ALEX the “Super App for Bitcoin” is Using Stacks and sBTC
by Grant Nissly on March 7th, 2024
The ALEX Lab Foundation is a nonprofit supporting the growth of the ALEX DeFi protocol. ALEX aims to use Bitcoin Layers, specifically the Stacks Bitcoin Layer 2, along with its upcoming sBTC release, to bring DeFi to Bitcoin.
This use case analysis looks at ALEX’s decision to use Stacks and sBTC to build its protocol.
This use case analysis looks at ALEX’s decision to use Stacks and sBTC to build its protocol.
ALEX: A Finance Layer for Bitcoin
Decentralized Finance (DeFi) has emerged as one of blockchain’s most compelling use cases. But the total amount of value locked in Bitcoin DeFi protocols has lagged far behind value locked on Ethereum. ALEX has a vision to change this.
ALEX aims to build the “Super App for Bitcoin” where users can lend, borrow, swap BRC-20 tokens, bridge assets to and from the Bitcoin ecosystem, and more.
However, in contrast to other blockchains like Ethereum, ALEX cannot build its application directly on Bitcoin. Bitcoin has limited smart contract functionality, slow confirmation times, and scalability issues.
To overcome these issues and build DeFi on Bitcoin, ALEX is building on a Bitcoin Layer 2, Stacks. The Stacks layer enables smart contracts and decentralized applications to use Bitcoin as a secure base layer.
ALEX aims to build the “Super App for Bitcoin” where users can lend, borrow, swap BRC-20 tokens, bridge assets to and from the Bitcoin ecosystem, and more.
However, in contrast to other blockchains like Ethereum, ALEX cannot build its application directly on Bitcoin. Bitcoin has limited smart contract functionality, slow confirmation times, and scalability issues.
To overcome these issues and build DeFi on Bitcoin, ALEX is building on a Bitcoin Layer 2, Stacks. The Stacks layer enables smart contracts and decentralized applications to use Bitcoin as a secure base layer.
sBTC Unlocks Bitcoin DeFi
ALEX launched in 2022 and has gained significant traction. To unlock BTC capital, ALEX requires a 1:1 Bitcoin-backed asset on the smart contract layer. This 1:1 Bitcoin-backed asset, or tokenized Bitcoin, is essential to unlocking hundreds of billions of latent Bitcoin capital.
Currently, ALEX is using xBTC and ALEX BTC or the aBTC token, a trusted, custodial tokenized Bitcoin as their 1:1 Bitcoin-backed asset.
aBTC is managed in a community-owned multi-sig, which runs counter to Bitcoin’s philosophy of decentralization — using xBTC and aBTC requires the user to place their faith in third-party organizations (similar to Wrapped Bitcoin on Ethereum).
This led the team at ALEX to search for a decentralized way to move BTC from Bitcoin L1 to an L2 and back. This brought the team to sBTC, a 1:1 Bitcoin-backed asset on the Stacks Bitcoin L2.
As ALEX notes in their documentation,
“We are introducing aBTC in anticipation of the roll-out of sBTC, to demonstrate to BTC holders what is possible when Bitcoin has its own smart contract layer and prepare our community for the sBTC roll-out.”
With sBTC, users get a Bitcoin-like asset that is operated by an open, decentralized network of incentivized signers, called Stackers. sBTC is the first decentralized and trust-minimized asset that can be used in Bitcoin DeFi applications.
Currently, ALEX is using xBTC and ALEX BTC or the aBTC token, a trusted, custodial tokenized Bitcoin as their 1:1 Bitcoin-backed asset.
aBTC is managed in a community-owned multi-sig, which runs counter to Bitcoin’s philosophy of decentralization — using xBTC and aBTC requires the user to place their faith in third-party organizations (similar to Wrapped Bitcoin on Ethereum).
This led the team at ALEX to search for a decentralized way to move BTC from Bitcoin L1 to an L2 and back. This brought the team to sBTC, a 1:1 Bitcoin-backed asset on the Stacks Bitcoin L2.
As ALEX notes in their documentation,
“We are introducing aBTC in anticipation of the roll-out of sBTC, to demonstrate to BTC holders what is possible when Bitcoin has its own smart contract layer and prepare our community for the sBTC roll-out.”
With sBTC, users get a Bitcoin-like asset that is operated by an open, decentralized network of incentivized signers, called Stackers. sBTC is the first decentralized and trust-minimized asset that can be used in Bitcoin DeFi applications.
ALEX is Building
As of January 17, 2024, ALEX celebrated two years on mainnet, marking a period of significant development.
As outlined in their documentation, ALEX aims to merge the capabilities of Bitcoin Layer 1 (L1) and Layer 2 (L2) technologies to foster a unified Bitcoin DeFi ecosystem.
This vision emphasizes a seamless DeFi experience that doesn't force users to choose between L1 and L2 but instead integrates L2's smart contract functionalities into the Bitcoin experience transparently, leveraging Stacks and sBTC.
In pursuit of becoming the financial layer of Bitcoin, ALEX has introduced many services, including a Decentralized Exchange (DEX), swaps, liquidity pools, staking, yield farming, a Launchpad for Bitcoin Economy projects, a Bitcoin Oracle, and more.
Melody He of the Spartan Group describes ALEX as “more than just an app; it’s a comprehensive Super App…”
As outlined in their documentation, ALEX aims to merge the capabilities of Bitcoin Layer 1 (L1) and Layer 2 (L2) technologies to foster a unified Bitcoin DeFi ecosystem.
This vision emphasizes a seamless DeFi experience that doesn't force users to choose between L1 and L2 but instead integrates L2's smart contract functionalities into the Bitcoin experience transparently, leveraging Stacks and sBTC.
In pursuit of becoming the financial layer of Bitcoin, ALEX has introduced many services, including a Decentralized Exchange (DEX), swaps, liquidity pools, staking, yield farming, a Launchpad for Bitcoin Economy projects, a Bitcoin Oracle, and more.
Melody He of the Spartan Group describes ALEX as “more than just an app; it’s a comprehensive Super App…”
ALEX is Growing
ALEX has seen explosive growth since its launch. With over $80M TVL, the potential of Bitcoin DeFi is clear. In addition, the total transaction volume is growing. It took 23 months to reach $500M in transaction volume following its mainnet launch. It took just 10 weeks to double transaction volume from $500M to $1Bn.
Ethereum and other blockchains attracted developers away from Bitcoin partly due to their increased functionality — especially with native smart contract capabilities.
However, builders like ALEX, in collaboration with Stacks and sBTC, are changing the narrative.
Developers and users are coming back to Bitcoin.
New use cases, like borrowing, lending, and exchanging, broaden the appeal of Bitcoin. They push us ever closer to the mass adoption that many have been working toward since Satoshi Nakamoto first released the Bitcoin white paper.
Ethereum and other blockchains attracted developers away from Bitcoin partly due to their increased functionality — especially with native smart contract capabilities.
However, builders like ALEX, in collaboration with Stacks and sBTC, are changing the narrative.
Developers and users are coming back to Bitcoin.
New use cases, like borrowing, lending, and exchanging, broaden the appeal of Bitcoin. They push us ever closer to the mass adoption that many have been working toward since Satoshi Nakamoto first released the Bitcoin white paper.