I love when the Crypto ecosystems are connecting the bits, when great projects instead of criticising each other - cooperate- not only expanding shared base of users, but also leveraging the fundaments built by one, to add even more robust and complete features on top. This is what I see looking at projects like Algorand, Blockstackor Rootstock, and what they doing for Bitcoin ecosystem. All different but at the same time - building something great. Leveraging the strengths of Bitcoin, and also addressing its weaknesses. Let me take you through my story with some of these projects.
Bitcoin : the security layer!
I think I don't have to introduce Bitcoin too much, but let me give it a short try, to make the message simpler and clearer for people new to this crypto movement. Bitcoin is a decentralized digital currency (no single entity controlling it) designed in a way that can be sent from one user to another, on the peer-to-peer basis, without the need for intermediaries in the process. Transactions are verified by network nodes, through cryptography and recorded in a public distributed ledger, called a blockchain. Bitcoins (BTC coins) are created as a reward, in a process known as mining. They can be exchanged for other currencies, products, and services in a real world or in a crypto world (mostly the latter these days). Bitcoin has been both praised and criticised.. Some of the critics include:
- price volatility ranging from 10%-20% on a daily basis is not a surprise
- large amount of electricity used to secure the network (big city burns less energy than bitcoin),
- expensive and slow transactions, the more users, the higher transaction costs and the slower transactions. The network is simply not scalable,
- little utility in real life, other than HODL (holding bitcoin because of it's Store of Value attribute is still then main use-case for BTC),
- transparency, all transactions recorded on the blockchain, are traceable and visible to everyone (this is both + and -)
On the other hand people praise Bitcoin for:
- outstanding network security, thanks to a decentralisation and thousands of nodes securing the bitcoin blockchain,
- limited supply, total number of bitcoins could never exceed 21 million BTCs, thanks to the way it is designed and implemented,
- censorship-resistant, you can not stop or rollback transaction once it is processed,
- Store of Value, Bitcoin is perceived as Digital Gold, because you can not "print" more than 21M Bitcoins, it accrues the value as the network effect grows,
There are hundreds of other projects trying to be the next Bitcoin, but these are typically not secure enough or are doing other shortcuts. So I particularly appreciate projects, which are levering the fundaments built by Bitcoin, namely its security and store of value, but at the same time are adding more features on top, to get it mainstream ready. Let me introduce you to Algorand + Blockstack
Algorand : borderless economy enabled!
Algorand will help to add more utility and functionalities to crypto assets and crypto world overall. To understand how it anchors into Bitcoin, you will need first understand Algorand platform, then Blockstack platform features, and then connect the dots and bits. (I will help you with that a bit:-)
Algorand, led by Turing award-winner, professor at MIT Silvio Micali and a prominent team of cryptographers, engineers, and mathematicians is committed to the ongoing development of interesting solutions for borderless economy. Algorand built open source, permissionless, pure proof-of-stake blockchain protocol, for the next generation of financial products. Algorand is powering the DeFi evolution by enabling the creation and exchange of value, bringing assets on-chain and providing responsible privacy models. Core features and characteristics of Algorand include: Smart Contracts capabilities, that enable DeFi solutions and dApps that can scale to billions of users, tens of millions of daily transactions, with negligible transaction fees. Smart Contracts enable the disruption of economies and the creation of new business models across different industries with efficient and automated transactions and applications, allowing for a trustless execution of an agreement. Just to name some of the possible use cases:
- Decentralised Exchanges,
- Interfaces to off-chains data sources,
- Transfer of Assets between multiple chains,
- Programmatic debt solutions of various kinds.
Algorand Standard Assets are standard blockchain assets with customizable options, directly in Layer-1, and enable asset tokenisation, 3rd party asset issuance, or democratized access to investments. With ASA, following things are made possible:
- real estates tokenization,
- securities tokenisation (like equities),
- loyalty points or in-game items issuance,
- tokenisation of commodities, gold, art and many many other.
Atomic Transfers for secure transfers and immediate transaction settlement for multiparty transactions built in Layer-1. You can use tokenised asset and thanks to Smart Contracts and AT execute complex tractions, like:
- Instantaneous settlement of complex multi party / multi asset transactions,
- real estate ownership transfer,
- debt settlement involving multiple parties.
Rekeying 1 solves operational inefficiencies of Blockchain, by allowing users to change their Private Spending key, without the need to change their Public Address. To include a new possibilities, like:
- Onboarding large user bases for projects that are moving to Algorand from other blockchains or more traditional technology platforms
- Advanced Custody solutions
- High-security scenarios where the spending key must be kept cold, and transaction is needed from the account
Co-Chains are private networks built on top of Algorand, interoperable with public Algorand chain, communicating, exchanging value and assets. This opens the gates for:
- Enterprises to built proprietary solution but leveraging features of public networks where they need it,
- Governments to built solutions for compliance and privacy, but also opening gates for transparency and traceability,
- Supply chains, to exchange information in a secure manner, but verifiable by public, and many more.
Interoperability in Public Blockchain space : coming soon by Algorand, You can probably learn more about Algorand from this video, i made some time ago (eng).
All these features of Algorand, are making it very interesting platform for decentralized developments- and many projects are already building on top.
Can these developments be beneficial for Bitcoinone day?
I guess so - keep on reading - Bitcoin is missing many of these features, so utility is limited, but has other major advantages (security, store of value)
OK.. So what connects Algorand to Bitcoin?
Algorand has it's own programming language (TEAL) which is non-Turing complete language, designed for security and available with multiple SDKs (like Java, Python, Go) - you can learn more here. Additionally Algorand works with Blockstack team on the Clarity Language.
Blockstack is tight to Bitcoin for security, and Clarity as an platform - interoperable language that executes Clarity contracts is adding utility to Bitcoin.
Algorand will adopt Clarity, so all what will be built on Algorand with use of Clarity also possitively impacts Bitcoin (used to secure stacks platform)
But why to use Clarity languge in the first place, instead of Solidity or anything else?
Clarity is a decidable language for smart contracts, meaning you can know, with certainty, learn from the code itself what the program will do. Clarity is interpreted (not compiled) and the source code is published on the blockchain, so Clarity gives developers a safe gateway to build complex smart contracts in a secure manner. We have seen multiple hacks of smart-contracts, and often this cause by the way programming languages are architected - for blockchain programming this is even more difficult because we are not iterating the development - it needs to be perfect as of Day 1 (because of the immutability features). For high stakes transactions (like DeFi, or anything what involves big fiances, with use of Bitcoins or Algos or STX) Clarity might be the best choice (Security, WSWIG, predicability)
Clarity can be used for programming on other blockchain platforms as well, currently starts with Algorand and Blockstack, but there are no limitation to expand to Ethereum or others. Building with Clarity developers can come up with more advanced business use cases where some functionalities run on Algorand (like DeFi component), some are implemented on Blockstack (like UI and authentication) and some leverage Bitcoin as an asset (as a collateral, Digital Gold). In the future these apps can interoperate in the broader crypto ecosystem (like Polkadot, Cosmos, Ethereum or Tezos). I cover some of my thoughts in this video About Algorand, Clarity and Blockstack, and how it impacts Bitcoin. Executing Clarity contracts will eat some Bitcoins. So executing Algorand features built with Clarity will add utility to Bitcoin. The important part in this picture is Blockstack, who stays behind PoX (Proof of Transfer protocol) that anchors security of Blockstack and Clarity to Bitcoin.
so lets now try to uderstand a bit better what is Blockstack and how it connect Bitcoin to a broader ecosystems of Algorand and potentially other projects.
Blockstack : innovations on top of Bitcoin.
Blockstack is an open-source, developer-friendly network for building decentralized apps and smart contracts. What is great about Blockstack is that it inherits Bitcoin's security through Proof of Transfer mechanism, so it is not trying to burn electricity again to secure the network, neither is trying to introduce another Store of Value coin. Blockstack takes what is the best in Bitcoin and expands it further. Among other features, Blockstack is designed in a way that protect user privacy and ownership with decentralized data storage and accounts, everything your users do will be private and owned by them / so it is great step forward, comparing to bitcoin.
There are more add-ons by Blockstack, just to name a few of the core characteristics:
Stacks blockchain, the Stacks blockchain inherits the security of the Bitcoin blockchain through its consensus mechanism, Proof of Transfer.
Decentralized accounts, users get a blockchain-generated key that unlocks their account and data storage in a private manner.
Encrypted data storage, data is stored independently from your app, in a place controlled by the user's key.
Clarity smart contracts, is Blockstack’s and Algorand's language for writing smart contracts that has been adopted by multiple projects in the space. Clarity is designed by top computer scientists from MIT (Algorand) and Princeton (Blockstack) to be secure and reliable.
Blockstack itself we have over 400 apps running already. In a way they leverage security of Bitcoin and will add utility to Bitcoin blockchain. How?
Blockstack is tight to Bitcoin via mechanism called Proof of Transfer (PoX). Simply put, the mined Bitcoins are used to secure Stacks chain, and and miners are rewarded in STX tokens for their work. On the other side, the Stackers (who support miners by providing important signals to them) they deposit their STX coins, and earn BTC as a reward for their help. So naturally BTC<>STX are glued in this mechanism.
I explain it more deeply in this material.
Long story short:
- Bitcoin Stores the Value.
- Blockstack takes Bitcoin's security and adds privacy and utility (400 apps already)
- Clarity adds programming interoperability, but it also adds value to BTC, thanks to how Blockstack and Algorand designed it.
- Algorand has a massive clients in pipeline (CBDCs, YouNow, PlanetWatch and many more) and some will use Clarity for their features now or in the future.
- So both Algorand and Blockstack building their apps add value to BTC.
- Unhodl. BTC needs it.
Well.. we are yet very early with the cryptocurrencies and blockchain adoption. In my opinion some fundaments are already established (store of value and high security chain - Bitcoin) some new trends are visible (dominating platforms for decentralized finance - Algorand) and some are yet shaping (new languages and ways to build and interconnected solutions on these platforms - TEAL, Clarity, REACH, Plutus, Marlowe, Motoko).
I don't believe in the concept of one big platform to rule them all. Simply put, the area is too complex, muti-dimentional, and business use cases require different features and parameters. Promising projects like Blockstack or Algorand joining the forces and figuring out how not to re-invent the wheel but go to the next stage, building this crypto automobile puts them on my TOP list. The area is much broader obviously, for example RSK Smart (aka Rootstock is building interesting stuff - RIF OS as a layer-2 and layer-3 on Bitcoin) , so who knows how it all evolves.
Bitcoin needs help.
HOLD use case for BTC is short-term play IMO. Either we expand it or somebody will take over the SoV narrative from Bitcoin one day.
( this article is my personal opition, and is not a financial advise! )