Bitcoin introduced digital property, says Muneeb Ali, founder of Blockstack PBC, the entity, which spearheads development of Blockstack’s Stacks blockchain, an open-source project building software for a user owned internet.
“In human civilization, whenever you have introduced property rights, the living standards for those people and societies have gone up, because, as soon as you introduce property rights, people start to self-organize,” he said. “They try to work for themselves, all sorts of capital formation happens, markets develop, and so on and so forth.”
These property rights must be defined at a global layer. “Bitcoin becomes that global layer, the source of truth,” said Ali. “Imagine how critical the internet is for everyday life, and we had been in an era where we didn’t have property rights.”
Bitcoin changed that. “Now, the web has property rights. People own their own stuff,” he said. “We can directly own cryptocurrencies, we’ve got smart contracts, and Web 3.0 applications. They are derivatives of property.”
Ali slices the evolution of the internet into two epochs: before digital property and after digital property. The Crypto 2.0 community—the harbinger of which is the Bitcoin blockchain —defined digital property rights. “Crypto then merged with the web to give you Web 3.0,” said Ali.
Web 3.0 will emerge on top of blockchains, says Ali, who worked on next generation internet infrastructure before entering the crypto industry. “There were very specific problems that we were trying to solve,” he says of his pre-blockchain work. “And, when we discovered blockchains, it was a perfect solution for the problems that we were looking at.”
Next generation internet, commonly called Web 3.0, will emerge on top of blockchains, says Ali. What’s not clear right now is which blockchain design works best.
“That’s where you’re seeing a lot of experimentation, with different projects trying to propose different types of designs,” says Ali. “You can’t discount Bitcoin from the entire Web 3.0 ecosystem. It is by far the most secure blockchain. There are network effects, as well. Most people get introduced to cryptocurrencies through Bitcoin, and projects like Lightning are innovating on top of Bitcoin.”
Ali says products like Blockstack can anchor Web 3.0 with Bitcoin. “That might be the sustainable path to Web 3.0 development,” he said. “As users start moving away from Web 2.0, we realize how the underlying technology to enable cryptocurrencies is the same as the technology that enables Web 3.0 apps. Users can own digital currencies and internet assets with similar private keys. The artificial line between money and data disappears, and a unified digital society emerges.”
Ali adds: “Bitcoin is the reserve currency of this society, and smart contracts, and Web 3.0 apps anchor to the security of Bitcoin.”
Bitcoin will serve the same purpose in a decentralized internet as for future payments on the network. “In ten years, you won’t be doing transfers at the Bitcoin layer,” he said. “There will be something like Lightning, where a lot of transactions are happening, and then you’re settling on Bitcoin or there are smart contracts running somewhere else, and they’re settling on Bitcoin. Similarly, applications built on Web 3.0 can derive their security from Bitcoin.”
Ali sees blockchain as a foundational layer for Web 3.0. There are many different projects trying to build blockchains for Web 3.0 type applications. The core innovation behind blockchains is that no single party has majority control of the network, says Ali.
“You’re not depending on a company, like Google GOOGL, Facebook or any single entity,” he said. “It is a network that is very hard to hack in the sense that, if something is written on Bitcoin’s blockchain, it’s very hard to go back and change that information in a process called reorg, which on bitcoin is insanely expensive to the extent it’s almost impossible to pull that off.”
Such functionality results by connecting the Stacks blockchain to Bitcoin, says Ali. Blockstack, which was founded in 2013, is building this foundational layer for Web 3.0 by leveraging Bitcoin’s security.
Instead of creating a separate proof of work blockchain, like some smaller blockchain, which might not be that secure and can be attacked in its early days, Blockstack designed a new consensus mechanism that benefits from the security of Bitcoin.
“It’s a next generation internet infrastructure with privacy focused decentralized applications or smart contracts,” said Ali. “You fundamentally need a blockchain for some of this functionality.”
Blockstack introduced in Q1 2020 Proof of Transfer (PoX), a mining mechanism that Blockstack believes will be a key tool in creating a user owned internet and Web 3.0. It would help anyone who wants to start a new blockchain to leverage bitcoin’s security layer.
The design uses Bitcoin’s proof of work to launch new blockchains, while allowing participants to earn Bitcoin for consensus participation, ecosystem developer funds, and incentives for specific players.
PoX enables smart contract languages, such as Clarity, to leverage Bitcoin’s security without any modification to Bitcoin, and developers to create new PoX blockchains using the security properties of Bitcoin. Blockstack could have started a new proof of work blockchain, says Ali. They choose otherwise.
“Bitcoin is already here,” he said. “It has been here for 10+ years now. It is by far the most secure proof of work blockchain. When looking at the hash rate of Bitcoin, it is hard to attack Bitcoin. It can be viewed as a reserve cryptocurrency.”