Decentralized applications (Dapps) and smart contracts have gained momentum in recent years because they enable users to take advantage of the blockchain industry without having to build an entire network from scratch. That’s why smart contract-capable platforms like Ethereum and Cardano have become quite popular.
But Bitcoin is lacking in this category because its core infrastructure doesn’t support Dapps and smart contracts. Stacks has stepped forward to add these features to Bitcoin so that the users can build decentralized apps and smart contracts on the safest blockchain network.
What is Stacks (STX)?
Stacks is a layer-1 solution that aims to enhance the Bitcoin blockchain without changing any of its features. The project is mainly focused on supporting the mass adoption of the Bitcoin blockchain. The apps and smart contracts built on Stacks blockchain are secured by Bitcoin because Stacks uses Bitcoin as its base layer.
Although Stacks is a separate blockchain network, it’s directly anchored to Bitcoin. It has a simple architecture that doesn’t affect any of Bitcoin’s features at all. Stacks incorporates a Proof-of-Transfer consensus protocol to make the most of Bitcoin’s blockchain without having the change the original blockchain.
Stacks works with commercial cloud storage providers to store its data separately. Stacks enables its users to assign easily readable names to different assets with the help of Blockstack Naming Service. The protocol uses a set of public and private keys to protect these assets.
The interesting thing about the Stacks ecosystem is that it’s the first-ever blockchain backed by the Securities Exchange Commission (SEC). Probably that’s why the Stacks team took around eight years to launch this project.
Stacks Brief History
Stacks was initially introduced as Blockstack by Ryan Shea and Muneeb Ali in 2013. They started working on this project after identifying the problem that the internet is being controlled by a group of companies. The team was initially focused on introducing a decentralized identity system.
The introduced Stack 1.0 blockchain in 2018. The team raised around $23 million through an initial coin offering in 2019. It gained more attention from investors because it was the first-ever blockchain network backed by SEC. In 2021, Stacks 1.0 was migrated to Stacks 2.0 through a successful hard fork.
The company’s name was also changed from Blockstack PBC to Hiro PBC. It’s the core entity in the Stacks ecosystem that’s responsible for building developer tools.
Features of Stacks
Stacks network consists of a range of features that improve the scalability and security of the network.
Mining – Mining is the most important part of the Stacks network that enables users to earn STX tokens as a reward for their contribution.
Building Decentralized Apps – Developers can build decentralized apps on the Stacks network using Bitcoin technology. The developers can use transaction signing, authentication, and data storage features for developing applications.
Gaia Storage System – Gaia storage system provides premium storage solutions with the help of Dropbox and Microsoft Azure. It keeps a record of data that isn’t directly stored on Stacks.
StacksArt – StacksArt is an NFT marketplace that enables users to buy and sell digital collectibles.
How Does Stacks Work?
Stacks uses a proof-of-transfer consensus protocol to connect the stackers and miners. Unlike Bitcoin, the miners don’t mine the Stacks tokens. The miners are only responsible for exchanging mined BTC tokens. These users receive STX tokens as a reward for their participation.
The Stacks network keeps a record of user identity information and transactional metadata through the mining process. The developers can use this data to run several operations in their decentralized apps.
Whenever a transaction is requested, the Stacks network first verifies the information itself and then adds it to a block after getting verification from Bitcoin because it’s directly anchored to Bitcoin.
Understanding Proof-of-Transfer
Proof-of-Transfer is a modified version of the Proof-of-burn consensus protocol. The proof-of-burn method requires miners to burn their own cryptocurrencies to become a part of the validation process. The eligibility of creating a block is determined based on the cryptocurrencies burned by the miner.
The network rewards the users for their contributions. The Proof-of-Transfer consensus mechanism works differently. It asks users to transfer their cryptocurrencies to other participants to qualify for the validation process.
In the Stacks network, the miners are required to transfer BTC tokens to other participants. The network transfers these tokens to STX token holders who have locked their tokens in specified wallets to support the ecosystem.
The network then randomly chooses a validator who is required to complete a unique puzzle to verify the transaction. They receive STX tokens as a reward for their contribution.
Clarity Smart Contracts
Clarity is a smart contract language that builds a connection between Bitcoin and Stacks. The Stacks network initiates a transaction containing information about crypto tokens being transferred. The Bitcoin network then determines the state of Stacks through a new transaction.
After the validation process, the Stacks network again launches a transaction to confirm the previous Bitcoin transaction. The developers can use Clarity smart contract language to create different products including fungible/non-fungible tokens, business-model templates, and app-specific blockchains.
Stacks Tokenomics
STX is the native token of the Stacks network that is used for the transfer of value. The users are also required to pay STX tokens as transaction fees when transferring funds to each other. STX token holders can lock their tokens for a specific cycle to receive Bitcoin tokens as a reward.
Similarly, the miners receive STX tokens as a reward when they verify a transaction. With a circulating supply of 1.3 billion tokens, STX has a market cap of $663 million. It ranks among the 100 best cryptocurrencies in terms of market. It has a total market cap of 1.8 billion tokens that will be released over time.
Conclusion
Stacks is a layer-1 blockchain network that is designed to improve Bitcoin’s functionality without the need for a hard fork. It enables users to create smart contracts and decentralized applications while offering the security standards of Bitcoin. If you need more information about how Stacks work, feel free to get in touch with us.
