This Week in sBTC

Week of November 6, 2023

Dear Bitcoiners,

Before we dive in, I’m happy to share that all of the sBTC talks from Bitcoin Unleashed are now live! You can check them out in the link below.

In this discussion, I sit down with sBTC core developers and gigabrains Jude Nelson, Mike Cohen, Friedger Müffke and Will Corcoran to discuss building sBTC-powered applications. Now, on to this week’s main updates.

🚀 Hermetica launches Bitcoin yield vault powered by sBTC

The first app to launch on the sBTC testnet is now live! Hermetica uses automated derivative strategies to generate a Bitcoin yield. The strategy has been back tested over the past six years and generates an average 6.5% APY. Check out the Hermetica Earn Vault.

This is a huge milestone for sBTC, which is now one step closer to delivering on its vision to make Bitcoin a productive asset. The sBTC testnet was released only two weeks ago and we are thrilled to see Hermetica become the first to integrate it into their application.

sBTC Design Sessions

Since the launch of the sBTC developer release, the working group has been focused on its next milestone: Mainnet. The sBTC working group been hosting daily SIP review calls, which have significantly simplified the design and uncovered some key new features. Summaries of all the key decisions can be found on Github.

⚙️ sBTC will support the OP_DROP transaction format (Github)

sBTC deposit transactions are initiated on Bitcoin with a special data field that includes the account address to which sBTC is minted. The working group has decided to use the OP_DROP format for this transaction, which affords a few key benefits:

  1. OP_DROP lowers sBTC integration efforts. It allows users to peg in BTC from any Bitcoin wallet, custodian, or exchange. By enabling deposits from custodians, this also simplifies the process for institutions, which have strict internal policies for which wallets they can use.

  2. OP_DROP allows for superior UX. Stacks apps can now abstract sBTC peg-in operations away, enabling users to interact with apps directly with native BTC.

Since this format uses two transactions to fulfill a sBTC operation, we call it the commit-reveal scheme. Documentation can be found here.

Check out this tweet thread for more detail, courtesy of Tycho from Zest Protocol.

🛡️ sBTC will not launch with a cap on the total supply (Github)

When the sBTC whitepaper was first released, it included a maximum amount of BTC that can be deposited. This was known as the liveness ratio, calculated by the total amount of STX locked in consensus.

The response from the community has been that this feature could inhibit adoption of the protocol due to its scalability limitations. By removing the hard cap, the working group is favoring a design where >30% of the signers are reputable and professional entities, which provide an additional backstop to secure the BTC threshold wallet.

Importantly, this decision ensures the sBTC protocol can scale to meet the demands of users today. Our strategy is to deliver the best practical system in the near-term while also ensuring the protocol can upgrade to meet the evolving needs over time. Long-term, the working group is doing active research and development on new technologies that could reduce the trust assumptions of the peg, such as BitVM or Discreet Log Contracts.

🎉 Mockamoto PR has merged! (Github)

This milestone brings the Nakamoto node online. Mockamoto is the first major milestone to launch Nakamoto on Mainnet. It supports the following functionality:

  • There is a single miner, and no stacker. It produces one block about once every five seconds.

  • It runs against a Bitcoin regtest node, which produces Bitcoin blocks once every 60 seconds.

With this update, we are one step closer to sBTC. The working group plans to provide more detail on the roadmap and implementation for Nakamoto and sBTC in the upcoming weeks.

Signing Off,