An introduction to Stacks
Bitcoin was created with the purpose to give the people a currency that can’t be inflated or corrupted. A form of money that can be directly owned and transacted without the need for intermediaries such as companies or banks. At all this, Bitcoin’s protocol and decentralized network have been doing a near-perfect job.
However, Bitcoin’s protocol isn’t very flexible when it comes to programming applications on top of it. Over the past few years, it has become clear that there are many more use cases of blockchain technology such as DeFi and NFTs. Bitcoin could thus far not be used in this.
This is where Stacks comes in.
If you want to learn how to use the Stacks ecosystem, click here
For our 7 favourite projects on the Stacks blockchain, click here
Stacks & Bitcoin
Stacks makes Bitcoin programmable by enabling smart contracts. You can see Stacks as a blockchain 1.5, where it is its own protocol but is directly linked to the Bitcoin network. Stacks leverages the security of the Bitcoin network to secure its own. Exciting use cases of blockchain are now possible on the Bitcoin network via Stacks.
For example, bitcoin owners can earn an interest with their bitcoins by lending them out, use bitcoins as a collateral for a stablecoin loan or buy some Bitcoin culture in the form of NFTs through Stacks, All without having to use centralized exchanges, intermediaries or companies like Celcius or Nexo but directly from your own wallet.
This and many more use cases are being unlocked by Stacks, adding an essential layer for mass adoption to Bitcoin’s monetary network. With Bitcoin as the base layer, Stacks is trying to enable a new internet that is secured by the Bitcoin network and protects privacy and property rights.
While Stacks is not the only project trying to accomplish this, it is the clear market leader. The Stacks ecosystem is just taking off, with various DeFi projects and dozens of NFTs projects live and interest in and usage of the ecosystem is on the rise.
The history of Stacks
Stacks started as a computer science PhD project at the university of Princeton in 2013 under the name Blockstack. A year later, the project became a startup and was incubated by Y-Combinator.
Thus far, the project has raised $76 million in funding. Stacks has a long list of notable investors, among which are Naval Ravikant, Anthony Pompliano, Meltem Demirrors, Winklevoss Capital and the Digital Currency Group.
What’s notable is that Stacks was the first project to receive an SEC qualification for their token sale in the US. While this doesn’t mean that the token is fully regulated, it does put the legal standing of the project’s asset STX miles ahead of most other tokens.
Team & organization
The PhD origins of Stacks was started by Muneeb Ali and Ryan Shea. As the project grew from a research paper into a startup and now into an ecosystem, the team has been gradually expanding, with an impressive pool of computer science talent from universities such as MIT, Harvard and Stanford.
Hiro PBC is the organization responsible for developing and upgrading the Stacks protocol. Additionally, the Stacks Accelerator helps projects launch on Stacks.
Technology
Stacks is the first protocol that has linked to separate blockchains. The first version of the protocol, which was released in 2018, functioned as a testing ground. However, with the launch of Stacks 2.0 mid January 2021, developers could start building smart contracts on Bitcoin. Now, Stacks has the first consensus mechanism between two blockchains.
Proof of Transfer
Stacks is a unique blockchain that is directly linked to the Bitcoin blockchain through its unique consensus system called Proof of Transfer (POX). All Stacks transactions are settled on the Bitcoin blockchain, leveraging the security of Bitcoin’s global Proof of Work network and making Stacks transactions as secure as a Bitcoin transaction. Click here for the Proof of Transfer whitepaper.
In Proof of Transfer, miners are not using mining equipment and electricity to mine Stacks. Instead, miners use Bitcoin to mine new STX tokens and earn transaction fees. Through this system, miners earn STX and STX stakers earn Bitcoin.
Microblocks
Since the Stacks blockchain is anchored to Bitcoin’s blockchain, Stacks is inevitably subject to the 10 minute block time of Bitcoin. The Stacks protocol is solving this with microblocks. These microblocks enable many transactions to be executed in between Bitcoin blocks. The final state of the transactions within these microblocks will be submitted to the Bitcoin blockchain. Click here to learn more about microblocks.
Clarity
Smart contracts on Stacks are written with the Clarity programming language. This language is developed by the team itself. While it is not as free as other languages (it’s not Turing complete), Clarity optimizes for security through something called predictable code. Predictable code allows developers to exactly determine what a program will do, how much data it uses and the cost of running a program. Click here for all information regarding Clarity.
If you want to learn more about the technology stack of the Stacks blockchain, you can visit this page.
Congestion
The rapid rise of an ecosystem on top of Stacks has led to congestion problems for transactions. During peak events, it could take hours for a transaction to come through. Therefore, an improvement proposal called SIP-012 was proposed and approved through STX community vote to improve transaction speeds.
This Stacks Improvement Proposal is scheduled to rollout late November and will turn Stacks into version 2.05. It also beautifully demonstrated the power of decentralized governance as a 66.7% approval rate was required and showed a valuable utility of the STX token.
Click here to learn more about how Stacks can scale
Stacks token ($STX)
The Stacks blockchain has its own native token, STX. This token is used to secure the blockchain through Stacks’ Proof of Transfer consensus mechanism. Due to this system, the STX token has one of the most interesting earning mechanisms in the industry. By staking STX, you can earn bitcoin.
Additionally, STX is used to pay for transactions on the Stacks blockchain and can be used for voting in protocol improvement proposals.
When the first version of the protocol went live in November 2018, 1.32 billion STX were minted. Here, you can find exactly how these tokens were allocated. The STX is inflationary with no max supply. Miners currently receive 1000 STX per block, but this reward will decrease by 50% every 4 years until the reward is 125 STX per block, which will remain the miner reward indefinitely.
The STX token additionally was the first crypto asset that received clearance from the SEC for a sale in the US.
Ecosystem
The Stacks 2.0 blockchain has been live since mid-January 2021. Since the summer of 2021, an ecosystem of dapps has slowly begun coming online on the blockchain.
There are two main NFT marketplaces, STXNFT and StacksArt which count a couple of dozen of NFT projects and a handful of DeFi projects, although the latter are still in beta and in a very early-stage. However, there’s a lot of work in progress, with hundreds of projects planning to launch on Stacks.
If you want to learn how to use the Stacks ecosystem, click here
For our 7 favourite projects on the Stacks blockchain, click here
Flagship’s perspective
Over the past few years, it has become clear that Bitcoin is the reserve currency of the crypto market, the internet and has the potential to become a global currency. While there are already many ways to use your Bitcoin, nearly all of them require a trusted third party which exactly defeats the purpose of the design of Bitcoin.
The Stacks ecosystem is starting to unlock a variety of use cases for Bitcoin without investors losing control over their assets while leveraging the world grade security of the Bitcoin network. If we look at Ethereum, DeFi has exploded over the past year and accounts for roughly 30% of its market cap. As soon as Stacks becomes scalable and includes a rich ecosystem of dapps, the ecosystem could attract billions.
While there are other projects working on bringing programmability to Bitcoin, Stacks still is in a league of its own, which may come as no surprise given the 8 years of work, the talented team and a highly professional infrastructure for assistance and financing for new projects. The ecosystem on top of the Stacks chain is just starting, the protocol doesn’t scale very well at the moment and there are no dapps that use native Bitcoin yet, so we’re not expecting mass adoption of Stacks any time soon.
However, a 10x scalability improvement is in the works, as is native Bitcoin and hundreds of projects are building on top of Stacks. Once these roll out and the network gets real traction, the sky’s the limit.
