Bitcoin DeFi: Why Stacks?

The Bitcoin DeFi revolution itself is set to unlock over $1 Trillion in BTC assets and allow them to be useable and investible while still retaining their store of value.

The BIG question that remains, is what the preeminent smart contract platform will be for Bitcoin DeFi. The main choices that currently exist are Liquid, RSK, and Stacks, with more on the way.

Liquid, produced by Blockstream, is the current leader in the space. They have a great product, but the big drawback is the federated network which has some risk of centralization due to the low number of participants. Sure, they may all be trusted, but inserting TRUST into a system designed to work without it is a future risk. Furthermore, smart contracts on Liquid do not allow you to read and respond to transactions on Bitcoin L1.

RSK, produced by Root Stock, is pretty special in that it is EVM-compatible which allows writing smart contracts in Solidity, and is a draw for current Ethereum developers who already know Solidity. The big drawback here is that Solidity contracts cannot read Bitcoin's blockchain, so they can't respond to transactions on Bitcoin. Similar to Liquid, RSK uses a federated model, which introduces a centralization risk.

Stacks is an L2 that does not use a federated model and thus does not have a centralization risk. With the Nakamoto upgrade to Stacks L2, it also supports bidirectional communication with the Bitcoin L1, meaning smart contracts on Stacks can both read and write directly to Bitcoin L1. This allows developers to create scalable apps for Bitcoin that are deployed on an L2 yet have access to all L1 data. It's the best of both worlds.