What is Stacks?
The Stacks Network is a smart contract-enabled blockchain “anchored” to the Bitcoin blockchain. It enables DeFi, NFT, and Web3 applications for the Bitcoin ecosystem.
It is easiest to think of Stacks as a Bitcoin layer 2 network–a.k.a. an “L2″–similar to Arbitrum or Polygon for the Ethereum blockchain. However, there are some differences beyond the scope of this article.
In short: The Stacks Network aims to extend the functionality of Bitcoin, with more complex applications and fungible and non-fungible tokens (NFTs).
The STX Token
The Stacks Network has its own token, “STX,” which is the native token for the network and is used to pay for execution of smart contracts and transaction fees for sending NFTs and other tokens.
STX tokens were initially distributed to those who participated in the 2017 token pre-sale. Additional tokens are now created by miners participating in the Proof of Transfer (PoX) consensus mechanism, which secures the Stacks Network and “anchors” its blocks to Bitcoin. More on that later.
Currently the STX token has a total market cap of $3,382,696,904.53.
Proof of Transfer (PoX) and Stacking Rewards
The Stacks Network is secured with its own consensus model called Proof of Transfer (PoX), which utilizes two parties: “stackers” and “miners”.
In Proof of Transfer, STX holders lock up or “stack” their tokens, while miners spend Bitcoin trying to mine Stacks blocks and win the 500 STX block reward.
When a miner mines a Stacks block, they are paid out in the newly minted STX tokens and all the transaction fees paid in the last Stacks block. They then log a hash of the last Stacks block to the Bitcoin blockchain, “saving” the state of the Stacks blockchain to Bitcoin and making it secure.
Stackers, on the other hand, earn Bitcoin for their role in helping keep the Stacks Network secure. How are they helping keep the network secure? It’s complex, but in short they’re giving miners hints regarding the stability of Proof of Transfer.
Proof of Transfer (PoX) Summary
The Proof of Transfer mechanism “saves” the state of the Stacks blockchain Network to the Bitcoin base layer, which is the most reliable and secure blockchain on the planet.
Who created Stacks?
The Stacks Network was founded by two engineers: Muneeb Ali and Ryan Shea, who became friends while attending Princeton University. It was not, however, originally known as the Stacks Network–but “Blockstack,” which launched in 2016.
Blockstack was an attempt to create a whole new decentralized internet, with decentralized applications including OneName (decentralized ID system), OpenBazaar (decentralized eBay), and Casa (decentralized AirBnb).
Blockstack included an identity system called BNS and a storage solution called Gaia, which allowed users to store their application data personally or with commercial cloud storage providers such as Dropbox.
Muneeb, Ryan, and the Blockstack team continued to run Blockstack until it became clear that a smart contract-enabled blockchain would be a better path forward.
So in 2018, Blockstack became the Stacks 1.0 blockhain, and the STX token was distributed to those who participated in the 2017 token pre-sale. A Proof of Burn (PoB) consensus mechanism was used.
Then in 2021, Stacks 2.0 launched along with the Proof of Transfer (PoX) consensus mechanism, the Bitcoin Name System (BNS) smart contract, and the Clarity Smart Contract Language.
All users who used the identity system on Blockstack were able to keep their “.id” identities when Blockstack became the Stacks Network.
Clarity Smart Contract Language
Based on Lisp, the Clarity smart contract language was developed specifically for the Stacks Network. In contrast to the Solidity smart contract language, Clarity is more predictable and is not a turing-complete language. It is also not intended to be compiled.
The Stacks team believed that these design decisions would:
- Decrease the probability of hacks, such as the $60m DAO hack on Ethereum
- Make fee prediction more reliable
- Make smart contracts more readable for everyone
To learn more about Clarity Language, check out its homepage.
Applications on the Stacks Network
The most popular applications built with the Stacks Blockchain right now are:
- Gamma – an NFT platform
- ALEX – a DeFi platform including a decentralized exchange, lending and borrowing, etc.
- btc.us – a registrar for the .btc namespace
- Sigle – a decentralized writing platform
In 2023, we expect to see Stacks DeFi grow substantially.
Frequently Asked Questions (FAQ)
Stacks is a blockchain linked to Bitcoin with the Proof of Transfer (PoX) consensus mechanism wherein Stacks transactions are combined into blocks, hashed, and logged in a Bitcoin transaction by a Stacks miner.
The Stacks Network was originally started by Muneeb Ali and Ryan Shea as Blockstack. The company that now does most of the development work for Stacks is Hiro PBC.
Notable investors in Stacks include Union Square Ventures, Lux Capital, HashKey, Digital Currency Group (DGC), Y Combinator, Foundation Capital, Winklevoss Capital, and numerous other organizations and individuals.
The Stacks Network is headquartered in New York, New York.
