Stacks Background and History

Stacks is a unique project in the crypto space that has been in development for nearly a decade. While Bitcoin has experienced over 5000x growth in asset price over the past ten years, its developer ecosystem has been slow to develop due to various challenges. The launch of Ethereum in 2015 shifted the focus away from Bitcoin for a time, as developers flocked to the new platform with its smart contract capabilities. However, despite the rapid development of Ethereum and various other Layer 1 platforms, they have been unable to tap into Bitcoin’s massive reserve of assets.

Bringing smart contracts to Bitcoin has always been a goal for talented innovators in the crypto space, and Stacks is one of the projects that has been working towards this goal for the longest time. The project was first proposed in 2013 by Muneeb Ali, a computer science PhD from Princeton University, and it finally launched in 2021. In an industry full of short-lived projects and hype cycles, it is rare to find a project with such a long lifespan that is still experiencing new growth and innovation.Muneeb Ali, the lead author of Stacks, is a highly respected figure in the crypto community. He has been involved in the Bitcoin ecosystem since 2013 and played a key role in developing the SEC’s crypto asset framework. As a result, Stacks became the first token to be compliant with the SEC’s framework.

Stacks is a project with a long and storied history in the crypto space. It has overcome many challenges and achieved significant milestones along the way. With its unique focus on bringing smart contracts to Bitcoin, Stacks is well-positioned for continued growth and innovation in the years to come.

Core Innovations

Proof of Transfer (POX) Consensus: Maximizing the Security of BTC PoW Anchoring

The security of Bitcoin’s Proof of Work (PoW) consensus mechanism has been a key factor in its success. However, PoW is also known for its energy consumption and scalability limitations. As a result, there has been a growing interest in alternative consensus mechanisms that could offer greater security and efficiency.

Proof of Transfer (POX) is a consensus mechanism that was first proposed by Muneeb Ali in 2013. POX is a hybrid consensus mechanism that combines elements of PoW and Proof of Stake (PoS). In a POX system, miners are rewarded for transferring BTC to a smart contract on the Stacks blockchain. This process is called “stacking”.In the Stacks architecture, becoming a miner is a unique design that requires burning BTC to lock in STX for Stackers. This protocol is called Proof-of-Burn (POB), and in exchange, miners receive STX block rewards. It is equivalent to using native BTC as a guarantee of miner qualification, and bringing BTC liquidity to STX holders, forming a two-way secure liquidity.Stacks blocks are called micro-blocks. Micro-blocks are packaged by Stacks miners and written back to BTC blocks. BTC blocks are used to finalize the micro-blocks’ eventual consistency, which takes about 10 minutes in the current version.

sBTC: Bridging BTC Liquidity to Stacks

In addition to technically implementing a secure BTC contract platform, Stacks introduces a new token, sBTC, on the native BTC base. The essence of this is how to safely leverage BTC liquidity.First, sBTC has a 1:1 mapping relationship with BTC. The specific implementation is based on the Stacks contract, and a multi-signature open member selection is introduced.The multi-signature mechanism ensures the security of sBTC. The private key of sBTC is divided into multiple parts and stored by multiple parties. To transfer sBTC, multiple parties need to sign the transaction together. This makes it difficult for attackers to steal sBTC.sBTC allows users to transfer their BTC to the Stacks blockchain without losing custody of their BTC. This can be used to participate in DeFi applications on Stacks, such as lending, borrowing, and staking. By bridging BTC liquidity to Stacks, sBTC can help to grow the Stacks ecosystem and increase the value of STX.Stacks Nakamoto Upgrade: A Major Leap Forward for BTC Contract Development

Stacks is a platform that enables developers to build smart contracts on Bitcoin. In order to better support the needs of BTC contract developers, Stacks is proposing a major version upgrade, which is expected to take place in mid-April through a hard fork.

Developer Ecosystem

Currently, due to the incomplete Nakamoto upgrade, the overall performance of contracts and transactions is relatively low. Therefore, Stacks developers are not as active as expected.However, starting with the Ordinal, the BTC ecosystem has received renewed attention. Stacks’ TVL also grew by 6 times in 2024, reaching 180 million US dollars.Currently, on-chain applications on Stacks are still concentrated in DeFi infrastructure. There are DEXs such as ALEX and stablecoins such as Arkdiko. The ecosystem is still in the early stages of rapid development.

Value Proposition

STX has a token liquidity market value of 4 billion US dollars and a fully diluted valuation (FDV) of 180 billion US dollars. The overall valuation is already quite high, comparable to Arbitrum, one of the leading Ethereum L2s. The ratio of Arbitrum’s market capitalization (MC) to Ethereum’s market capitalization is 1:100, while the ratio of STX’s market capitalization to BTC’s market capitalization is 1:350.

The 2019 DeFi Summer quickly activated the liquidity ecosystem of ETH. At its peak, the TVL of the ecosystem reached 100 billion US dollars, and it is now close to 500 billion US dollars. If the large-scale implementation of BTC L2 is realized this summer, according to the same development expectations, there will be nearly 200 billion US dollars of BTC TVL, while the current BTC TVL is only 10 billion US dollars, and the overall growth may reach 200 times.

STX has the potential to grow significantly in the future. With the development of the BTC L2 ecosystem, we can expect to see a large increase in the TVL of BTC. This will drive the growth of STX’s market capitalization and value.