Article reproduced from: Blue Fox Notes
Author: Blue Fox Notes
During this bear market cycle, the crypto space experienced a rise of the BTC ecosystem. Although some staunch supporters of BTC as a store of value do not favor any ecosystem around BTC, exploration of the BTC ecosystem has been ongoing. There are several driving forces here, aside from the significant factor of 'speculation', there are two other aspects of demand: one is the desire to unlock the value of BTC assets; the other is to address the future mining subsidy issues of BTC, which is also the most core issue for BTC’s future, involving how to ensure the sustainability of the entire network's security. Without the rise of the BTC ecosystem, BTC would face challenges in solving this issue in the future.
In the exploration of BTC L2, there is also the exploration of Stacks, which is one of the earliest projects to enter this field. It attempts to allow ecosystems such as DeFi to have opportunities to emerge within the BTC ecosystem through its L2. So, how can we understand the evolution of Stacks from a technical perspective? Here, Stacks is divided into the sidechain era and the L2 era. Although this division is not particularly rigorous, and the dimensions vary, it mainly aims to help everyone focus and understand some of the most important stages in the development history of Stacks.
Sidechain Era
The concept of Bitcoin sidechains was proposed by Blockstream, which later developed the Liquid Network; at the same time, the Rootstock network was also launched during that period. In 2018, Stacks launched its mainnet and introduced Clarity contract development oracle in 2019, additionally applying for compliant token issuance with the SEC, which was a rare practice at that time. Its significance lies in the fact that under compliant regulatory policies, Stacks earned more exploration time for itself. Throughout this long period of alternating bull and bear markets, Stacks has persevered.
The initial technical mechanism of Stacks is similar to BTC's sidechain. However, it is not entirely the same as other sidechains; it has a unique mechanism to achieve its security, which is its characteristic. Simply put, Stacks integrates with Bitcoin by utilizing an anchoring transaction mechanism, which includes block header information from the Stacks chain that needs to be broadcasted to the BTC network. Therefore, although it is referred to as a sidechain, it differs from the ordinary sidechain concept.
Stacks has a PoX mechanism, partly similar to the PoS staking system, where PoX stands for Proof of Transfer. It involves two types of participants: miners and signing validators. Miners need to participate in Bitcoin chain transactions to qualify (to have the chance to write new blocks to the Stacks chain, which is the qualification for mining), this is its unique aspect. Miners on Stacks need to obtain the opportunity to write new blocks to the Stacks chain to earn rewards. To gain this opportunity, Stacks miners must participate in each round of leader elections by sending transactions on the BTC chain, and then a leader is randomly selected from these participants for each round through a VRF (Verifiable Random Function) to gain the opportunity to write new blocks on the Stacks chain.
Each Bitcoin block will have a corresponding Stacks miner who obtains the production rights for all Stacks blocks during that block's tenure. When a Stacks miner adds a transaction to the Stacks block, the signers of Stacks perform signature verification; if over 70% of the signers validate successfully and reach consensus, the new block can be added to the Stacks chain.
Stacks has a 'chain anchoring' mechanism for interaction with the Bitcoin L1 layer. This mechanism binds the information on the Stacks chain to BTC L1. Each Stacks block contains a hash pointing to the previous Stacks block and a hash pointing to the previous Bitcoin block. Through this mechanism, the Stacks chain attempts to ensure that all state changes occurring in its network can be validated on the BTC L1 network.
In summary, during this process, Stacks miners need to spend BTC to gain the opportunity to become block leaders (to earn rewards). To increase their chances, Stacks miners will spend more BTC based on the cost-effectiveness of the rewards. Once a certain miner in Stacks obtains the leader position, they gain the right to create a new block in Stacks and add block transactions to the Stacks chain. After completing their work, miners can receive STX token incentives. The sources of STX incentive tokens are the new STX token rewards from blocks and transaction fees from users on the Stacks chain.
In addition to Stacks miners obtaining the opportunity to write new blocks through PoX, there are also Stackers signing participants involved in validation, which is another important participant in the PoX mechanism. STX (Stacks token) holders can participate in the PoX consensus mechanism, mainly to validate the effectiveness of Stacks blocks and determine whether the block should be added to the chain. STX holders participate in the stacking process by staking STX, allowing them to earn a portion of the BTC that miners initially bid for, as well as STX as rewards. The stacking rewards for STX holders will be based on the amount of STX staked and the duration of the stake. A staking cycle lasts about 2 weeks (approximately 1800 blocks).
The total supply of STX tokens is 1.818 billion, currently around 1.5 billion (according to CoinMarketCap data). Mining rewards are the main way of release in the future, with 1000 STX per block for the first four years, halving every four years until it reaches 125 STX per block and then no longer halving.
L2 Era
Stacks 2.0 enters the Bitcoin L2 era, the two most important aspects include: the Nakamoto upgrade and the launch of sBTC. The Nakamoto upgrade brings Stacks into the era of BTC L2 from a technical foundation, attempting to solve issues related to security and performance; while the launch of sBTC prepares for practical implementation in its L2 ecosystem.
*The Nakamoto upgrade allows Stacks to truly evolve towards Bitcoin L2.
The Nakamoto upgrade is a significant milestone for Stacks itself. It evolves Stacks toward a true L2 direction.
The most important point of L2 is sharing the security of L1. The Nakamoto upgrade attempts to ground this direction. After the Nakamoto upgrade, Stacks aims to establish itself as a layer of the Bitcoin network, more closely integrated into the Bitcoin network, thus becoming a deeper part of the Bitcoin network and ecosystem.
