Decentralised Finance has been one of the biggest features of blockchain technology and it had seen a very large influx of investors who saw the limitless opportunities in the ecosystem. This was also the case for the Stacks ecosystem which saw tremendous growth in the past year. After Okcoin announced their collaboration with Stacks Accelerator, Stacks Foundation and some venture capital partners to fund the Bitcoin Odyssey project on Friday, $STX price rose about 75% more than the 24 hour daily open. The Bitcoin Odyssey is a year long initiative which is being set up to deploy $165 million to projects built on Stacks and on the Bitcoin blockchain. Projects that could be considered will be Bitcoin and Stacks-focused projects in the areas of (but not limited to) DeFi, GameFi, NFTs and Metaverse projects as well as DAOs and GovTech projects. This was a huge validation signal for developers and the founders who have been building over the years on Bitcoin via Stacks.
This raises questions for those who got introduced to cryptocurrencies and were told that Bitcoin was not programmable — how then would these innovations be built or how are they being built on Bitcoin? This is where the people at Stacks come in.
What is Stacks?
According to the algorithm system, it is easier for the computer language to easily encode or decode a programming language that is Turing-completed. Therefore, Bitcoin is a more feasible and safe option for transactions between two parties because it is harder to be decoded.
Stacks — previously called Blockstacks and launched by Muneeb Ali and Ryan Shea — is an open source platform for building decentralized blockchain applications and smart contracts. Blockstacks was launched in 2017 and in 2019 was registered by the SEC as a security becoming the first SEC registered token offering therefore allowing the company to distribute its cryptocurrency token, $STX to the public. In January 2021, Stacks mainnet was launched and this meant they were no longer a security and could be traded freely.
Stacks is a layer-1 blockchain that runs parallel to the Bitcoin blockchain leveraging on the security, stability and economic power of Bitcoin to run smart contracts and build decentralized apps. It can be termed a virtual blockchain as all transactions on stacks are encoded within the metadata of the transactions in the Bitcoin blocks. It is basically bringing smart contracts to bitcoin which lacks programmability. The decision to build on Bitcoin was based on their conviction and thesis that Bitcoin is the standard for value settlement. Influencing or attacking the Bitcoin network is impractical for any potential hackers and it has stood the test of time.
Bitcoin has two features that are good for its network as is but when you want to use it for more they make its network limited.
- Scalability: Very limited number of transactions can be carried out on each bitcoin block.
2. Secure Contracts: The scripting language used for bitcoin blockchain does not allow for general smart contracts. This is not a bug as it provides security at the bitcoin base layer.
The unique consensus algorithm deployed by Stacks which runs between the Bitcoin and Stacks blockchains addresses these issues and therefore makes it possible for use cases to be built directly on Bitcoin.
Proof of Transfer Consensus Mechanism
This is the consensus mechanism that runs between Stacks and Bitcoin.
It recycles Bitcoin’s Proof of Work to achieve both high levels of decentralization and scalability without additional environmental impact.
With the launch of the Stacks mainnet (Stacks 2.0), proof of transfer (POX) mining was implemented and it anchors to Bitcoin’s security. With POX, miners bid their BTC to verify transactions, execute smart contracts and mine new blocks on the STX blockchain and then earn STX as rewards. On the other hand, STX holders earn the bid BTC as rewards for stacking and running nodes. This is a like a combination of proof of work and proof of stake consensus mechanisms.
Clarity Smart Contracts
Stacks uses the clarity programming language to run its smart contracts. Clarity is a decidable language i.e you can know with certainty what the program can do from the code. With this developers can analyse what a program will do, its data usage and cost of running the program. Also, clarity contract’s source codes are interpreted and broadcast on the blockchain the exact way the developers wrote them needing no compiler therefore eliminating the issues of compiler bugs.
Why should Stacks Interest You?
Stacks aims to unlock the deep capital in the Bitcoin ecosystem for multiple use cases. If you believe in the finality of Bitcoin and still want decentralization, you have to look at what stacks is doing. They are extending Bitcoin’s functionality. Currently through STXNFT, Byzantion.xyz amongst others there are now NFTs on Bitcoin. Bitcoin DeFi (e.g Arkadiko, AlexGo) is unlocking the trillions of dollars making bitcoin more productive than just being a passive asset. No better way currently can this be done than through Stacks. Other solutions like lightning, taproot and Liquid do a lot for Bitcoin but Stacks adds a lot more and still works with these other innovations.
Stacks has been building for a while and their ecosystem keeps on growing bigger and stronger. I believe they are going to deliver on their set out goals. Bitcoin is going to remain the biggest cryptocurrency and the most secure settlement protocol for a long time. Among the other similar protocols I think Bitcoin will remain the standard and I am willing to bet on Stacks adding the necessary spice to make this soup tastier.
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