Author: Blue Fox Notes
During this cyclical bear market, the crypto space experienced a rise in the BTC ecosystem. Although some staunch supporters of BTC's value storage do not like BTC to have any ecosystem, the exploration of the BTC ecosystem has been ongoing. There are several motivations here. Apart from the important factor of "speculation", there are two other needs. One is to unlock the profit opportunities of BTC asset value; the other is to solve the problem of BTC's future mining subsidies, which is also the core issue of BTC's future and involves how to ensure the sustainability of the entire network security. Without the rise of the BTC ecosystem, BTC will face challenges in solving this problem in the future.
In the exploration of BTC L2, the exploration of Stacks is also included, as it is one of the earliest projects to enter this field. It attempts to allow ecosystems like DeFi to have opportunities within the BTC ecosystem through its L2. So, how can we technically understand the evolution of Stacks? Here, Stacks is divided into the sidechain era and the L2 era. Although this classification may not be too rigorous and the dimensions may vary, it is mainly 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 launched during that period. In 2018, Stacks also launched its mainnet and introduced the Clarity contract for oracle development in 2019. Additionally, it applied 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 gained more exploration time. Throughout this long period of bull and bear market fluctuations, Stacks has persisted.
The initial technical mechanism of Stacks was similar to that of Bitcoin's sidechains. However, it is not entirely the same as other sidechains; it has a unique mechanism to achieve its security and distinctive features. In simple terms, Stacks uses an anchoring transaction mechanism to integrate with Bitcoin, where anchoring transactions contain block header information from the Stacks chain, which needs to be broadcasted to the BTC network. Therefore, while it is considered a sidechain, it differs from the conventional concept of sidechains.
Stacks has a PoX mechanism, somewhat similar to the PoS staking system, where PoX stands for Proof of Transfer. It has two types of participants: miners and signing verifiers. Miners need to participate in Bitcoin chain transactions to gain eligibility (the opportunity to write new blocks into the Stacks chain, which is the qualification for mining), which is its unique aspect. Miners on Stacks need to obtain the opportunity to write new blocks into 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 for each round from these participants using 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 obtaining the production rights of all Stacks blocks during that block's term. When a Stacks miner adds transactions to a Stacks block, the Stacks signers perform signature verification. If more than 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 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 allow all state changes occurring in its network to be verifiable on the BTC L1 network.
In summary, during this process, Stacks miners need to spend BTC to gain a chance to become the block leader (to earn rewards). To increase their odds, Stacks miners will spend more BTC based on the cost-effectiveness of the rewards. Once a Stacks miner obtains the leader position, they gain the right to create new blocks on Stacks and add block transactions to the Stacks chain. After completing their work, miners can earn STX token incentives. The sources of STX incentive tokens are primarily new block STX token rewards and transaction fees from Stacks chain users.
In addition to Stacks miners obtaining opportunities to write new blocks through PoX, there are also Stackers signers participating in verification, which is another important participant in the PoX mechanism. Holders of STX (Stacks tokens) can participate in the PoX consensus mechanism, primarily to validate the effectiveness of Stacks blocks and determine whether a block should be added to the chain. STX holders participate in this Stacking process by staking STX and can receive a portion of the BTC bid by miners as well as STX as rewards. The Stacking rewards for STX holders will be based on the amount and duration of STX they stake. A Staking period lasts about 2 weeks (around 1800 blocks).
The total supply of STX tokens is 1.818 billion, currently close to 1.5 billion (according to CoinMarketCap data). Mining rewards are the primary release method in the future, with 1000 STX per block for the first four years, halving every four years, until 125 STX per block is reached, after which it will no longer halve.
L2 Era
Stacks 2.0 enters the Bitcoin L2 era, which includes two important aspects: the Nakamoto upgrade and the launch of sBTC. The Nakamoto upgrade brings Stacks into the BTC L2 era from a technical foundation, attempting to solve issues related to security, performance, etc.; while the launch of sBTC prepares for the actual implementation of its L2 ecosystem.
*The Nakamoto upgrade allows Stacks to truly evolve towards Bitcoin L2.
The Nakamoto upgrade is a very important milestone for Stacks itself. It allows Stacks to evolve towards a true L2.
The most important aspect of L2 is sharing the security of L1. The Nakamoto upgrade attempts to land in this direction. After the Nakamoto upgrade, Stacks aims to construct itself as a layer of the Bitcoin network, integrating more closely into the Bitcoin network, thereby becoming a deeper part of the Bitcoin network and ecosystem.
