Why Bitcoin’s DeFi Moment Is Finally Here: Stacks Co-founder Muneeb Ali

Crypto projects building on top of Bitcoin have received some of the most praise this cycle — and perhaps none more so than Stacks.

The token powering Stacks, the layer-2 enabling smart contracts for Bitcoin, has exploded more than 220% since November as interest in Bitcoin scaling solutions reaches a new zenith.

Stacks co-founder Muneeb Ali joined Coinage for a new interview Friday to explain why leaders building in the Bitcoin ecosystem have taken their time. Ali and his team at Stacks have been building since 2017, for example, all while Ethereum’s ecosystem has exploded. Now, the pendulum has seemingly swung back to Bitcoin as Ordinals and Runes look to emulate the excitement NFTs once brought to Ethereum.

“If you are the king, you don't need to rush, right?” Ali said of all the builders looking to leverage Bitcoin’s dominant lead in the crypto space. “You can sort of take your time and do things the right way because you're not in a hurry. And I think Bitcoin still remains the king.”

That is perhaps precisely what has analysts and builders excited now about the opportunity to scale smart contracts and DeFi on Bitcoin. Others have tried and failed, but momentum has finally broken through in 2024, with Fundstrat analyst Sean Farrell calling a bet on Stacks, “a bet on the development of a Bitcoin economy."

Indeed, there is a lot of room to run. As of today, Stacks only counts a little over $150 million in total value locked, according to Defi Llama. As Ali explains, many people often compare that to the billions locked in respective Ethereum layer-2 blockchains, like Arbitrum, and salivate over what might be possible.

“I'm not a trader or a fund person, but I have friends, I have other people that I talk to and I've seen these models,” he said, noting the comparison of $90 billion on Ethereum layer-2s to the roughly $400 billion in Ethereum market cap. “Compare that to Bitcoin, the total capital is north of a trillion and the total market cap [of Bitcoin layer-2s] is around $5 billion and Stacks might be 90% of it.”

But as Muneeb explains, the opportunity to scale Bitcoin is not limited to DeFi. By leveraging the security of the Bitcoin blockchain, Stacks is attempting to become the most used transactional layer on top of Bitcoin. That is, by providing cheaper transactions, Muneeb hopes Stacks comes to house the bulk of activity in crypto.

In order to pull that off, Stacks is currently undergoing an upgrade dubbed “The Nakamoto Upgrade” which should enhance speed and result in lower fees.

“If anything, the biggest limiting factor has been the total network capacity that Stack's had. Like I mentioned that the current version, it’s sort of optimized for decentralization, where you can run nodes on Raspberry Pi and the network capacity is actually pretty, pretty small and we just keep hitting that wall,” Ali said. “People are sort of yelling at us to launch Nakamoto faster, and it's coming.”

The upgrade is expected to be complete in late May.

Coinage members can watch our full interview with Muneeb Ali above. To support our community-owned outlet, own it with us, and unlock other exclusive benefits, mint one of our Membership Passes today! Chat with Coinage in our Discord.