I’m writing this post to make the case to enable sBTC as a gas asset with the Stacks ‘Nakamoto’ upgrade, and invite members of the Stacks community to take part in the discussion.
The Business Development (BD) Working Group found that there is a strong case to be made for sBTC as gas. Specifically, that almost all users want to use “sBTC as gas” and sBTC as gas would serve that purpose and strengthen Stacks’ position as a Bitcoin L2. At the same time, the technical work that’s required to enable sBTC as gas is relatively trivial. And finally, there is minimal concern that sBTC as gas would detract value from STX. Let me break down these points one by one.
Firstly, almost all users want to use sBTC as gas.
We can consider the wallet and DEX teams as the most end user-facing teams in our ecosystem. Both Leather and Xverse, as well as ALEX are figuring out solutions to how they could allow users to use sBTC as gas if STX would remain the only gas asset enabled on the Stacks layer. So, for end users this is already going to happen. Some of the avenues they are exploring are sponsoring Stacks layer transaction STX gas fees while deducting an equivalent in sBTC balance from the user’s account, free sBTC<>STX swaps to pay for gas under the hood, and more. These solutions are clunky, could lead to edge cases, and are technically complex ways to solve for allowing users to pay gas in sBTC. Support at mining level can make this experience easier for users and developers.
Additionally, the sBTC BD working group has found significant traction from exchanges who would be looking to support “BTC withdrawals over L2” i.e., sBTC withdrawals for their users. Most exchanges already have similar solutions in place for withdrawing ETH on L2 or other chains (multi chain support for assets). Now that Bitcoin L1 fees are reaching similar levels to Ethereum L1 regularly, BTC withdrawals onto the Stacks L2 are becoming a serious option to consider. However, it’s crucial to our exchange partners that their users can move around BTC without needing to buy STX.
The technical work to implement sBTC as gas asset is minimal. The current gas asset of the Stacks network (STX) is a SIP-10 token. sBTC is also a SIP-10 token. Allowing another SIP-10 as gas would be trivial to implement. The BD working group confirmed this with Jude Nelson, Research Scientist at the Stacks Foundation and long-time Core Contributor, whose comments we welcome below. STX as gas could remain for backwards compatibility, which is similar to how OP is used as optional gas asset on Optimism (concurrently to ETH as the default gas asset).
Most importantly, sBTC as gas would strengthen Stacks’ position as a Bitcoin L2. A common criticism of Stacks as a Bitcoin L2 is that fees on the network are paid in STX. People often make a similar point about Polygoin as an Ethereum sidechain instead of a true Ethereum L2, since MATIC is it’s gas asset (whereas ETH is the gas asset on ‘true Ethereum L2s’ like Arbitrum and Optimism). Making sBTC a gas asset on the Stacks network, would cement Stacks as a Bitcoin L2 in the current race to claim leadership over this new category.
Finally, there is minimal concern that sBTC as gas would take away value from STX. It’s tempting to think that STX value accrual happens because users need to buy STX to pay for fees on the network, but this isn’t the common value accrual mechanism for L2 tokens. If we look at our L2 peers on Ethereum, we see that ARB isn’t used as gas on Arbitrum ($10bn FDV) and OP is used as an optional gas asset on Optimism similar to this proposal ($7bn FDV). With STX at $~1bn FDV we shouldn’t be too worried about losing out on value accrual mechanisms by enabling sBTC as gas. Besides, the common value accrual system for L2s is that token holders receive transaction fees for validating the network. On Stacks, the transaction fee revenue flows to STX stakers by Stacks miners increasing their BTC bids when their revenue increases (when network usage goes higher). The 4000 Stacking slots is the scarce thing about the Stacks network, and the only way to access them is by holding STX. The more gas is paid on the network (in whichever token), the more valuable these stacking slots will be (and thereby STX). STX will continue to work as a gas asset for those who want to use it that way, but it wouldn’t be surprising if a lot of new users simply use sBTC as gas.
I look forward to peer reviews to this idea below. If this makes sense, this post & discussion could form the basis for a SIP. I’d also like to invite you to a special edition of the weekly SIP call I’m helping host on Friday, December 8 to discuss further!