin. And I feel like I say that as a Bitcoin. I joined the Bitcoin community in 2013. I've been building on Bitcoin for five plus years. And we need to be open-minded about the shortcomings. And we need to be open-minded about making the sovereign state of Bitcoin stronger by building the right type of tooling right here in the Bitcoin ecosystem and enabling the type of applications that we want to see in the Bitcoin ecosystem. So you can be against Ethereum, but still be for DeFi.

You can support the concept of DeFi without violating your core Bitcoin, get your card taken away for being a poor Bitcoiner because you like smart contracts. Totally makes sense. Yeah, exactly, right? So it's a little bit like, I think it's about, if there's a glass half full,

you can always target the potentially wrong things, right? So people, I've seen so much criticism of DeFi whenever some hack happens, great. I think those things are bad. And there could be more secure programming languages or better auditing of code and all of these things. That doesn't mean all of DeFi is bad. Trading is not bad. You want to trade, you trade your Bitcoin on exchanges. You want Bitcoin to be a reserve asset. What is the meaning of a reserve asset? That everything in the world trades against Bitcoin, that everything in the world actually settles on Bitcoin eventually. And that's the meaning of a reserve asset. If you want to replace the dollar,

the dollar is the reserve currency. Everything trades against the dollar. You want to encourage as much trade as possible against Bitcoin. And for trading, you need decentralized exchanges because why would you want to depend on centralized exchanges for all the trading activity? That makes perfect sense. It's very compelling. So you talked about Lightning having shortcomings. I'd like to hear why Lightning is always seemingly 18 months away from launching in full. I think I feel like Lightning has at least Lightning Labs, right? So I know there are multiple versions being developed. Blockstream is working on one as well. I feel like they have remained true to kind of like the ethos of Bitcoin.

They've never tried issuing a token. They've kept team sizes small. I think Lightning Labs is probably still like 20, 25 people. And they are heads down working on that technology. And they're slowly, slowly, slowly rolling it out. So I know that you could have actually criticized Lightning easier two years ago with this thing. But if you pull out the latest stats, the Lightning network is actually showing signs of growth. The capacity is going up. You see graphs that are up and to the right. And usages, if you look at the number

of things being built, like LNStrike, all these wallets that are coming online, I feel like it's finally happening. So I know that people have been waiting for a while and the progress has been slow and steady, but I feel like it's actually finally happening. That makes sense. So what can you build on stacks that we're seeing on Ethereum and other chains that would be life changing for Bitcoiners? You've mentioned a few of them, smart contracts, NFTs, DeFi. What are the things that get you most excited about what you're seeing being built?

So I think I'll give an example. So there's a project, it's called Arcadeco. And they have built a stablecoin, a decentralized stablecoin, where the collateral that you put up actually earns Bitcoin, which is a very nice property of Stacks, the gas asset itself. By the way, Stacks doesn't compete with Bitcoin.

I think one of the problems that Bitcoiners have with Ethereum is that Ethereum initially was gas for smart contracts, but now they've started aiming for being money for the internet by adjusting their supply, by making Ethereum more scarce and so on. And they're actively, even in marketing, they're coming for the market of like, hey, we can be money. Stacks is not money, can never be money because Stacks actually is not sovereign. Stacks is not a sovereign ecosystem like Ethereum. It actually depends on Bitcoin for survival. Like Stacks cannot exist without Bitcoin. Stacks treats Bitcoin as the store of value and is purely a gas asset.

And interestingly, this gas asset itself earns you Bitcoin, right? So there is right now like a 10% native yield, roughly without getting into the technical details, roughly think of that as the type of yield the Ethereum people will be getting from their proof of stake system. Stacks is not a proof of stake system like the consensus is actually very similar to macromodal consensus but but uh we have this mechanism where people can lock up their stacks the the let's say the excess gas that you have and you can sit back and earn bitcoin and this bitcoin is actually native bitcoin so bitcoin actually the people who have experienced this, they describe this as a magical experience because in your account, money just appears,

money in Bitcoin would just appear and that's like 10.9% is the API right now. Anand Oswal, Ph.D.: So what developers are doing is they're taking this Bitcoin yielding asset and now they're building stable coins with it. So when you're putting up your collateral in Stacks, there's the base 10% yield, but then maybe you get other benefits of providing liquidity to the stable coin and you're earning some more fees on top as well.

So it's a very unique type of a stable coin where it's a little bit like you get a Bitcoin native stablecoin this way. And the next thing, which doesn't exist yet, but can very easily exist, is you can actually put collateral as Bitcoin to mint a stablecoin. Meaning that people who, let's say, never want to sell their Bitcoin, but do want some sort of access to a USD type of a currency, they can actually put their Bitcoin as collateral. They're earning some sort of interest or fees on it, and they can mint a stable coin, go use it, spend it on whatever they want to spend it on and return it.

Pretty much like DAI in the Ethereum ecosystem. You can have a version of that that which is backed by Bitcoin itself. So that's one application. I described lending earlier. Lending is pretty fascinating. I know that people have been using BlockFi. I know their rates have been going down and obviously there's some sort of a counterparty risk there if you're giving your Bitcoin to any party. With Stacks, what happens is that you can have this lending application where you keep your Bitcoin as pure Bitcoin. You don't need to move it to the Stacks chain. And the Stacks smart contract will have the collateral.

So let's say you want to borrow from me, right? And let's say you want to borrow 100K worth of Bitcoin. So you put up, let's say, 150K or 100k worth of bitcoin so you put up let's say 150k or 200k plattles 150 or 200 and then i need to send you bitcoin on the bitcoin main chain right so the security of your bitcoin remains on the bitcoin main chain the smart contract already automatically uh detects that i've made the payment right right? It starts the clock on the loan and the clock is actually in Bitcoin blocks. So if by the expiry of the Bitcoin blocks,

I don't get my money back plus the interest, the smart contract will automatically release the collateral to me, right? And then I can just go and buy 200K worth of Bitcoin with that collateral. So these applications are available today and meaning like what a profound change it is, like instead of going to any trusted third party, like a lending desk or some sort of a BlockFi like a company, you can actually just do peer-to-peer lending with other people in a completely trustless way where your

Bitcoin remains on the main Bitcoin chain. That is really fascinating. And you talk about BlockFi and these other platforms, of course, they're relatively secure, but they have to go out and find a way to gain that yield, right? They have to make 12% to offer you 10% or whatever the math is. And this completely eliminates that from the equation. Absolutely. And I think the thing about these decentralized applications is it's all about being transparent and having full visibility into the risk, right? So in such an application, I'm pretty sure like as this starts getting more popular,

a marketplace would emerge where you would actually have data on a borrower that this borrower has actually returned more than a hundred Bitcoin before. And you can actually just look at on-chain activity of that borrower to be able to be like, you know what? I feel more comfortable lending out to this Bitcoin. It's like Yelp, but completely subjective, right?

Or objective. So that's really, really, really interesting. And all of this, a Stacks wallet, your coins share the same address as your Bitcoin address wallet, correct? So what happens is, so we had this very interesting feature, which was partly there for security reasons, but partly it was there because I wanted to make a point to the Bitcoin community because I knew that the separate gas asset is going to be some sort of a mental hurdle for a lot of people to overcome. So what we did was you can actually do pure Bitcoin transactions that get recognized on the stack side, right? So you can actually, imagine that I hold stacks

and I can do a transaction on the stacks chain to transfer them. But I could also just do a Bitcoin transaction on the Bitcoin chain to transfer the stacks on the stack side. And interestingly, it will cost you more gas fees, right? Because Bitcoin is more expensive, right? And similarly other functions like we call it stacking,

like when you lock your stacks to earn Bitcoin, you can do that on the Bitcoin side. But when you're doing that on the Bitcoin side, you're actually paying like whatever $50, $60 in fees because Bitcoin is more expensive real estate. And you could actually pay cheaper gas fees by just using the stack side. And I think that optionality, like giving Bitcoiners the optionality that you could actually literally just use Bitcoin and not touch stacks, they actually like it. They're like, okay, good. Now I have optionality. If I'm using this gas asset, I'm using it because it's an option and it's cheaper. So it makes sense to use. I went to send someone $100 yesterday in USDT on

Ethereum and the proposed gas fee was $84. Yes. So I don't know if expensive, I guess, is all relative if you're comparing it to what currently exists. Obviously, everybody will be triggered. I know that there are better options than that. I'm just using it as an example of what I personally saw. So Bitcoin has gone through a lot of evolutions as to its use case or what it is or how people define it, right? It was obviously in the white paper, peer-to-peer cash. I think that it sort of solidified the narrative of digital gold and store of value. So we just got the mainstream to finally accept that narrative. So you must have a huge challenge in pushing beyond that narrative now, because you're asking

people to view it as something more than digital gold or a store of value. Yes. So I think you're absolutely right that the digital gold narrative worked really well for Bitcoin and people started viewing it as a really valuable asset. But interestingly, it's the same thing that happened with the Bitcoin block wars, where people who were pushing for bigger blocks. So interestingly, I was on the small block side, but I am pro building applications and small contracts on Bitcoin. But usually people who are pushing for bigger blocks were saying, because you need to build other types of

applications on Bitcoin, that's why you need kind of like bigger blocks, right? So I'm in the camp that Bitcoin needs to be a settlement layer. It needs to be digital gold. It needs to be effectively a single Bitcoin transaction should actually settle thousands of other transactions. And this is literally what Stacks does, right? So just like when a Lightning channel closes, it settles information on Bitcoin. Every single block on Stacks is settling thousands of transactions on the Stacks side,

whatever the current traffic is on Bitcoin. So the way people would think about Bitcoin is kind of like the most secure store of value, a settlement layer, because I believe in a world where everything would effectively, the price of something is relative to Bitcoin, right? Bitcoin is a true measure of value.

So everything eventually will need to settle against Bitcoin. And that is the true price of that commodity, whatever the commodity is, right? And Stacks enables that. So I do think there's a little bit of a challenge where, you know, people think of that as digital gold. I don't think that people would think that, hey, Bitcoin, like literally Bitcoin has smart contracts. Rather, I want them to think that there is a healthy economy emerging around the digital gold of Bitcoin. That's smart. Instead of when you see some things like wrapped Bitcoin, that's Bitcoin going to other chains. And that's problematic in many, many ways, both technical

and also from a community and culture perspective. But what we're saying is, hey, Bitcoin, you're so important that smart contracts are coming to you, like decentralized exchanges are coming to you. And we want to build that in the broader Bitcoin ecosystem. So you touched on the point that you don't think there'll be another fork, but you do think that there can be improvements because we see Taproot coming, obviously. And Taproot, an element of that is smart contracts, correct? So can you explain how Taproot, first of all, I guess, give a very quick primer on what it is for those who might not understand, but then how this interplays with what you're building? Yes. So I think the simplest way to understand Taproot,

again, big supporter of it. I think it's amazing that this upgrade is happening. So it will effectively do two things. One is that it will make certain Bitcoin transactions more efficient from a storage perspective.

So you will effectively see the size of some transactions become smaller, which means that Bitcoin would have more bandwidth. It can actually do more transactions and so on without increasing the block size, which I don't think is increasing. So that's great. The second thing is it helps with privacy because what it does is that certain complicated transactions that you're doing, with Taproot, you won't be able to differentiate between those complicated transactions and normal Bitcoin transfers. So it would make things more private because now you're not revealing to other parties that, hey, what exactly are you doing with these complicated transactions, right?

So that's the two benefits. The reason why a lot of people say that, you know, Taproot equals smart contracts coming to Bitcoin, and that's where I think I would say you need to double click and like actually get into the details. Taproot itself is not bringing any smart contracts. Taproot is helping certain complicated transactions that you can do on Bitcoin even today, but maybe they would be too

expensive because the size would be too big, or you don't have enough privacy for those transactions. So Taproot would make those things easier. This goes back to the earlier discussion I was having that with approaches like DLCs, which are kind of like these off-chain type of contracts that require coordination between parties and they don't have global state, it will help with those types of transactions. That does not equal fully expressive smart contracts like the ones that run on Ethereum, the ones that run on Solana. So I feel like what happens again in the Bitcoin ecosystem is that people point to things like Taproot or DLCs and others and use the same terminology

that hey these are smart contracts right and and and then some of the criticism and I think it's a valid criticism that people go like what are you talking about I've never seen a proper Bitcoin smart contract because when people expect to see smart contracts they expect to see uni swaps they expect to see compound like lending protocols they expect to see n swaps. They expect to see compound lending protocols. They expect to see NFTs and being able to have a marketplace of NFTs. You can't do those things with these limited smart contracts. And I think that's why it's very important to differentiate Stacks and the Clarity programming language that we have from things like DLCs and Taproot and those types of upgrades, because those things,

they're great. I'm not against them. They're upgrades. They are beneficial to the ecosystem. They will not give you the type of applications that people associate with modern smart contracts. So let's dream for a bit that all of this comes to reality and that we have this full, robust ecosystem on Bitcoin. What does the world look like to you on a Bitcoin standard with Bitcoin as a global reserve currency? What's the vision? Yes.

So I would love to dream with you before dreaming. I want to get there, right? So I feel like the current scenario is that I think it's just a reality that Ethereum is gaining a lot of traction. Again, I've been critical of some of the design decisions of Ethereum going back to 2016. I have a lot of friends in the Ethereum community who criticize me for that. That's fine.

I think people need to realize that if the Bitcoin ecosystem does not react, I'm not saying that Bitcoin cannot win the competition without having small contracts. What I'm saying is you will make your life needlessly hard, right? Because what you're saying is I am only deciding to compete on the money layer and I'm ignoring trading. I'm ignoring lending. I'm ignoring NFTs.

I'm ignoring lending, I'm ignoring NFTs, I'm ignoring marketplaces, I'm ignoring like 99 things and I'm planning to fight on only one thing. That one thing might be really important. It might be so important that maybe you still are the largest cryptocurrency and so on. But why do you want to take that risk? Like why give you, Bitcoin is the dominant cryptocurrency, right? And if you want Bitcoin to truly become a reserve currency of the world, you can just logically see that you have to have these decentralized exchanges,

decentralized lending, all of this financial infrastructure built around Bitcoin. But right now, apart from a handful of projects like Stacks and maybe Sovereign and a few others, the bulk of the Bitcoin community is effectively saying we're not even going to compete here. And we're going to let Ethereum and other people just take that market. I think to dream, we need to address that reality as well.

That first, people will have to wake up a little bit and be more open to these types of solutions let's let's let's not play out the dream right so in in that dream world i feel like um like like i feel the most secure holding bitcoin on my multisig wallet and i would say that i don't want to sell my bitcoin but i have tons of option to take loans against Bitcoin, but in a decentralized way, like without going to a bank, without going through KYC. Effectively, if I want to spend whatever a stable currency is, maybe, I don't know what it would look like 10 years from now, but I can take that loan. If I want to buy a house, I can give Bitcoin as collateral in a decentralized way to get some sort of a loan that I pay and I'm actually able to buy a house i can give bitcoin as collateral in a decentralized way to get some sort of a loan that i pay and i i i'm actually able to buy buy the house on my mortgage or something like that

and then my bitcoin address or more interestingly like this is another thing built on stacks we have this dot btc uh domain names like decentralized domains so you've seen all all the ethereum folks with the.eth in their Twitter handles. Like Bitcoiners, you can get that, right? You can go to btc.us and purchase a decentralized domain. It's different from a DNS domain, but that becomes your identity online, right? You could use your Bitcoin address if you want, but I think it's a little bit clunky, right?

Like your human readable name is much easier. Nobody wants to type that in from a piece of paper or hear it on a radio ad. Absolutely, so I'm muneeb.bdc and imagine that you're using a decentralized application by muneeb.bdc being your login. Like, by the way, again, this technology exists today, where like Stacks has the software and

the auth libraries to log into applications. So imagine your reputation is actually associated with your Bitcoin identity, right? Because people have a history of your transactions and it doesn't need to be kind of connected to your real identity either. You could be anonymous. You could create a pseudonymous name or something, right? And you're just using that and you're building reputation around it.

Like imagine as the world is becoming more and more digital, which is happening, most of your business would be actually done in the internet world and not in the physical world, right? No credit check because your reputation is completely transparent. It's sitting there for everyone to see. You've always paid back your loans.

You've always been reliable. Exactly. And I feel like this is the thing, this is the argument that a lot of people are kind of like dismissing. But in these types of applications, let's be real, Ethereum is at the forefront of it. And then followed by the newer blockchains. Bitcoin is actually fairly small in that market right now. There are a handful of projects, I would say Stacks or Sovereign or a few others, who are

even building the type of these solutions. Because for these applications to emerge, you need to be open to decentralized identity like nfts like all these marketplaces and you need to be able to use bitcoin and and bitcoin based uh protocols over there and that is that is small right now but my hope is like within the next year or so hopefully we will we will actually uh see a lot of it let me let me actually comment a little bit about what is the opportunity that I see here. I know that most of the chat I've been talking about, hey, what's not happening and what I would like to see happen.

But let me talk a little bit about the opportunity. Bitcoin has a trillion dollars of capital. Bitcoin has had a beginning that is almost impossible to replicate. No founders like Satoshi or whoever they were, like are no longer around. No founders, no pre-mine, no ICO, only mining launch

have always been the stable, secure thing, minimum amount of issues ever, 10 plus years of history. And has really been the thing that is reaching almost like a cross-sec chasm to the broader markets as well. And imagine if you enhance that brand name, if you enhance that community, if you enhance that capital, a trillion dollars of capital, by attracting tons and tons of developers to come in and build an entire economy around Bitcoin. I feel like the reason why Ethereum even competes with Bitcoin is they're scared of that happening, that Bitcoin is the big dog still,

right? And as soon as developers start building interesting things there, then you really start asking the question that, hey, why would I go and use a decentralized domain or an NFT? Think about an NFT. An NFT has value because of the ownership and because of the providence of the history that, hey, you can verify that this is authentic. What's more secure and authentic than the Bitcoin blockchain? Sure. Right? If the NFT was minted at a Bitcoin block, if you could track on Bitcoin, like when was it minted?

Is it actually original? How has it traded? Right? All the history is preserved in the Bitcoin chain and people's trust that Bitcoin is the thing that's going to be around 20 years from now, 50 years from now,

maybe 100 years from now, versus other blockchains might not be around. So your NFTs are literally more valuable if they're on Bitcoin, right? If that starts happening quickly, rapidly, and developers start doing that, then very quickly, the question becomes, why would you go to any other blockchain if you could just do it on Bitcoin? And by the way, it does not mean that Bitcoin would get any more spam or any extra data. Those arguments are gone. When three, four years ago, when I would have these discussions with people, we'd be like, yeah, but you don't want to save images in Bitcoin blockchain. You don't want to put your NFT or these high level of transactions on the Bitcoin blockchain. No one is arguing for that.

These are separate layers. They connect to Bitcoin. They settle in Bitcoin just like Lightning does. Like whenever there's a Lightning channel that has done like thousands of transactions, it doesn't put any load on the Bitcoin chain. Similarly, if someone is registering like 10,000 NFTs on stacks, it is not putting any load on the Bitcoin chain. It is a completely scalable,

completely almost like an extension of Bitcoin in a very energy efficient way as well. Like that's an argument that is also very interesting that we've seen a lot of like, you know, fear mongering around Bitcoin's energy. Interestingly, the way Stacks works is it doesn't consume any electricity, right? So Bitcoin miners are consuming electricity and are kind of bidding in this random selection that, you know, some of them will become a miner. The Stacks miner is actually bidding in

Bitcoin. Bitcoin, that we are using Bitcoin a representation of digital energy, which I think Bitcoiners would love if they think about it. We use Bitcoin as a representation of digital energy. You're spending the digital energy to bid and you have a probability of winning a slot. So you're no longer burning electricity anymore. And all the transactions on the stack side, they have a minimal carbon footprint because it's just a hash on Bitcoin. So the carbon footprint is actually just a Bitcoin transaction fee. So you could actually go to people who try to criticize Bitcoin in terms of its per transaction energy footprint, and then add the thousands of transactions on the stack side

to a single transaction on Bitcoin and be like, well, Bitcoin just became like a thousand X more energy efficient. Right. There you go. Like update your models. Right. So I feel like even from a pure energy argument sake, like this is something very interesting that is happening. It's a wonderful dream. And I would love to see it all built on Bitcoin. But stepping back, can we at least all come together and eliminate the tribalism and say,

all of these projects are pushing the ball forward from the legacy system? So even if Bitcoin doesn't win and everything's not built on Bitcoin, and I mean, Bitcoin doesn't win in the smart contracts, DeFi space. I don't mean obviously as a store of value, digital gold, I believe Bitcoin is the most important asset of all time. But if Ethereum wins in that regard or Solana, isn't that still so much better than the systems that we had? And isn't at the end of the day, the goal to give your average person access who doesn't have a bank account or is underbanked or doesn't have access to loans in these systems? I would agree 100%, right? Like in the sense that obviously the way I see this as, you know, these are all these

tribes or like almost like sovereign nations. They're kind of like going in the same direction. People are very opinionated about the paths that they've chosen, right? And they're very opinionated about, no, you're going in the wrong direction. This is not really the true way of doing this or people get personal and like start attacking each other but at the end of the day you have to to believe that we're all moving in the right direction and this is all moving away from the kind of problems that we see in the world today of of centralization all all these big companies that control everything, the big banks and so on.

And I think we need to appreciate that. And that's why at this point, my mental model is that at this point, it is abundantly clear that this new internet, some people call it Web3, or we call it a user-owned internet, it is going to emerge from the crypto industry. It's just a matter of which blockchain is going to fill in which part of it. And maybe there's a world that Bitcoin is just store of value and applications run on the Ethereum and Avalanche or Solana and others. And somehow these things can connect with each other. Or there's a world where Bitcoin is actually very dominant. I like this concept of being a Bitcoin centrist, someone who believes that Bitcoin will be in the center of everything. And Bitcoin is not

only the store of value, but a ton of applications are actually built around it. And then you have these smaller chains that try to connect to Bitcoin or try, come to the center of the three. Right. It's the hub, right. So effectively, you live in a world where Bitcoin is at the center. Some of these other chains perhaps find a niche or a specialization and they're interoperable. Yep. Not such a bad dream.

I like the term Bitcoin centrist rather than Bitcoin maximalist. And I also love the idea that you propose that we're somewhat all heading to the same destination, but perhaps just disagree on the path on how to get there. I absolutely love that. So what did I miss? What else would you like to share before we're done? Anything else that you'd like to talk about that i i may have ignored uh i think one thing would be that um i feel like especially bitcoiners who are listening to this i would encourage people to just look at developer activity like what are the developers doing right so i think i think developers in my experience are generally interested by solving interesting problems and they go to where they find good tooling to work with. They're sometimes less motivated by making money.

They're just intellectually curious type of people. And so generally speaking, obviously can't speak for everybody, but generally speaking, I think if you just go, if you want to understand what's really happening in this industry, you should go and see what the developers are doing, right? And there are some really good reports. Like there's one by Electric Capital. They put out a summary every Q3. So they would have the Q3 2021 out.

And what they do is they actually go and check out GitHub and they analyze it and they see what the developers are doing. And I think over there, you should actually study how many developers are trying to build things on Bitcoin, including the projects like around Bitcoin, how many developers are building on Ethereum, how many developers are building Polkadot and so on. I think it's a little bit of an eye opener because the reality is that the bulk of the developers are actually building on ethereum and then they're building on some of these other chains and bitcoin is not getting a lot of developer activity so that's the part that i feel like where people need to open their eyes a little bit and

give credit where credit is due that you know these developers actually find something valuable in these applications and right now uh they're going to these platforms, which maybe might not be the most secure or might not be the most decentralized. But then, as the Bitcoin community, it's almost like our responsibility to show them the more decentralized way, to show them the more secure way of doing things.

And then I want to end on a positive note that then people should also go and see what these developers are doing in the Bitcoin ecosystem. Like some of the products that I've mentioned, like Archadeco, that's building a stable coin around Bitcoin that can earn a Bitcoin yield. Or the.btc domains, right, like where you can go and get a decentralized domain and maybe you can do interesting things with it because you can log into decentralized applications. So I think it'll be very interesting if, I know that store of value and hard money will always be a strong team in Bitcoin, but my wish is that people can also open up to the type of interesting things developers are building and they want to try it out and they want to actually see like hey let me play around with the nft on bitcoin like i know it's very hard because people to go go go across the fence and play with nfts in ethereum but what if nfts are here in the bitcoin world maybe you

want to play around with them and see like what why they might be valuable or or why people might see value in it and i feel like that and then appreciate the developers were here right like right? Like support them. Like even just saying that to the developers that, hey, you're doing amazing work and this actually makes the Bitcoin ecosystem stronger. Like I think small things like that can actually go a long way. So where can people follow you and follow what's happening with Stacks after this conversation? So I'm at Muneeb on Twitter and it's my first name, M-U-N-E-E-B. And if they want to learn more about what's going on with Stacks, which is smart contracts for Bitcoin,

they can go to stacks.co. I look forward to living in a Bitcoin centrist world with you one day. I know you'll be looking forward to it since you apparently bought your first Bitcoin in 2013, which is three years earlier than me. So whatever happens, it'll be a boon for you, I would imagine. Absolutely. I'm a Bitcoin editor. Thank you so much. This was awesome chatting, man. Great.