Stacks is a Layer 1 blockchain solution that enables Bitcoin to support decentralized finance (DeFi), non-fungible tokens (NFTs), applications, and smart contracts. As a Layer 1 blockchain, it enhances the foundational protocol and improves the scalability of the entire system. Stacks allows developers to build decentralized applications and smart contracts that integrate natively with Bitcoin's stability, capital, and security—ultimately creating a user-owned, decentralized internet for Bitcoin issuance. The native token of the Stacks ecosystem is STX.
Network applications that use data are executed locally within the user's browser. This means users have complete ownership and control over their personal data. With a compatible browser, users can access all content on the Stacks network.
Stacks provides software support for internet access, a decentralized application environment, and development tools that power the computational network. Its primary goal is to reduce reliance on applications that may collect and sell user information, as well as centralized cloud service providers. Through the Stacks network, users can directly acquire digital assets such as usernames, domain names, and software programs. Computation occurs on the client device (edge) via the Stacks blockchain, while applications on the platform store data separately and use the blockchain only when necessary.
The History and Team Behind Stacks
In 2013, Muneeb Ali and Ryan Shea founded Blockstack (later rebranded to Stacks) at Princeton University's Computer Science Department. Their goal was to address inherent problems in existing online and mobile applications. In the summer of 2014, they began their startup journey under the guidance of the Y Combinator incubator. Shortly after, they raised seed funding led by Union Square Ventures (USV), with participation from Naval Ravikant, SV Angel, and others.
After introducing a blockchain-based decentralized identity (DID) system in 2014, Stacks revealed the initial design of what was then the Blockstack platform in 2015. The peer-to-peer communication and data storage system also became operational around this time. By 2017, development was complete, and the alpha version of the Blockstack developer platform was launched—this included a developer version of the Blockstack browser and a decentralized storage system. Toward the end of 2017, Staks secured two additional funding rounds: a Series A round led by USV with participation from Lux Capital and Digital Currency Group, and a token sale conducted under the Reg D framework.
Blockstack reimagined how users interact with applications. After receiving initial investment, the team continued working toward its goal of creating a full-stack solution for decentralized applications (dApps). The platform's main objective is to replace centralized cloud service providers and applications that currently control user data storage.
Stacks 2.0: A Major Upgrade
The Stacks team significantly enhanced its original innovations with Stacks 2.0, which brought secure applications and smart contracts to Bitcoin.
The launch of the Stacks 2.0 mainnet allowed programmers to use the Stacks protocol to create a Bitcoin-based, user-owned internet. Users can also earn Bitcoin through the platform.
The Clarity Programming Language
The Stacks blockchain supports decentralized applications and smart contracts while also facilitating the development of adaptable virtual assets that are easily transferable. These operations are secured by the Clarity programming language, which makes executing smart contracts more straightforward.
Clarity is a predictable programming language that does not require a compiler. Stacks uses this language to help introduce smart contracts to Bitcoin. To execute smart contracts when they are published on blockchain nodes, the programming language leverages predictable source code.
How Does Stacks Work?
The operation of Stacks relies on the relationship between two key participants: miners and stackers.
Interestingly, miners in the Stacks network do not actually "mine" in the traditional sense. Instead, they transfer already-mined Bitcoin (BTC) from outside the network and submit it, in exchange for the opportunity to earn STX tokens. For more details on how this unique mining process functions under its own set of rules, refer to the Stacks mining section later in this article.
To connect all applications within the Stacks ecosystem, every block mined on the Stacks blockchain contains user identity and transaction metadata. Stacks IDs or wallet balances are linked to cryptocurrency, so any modifications to them can be confirmed using the Bitcoin blockchain. The same applies to Stacks smart contracts, which are created using a unique coding language that was specifically designed and tested for Stacks by Algorand.
Each time a new block is created on the Stacks blockchain, the protocol distributes BTC produced by miners to stackers as a means of increasing the network's value. Eligible stackers receive BTC approximately once per stacking cycle (e.g., every 7 days, though the exact duration is subject to change).
STX holders must maintain a minimum active amount of STX to participate directly. There are approximately 100 million STX on the mainnet, but this number can fluctuate based on overall participation and supply. Those who do not meet the requirement can still participate through delegation services offered by third parties, allowing them to pool their holdings with others for group participation.
Key Features of Stacks: NFTs, DeFi, and BNS
Bitcoin NFTs
Just like fungible tokens, NFTs on the Stacks blockchain are generated using Clarity smart contracts. Thanks to the connection between Stacks and Bitcoin, NFTs created on Stacks settle on and are secured by Bitcoin. Some marketplaces, such as Gamma, now support Lightning and Bitcoin payments. The emergence of Stacking-powered NFTs that generate Bitcoin yield opens up exciting new possibilities.
Bitcoin DeFi
With a market valuation of approximately $1 trillion and growing institutional adoption, Bitcoin's DeFi sector represents a massive, largely untapped opportunity. Although Bitcoin is increasingly being used as a sovereign currency, it cannot easily be used as a resource for DeFi profitability—unless it is wrapped as WBTC through centralized exchanges or bridged to other blockchains. Stacks changes this dynamic.
Stacks smart contracts can observe the state of Bitcoin and possess the innate ability to leverage Bitcoin's security and settlement guarantees. This places Stacks in a unique position to enable true Bitcoin DeFi. Because the Stacks chain uses the Proof of Transfer consensus algorithm, all Stacks transactions settle on the Bitcoin network. Therefore, Stacks benefits from Bitcoin's exceptional long-term transaction reorganization security.
Blockchain Naming System (BNS)
The Blockchain Naming System (BNS) is a network system that connects Stacks usernames to off-chain data without relying on any centralized control source.
Unlike the Domain Name System (DNS), BNS allows anyone to create a namespace and modify its settings. Namespaces are offered on a first-come, first-served basis and remain active permanently once created.
BNS names possess three key characteristics that make them highly effective tools for creating a wide range of web applications.
The Stacks Ecosystem
The Stacks ecosystem comprises a network of decentralized autonomous organizations primarily focused on researching, scaling, and guiding the Stacks network.
Proof of Transfer (PoX) Consensus
Stacks introduced a novel consensus algorithm tailored to its operations and network security. This sets it apart from other blockchain projects that rely on Proof of Work or Proof of Stake mechanisms. The concept of Proof of Burn forms the basis of this method. Proof of Transfer (PoX) consensus is the first technique that utilizes two blockchains simultaneously. This approach prevents the burning of already-mined existing currency on a confirmed blockchain while also securing the new blockchain.
The Proof of Transfer mechanism eliminates the need for burning cryptocurrency. Instead, it requires mined tokens to be distributed to other participants in the ecosystem.
This new consensus mechanism simplifies the network's reward protocol. More interestingly, it allows network users to earn rewards and pay transactions using real, established tokens. These participants now have the opportunity to engage with the new blockchain simultaneously.
Thanks to this technology, Stacks eliminates problems typically faced by users when adopting a new blockchain. As a result, new users can enter the network with confidence.
Furthermore, the network leverages the highly secure Bitcoin blockchain to protect the new chain. There is no need for a new Proof of Work chain or cryptocurrency since Stacks is inherently connected to Bitcoin.
What Is the STX Token?
STX is the native token of the Stacks blockchain. Network operations cannot function without it.
Essentially, STX tokens facilitate the execution of smart contracts on the Stacks network. They are used to add new smart contracts to the blockchain. Additionally, STX is used in transaction processes such as earning rewards and paying fees.
Is Stacks (STX) a Good Investment?
Stacks has strong potential as an investment that could generate returns. Its use cases are built around smart contracts and offer the unique advantage of enabling mining activities on the Bitcoin network—the largest cryptocurrency network in history. If Bitcoin's support for smart contracts expands in a manner similar to Ethereum-based smart contracts, the price of STX could rise significantly.
To date, STX has demonstrated considerable returns and suggests the potential to remain a popular cryptocurrency. Based on current market conditions, there are no immediate bearish signals for STX. That said, it is essential to conduct your own research based on your investment goals.
How to Acquire and Hold Stacks (STX)
One way to acquire STX is by purchasing it through a centralized cryptocurrency exchange. To buy STX, you would typically need to register an account on a supported exchange, complete identity verification, and then deposit funds. Once your account is funded, you can follow the steps to purchase STX on the spot or derivatives markets.
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Latest Developments and News about Stacks
During the first week of November 2022, domain transactions ending with .btc reportedly increased by 260%. What drove this surge? Think of it as the Web3 equivalent of .com domains. In the early days of the internet, users had to enter long and complicated IP addresses to access websites. Then came the Domain Name System (DNS)—a naming scheme that allowed people to access their favorite sites by typing human-readable text strings ending with .com. Similarly, BNS (also known as .btc) has the potential to enhance the Web3 user experience much like DNS did for the internet.
Frequently Asked Questions
What is the main purpose of Stacks?
Stacks aims to bring smart contracts and decentralized applications to Bitcoin without modifying Bitcoin's core protocol. It enables developers to build applications that leverage Bitcoin's security and capital.
How does Stacks achieve consensus?
Stacks uses a unique consensus mechanism called Proof of Transfer (PoX), which relies on the Bitcoin blockchain for security. Miners transfer Bitcoin to participate and earn STX rewards, while stackers earn Bitcoin by locking STX.
Can I earn Bitcoin by holding STX?
Yes, through a process called Stacking, STX holders can lock their tokens to support network security and earn Bitcoin rewards in return. This is similar to staking in other blockchain networks.
What makes Clarity smart contracts special?
Clarity is a decidable language, meaning developers can predict exactly how a smart contract will behave before it is executed. This reduces the risk of bugs and vulnerabilities, making it ideal for financial applications.
Is Stacks compatible with Bitcoin wallets?
Yes, Stacks is designed to work seamlessly with Bitcoin wallets. Users can manage their STX and Bitcoin holdings in compatible wallets that support both assets.
How does Stacks improve Bitcoin's functionality?
By adding a layer for smart contracts and decentralized applications, Stacks expands Bitcoin's use cases beyond store of value. It enables DeFi, NFTs, and other innovative applications directly on Bitcoin.