The Frontier of Bitcoin

Transcript

Hi everyone. Muneeb Ali, founder of Stacks. Uh, I started in Bitcoin around 2013. So, I've been building on the frontier of Bitcoin for almost like 13 years at this point. And today, I'm going to talk about the frontier of Bitcoin. What are the challenges that we as the Bitcoin community needs to work on and overcome in the coming years. But before I start, I'm going to share a little story, and this is the first time that I'm publicly talking about it.

So, what is the story? I live in New York. Um, I'm just walking around one of the days on the streets of New York, and I bump into an old friend. This guy has been in crypto for a very long time, but is not really in Bitcoin. He focuses more on other chains. Um, and he he's like, "Hey, I've I've been I've been meaning to talk to you. I'm very concerned about AI-assisted security problems with blockchains." And he wanted to learn from me that what is Bitcoin doing about it, right?

And I was like, "Dude, I'm actually concerned about it as well, and I don't think Bitcoin is doing anything about it." And that was a scary thought. Like, this is this is pre sort of like me those like this sort of like, you know, 6 months back. And the more we started talking, we realized that if a frontier model actually finds a bug in Bitcoin core, it's over for most of us, right? It doesn't matter what blockchain you work on, it doesn't matter what your project is, whatever you're doing, if Bitcoin nukes, it's this industry would get a massive massive hit. Like, much worse than what happened on 10/10 last year.

So, I I start freaking out a little bit. Uh I had to run. I'm now sitting in an Uber. And I am part of a bunch of these Bitcoin OG groups. And I start sort of like texting everybody. So, imagine these are people from like who got into Bitcoin in like 2011, 2012, 2013. Uh like they're different classes. Some of the largest companies, the CEOs, uh folks. And I'm basically asking people, "Hey, do we have contacts to Entropic? Can we get access to Methuselahs to make sure that there is no bug there?" I'm realizing that actually no one not only that nobody has done this, no one had access to Entropic.

And I am sort of like one of those few people who are losing sleep where most of the Bitcoiners are not that worried about it. Long story short, we got access to Methuselahs when it was still private. We actually ran the frontier models on Bitcoin Core. And thankfully, Bitcoin Core actually came out to be clean. If that didn't happen, like I remember the Zcash bug that was discovered when with with Opus. And Opus is actually not even that advanced of a model. And and Zcash dropped like 30% in one day and and then recovered. Something like that happening to Bitcoin is bad for everybody.

The next thing that we had to do was frontier models, they keep improving all the time. So, it doesn't matter that you ran the code base once on a on a specific model. You have to do it all the time. So, now we have we have got our act together a little bit. I won't name the companies, but there are basically two, three companies that have access to all of the frontier models. And they're actively running Bitcoin Core against those models when when that comes up. So, with that background in mind that how close we were in terms of something happening to Bitcoin and us as an industry actually taking a collective hit on it, let's talk about the frontier of Bitcoin, especially in the light of

AI. Open AI just dropped a bunch of like math problems literally yesterday. So, the world has changed and we have to evaluate what the frontier of Bitcoin looks like and what are we going to do about it. So, I'm going to I'm going to basically talk about three things. One is Bitcoin capital markets. Why are on-chain Bitcoin capital markets important? I'm going to talk about privacy. Why privacy becomes more important for Bitcoin and the biggest elephant in the room, which is the post-quantum threat that we have for Bitcoin. So, let's start over. Here's the situation with Bitcoin right now.

It is clearly a store of value. A lot of institutions and large players have sort of like accepted Bitcoin and they're holding Bitcoin. But, look at the small number over there. Like less than 0.5% of BTC is actually actively deployed anywhere. Right? It's not It's not earning any yield. It's not doing anything. It's basically just sitting there. And that's actually an opportunity. If you're a developer, if you're a builder and you see an asset class which is around $1.5 trillion, but the bulk of it is actually not doing anything, that means there's a large opportunity here. What's the opportunity? It's to deploy Bitcoin capital. A lot of people talk about

Bitcoin in comparison to gold, that is digital gold. At some point, you know, we're going to be 10% of gold market cap or or 40%, 50%, whatever your Bitcoin price target is. What I think is if Bitcoin actually has a yield and there are active capital markets, Bitcoin can actually be bigger than gold. Because gold doesn't have any income. It doesn't have any yield. So, the real opportunity for Bitcoin to actually flipping gold and becoming a much bigger asset is if we can figure out how Bitcoin can be income generating. Because a yield-bearing asset actually becomes a foundation of financial markets, and you can actually

build entire financial markets around it. So, how does that happen? There are two things. Most people who have used Ethereum, Solana, or any other blockchain, they're used to staking. They know that they can lock their asset, and they can start getting a yield on it. Even if you look at the last cycle, what happened was a lot of large institutions and public treasury companies or large ETFs, they came in and now they have Bitcoin. The biggest difference between a large player like Saylor with strategy or BlackRock's Bitcoin ETF versus the Ethereum ETFs or Solana ETFs is Bitcoin people can't earn any income on their BTC right now.

Right. So, whoever figures out any form, any variation of staking like native native yield for Bitcoin is going to be a big big deal. And the second thing is credit. People don't want to sell their Bitcoin. They want to hold it. They don't want to get a tax hit. And and they're long-term holders for Bitcoin generally across the board. And what they do want to do is use Bitcoin as collateral and take loans against it. Those are the two big things that if we get that right, we can actually start Bitcoin capital markets. If you compare that to normal markets, you have money, you have the dollars, and and then you have the rails and the and the capital markets around it, which leads to a

productive asset. And we need the same thing for Bitcoin, which is which is one of the frontiers, and we are actually doing a bunch of work on it. The second frontier is privacy. You guys might have seen Zcash, a lot of people working on it. I'm I've I've known Zuko for a while. I'm a supporter of Zcash. But having Zcash doesn't mean we don't need privacy or some form of privacy on Bitcoin. Especially now that we have AI, it is extremely easy for anyone to just run all the data that is public on the Bitcoin blockchain and figure out who's doing what. And I think this is

something that institutions are now becoming more aware of. We're likely not going to see privacy on the Bitcoin L1. So, it's likely going to happen on an as another layer on top of Bitcoin, which is If this is a spectrum and Zcash is on one end of the spectrum in terms of strong privacy, I think what we can do is we can offer some sort of practical privacy or institutional privacy with different sort of like layers for for BTC. And it's going to be a big frontier for Bitcoin because Zcash is a potential alternate store of value that has certain properties that Bitcoin currently doesn't have. And anyone who does a bunch of work on Bitcoin actually enables private BTC, I think it's going

to be going to be a very very valuable thing to do. The third frontier is actually post-quantum. Before I get into to post-quantum, I would want to link this back to the earlier mythos story that I was talking about. Basically, it doesn't matter, in my view, if other blockchains figure out a post-quantum upgrade. Because if Bitcoin doesn't figure it out and someone actually steals Satoshi's coins or other large amounts of Bitcoin, it hits all of us. It hits the entire industry. So, Bitcoin's post-quantum upgrade is not a Bitcoin problem. It is

our problem collectively as an industry, and we'll need to figure out figure out a solution for it. Bitcoin's problem is actually worse than other chains because Bitcoin is very decentralized. There are all sorts of politics around Bitcoin development. It's hard to get community consensus around what's the what the upgrade should look like. And what it makes especially challenging is that Bitcoin takes a very, very long time for doing any upgrade. If we think quantum computers are going or we need to be quantum ready by 2030, Bitcoin takes on average 2 years plus to do even a small upgrade. When they did the SegWit upgrade or the Taproot upgrade,

takes like 2 years. Then, Bitcoin's capacity is so limited. It's going to take something like 2 years to even move the assets. So, imagine 2 years for an upgrade, 2 years to move the assets, which means that if you're not getting our act together right now, we're already entering a yellow/red zone for Bitcoin's quantum upgrade right now. One thing that most people don't realize, this is right right now we're trying to get Bitcoin to upgrade. We're we're trying to reach post-quantum. As soon as we do the upgrade, Bitcoin's capacity is going to get slashed by up to 97%.

So, Bitcoin does because those signatures are so big, right? So, if signatures are really, really big, you can't transact on Bitcoin anymore. So, not only we need a quantum upgrade, we also need another layer on which most of the Bitcoin transactions would happen in a post-quantum world. And all of this should happen all these solutions should be secured by Bitcoin by Bitcoin's hash power. All the economy of the Bitcoin capital markets should run in BTC and it should be decentralized. People should be owners of their own keys and should be able to use it on chain in a fully decentralized ways. These are these are some of the principles that we're looking at.

Where is this already happening? Stacks is the largest Bitcoin project out there. Think of this as Bitcoin is old and clunky. It's very very hard to change it and Stacks is a new rails for BTC where Bitcoin can be cheaper, faster, programmable and we can actually move much faster to do an upgrade for stealth addresses, to do an upgrade for post quantum and even try to influence Bitcoin core development as well to make sure that whatever support we need from Bitcoin core can actually be there.

So for Bitcoin capital markets, one of our focus has been enabling BTC yield. So you can actually lock your Bitcoin in a self-custodial way and earn a 3% yield on BTC. And this product is very recent. It actually just came out in the last couple of weeks and we've been been seeing an insane interest on it because remember all of these large treasury companies, ETFs, they're sitting on billions and billions and billions of Bitcoin and no real way of earning any income. And that's a healthy thing for Bitcoin because it's the first signs of people actually deploying their capital on chain and once capital starts flowing, you start

seeing second order effects of it because now people might want to do looping around this and and boost their yield. They might want to use the same collateral and take stablecoin loans. The kind of on chain activity that you've been seeing on Ethereum and Solana, it's finally coming to Bitcoin and we are we're we're super excited about that. So to recap the frontier of Bitcoin in my view is on-chain capital markets, it's privacy, and it's post-quantum.

And Stacks is doing a work on all of these. Right now, we are focused on on-chain capital markets, and in our road map, we're doing a ton of work on on privacy and post-quantum as well. And with AI models, all of this actually accelerates very, very quickly. This is not something that we can just sit on, that yes, let's wait for the next 2 3 years and figure out what is going to be Bitcoin's post-quantum solution, or what is going to be Bitcoin's privacy solution. This is a today and a now problem, and we are at the frontier of it. Thank you.

Thank you very much.