Bitcoin breaking $100,000 seems just around the corner, and the community is eagerly anticipating the development of the Bitcoin ecosystem.
Although the tokens of related ecosystems are not performing particularly well, American compliant trading platforms such as Coinbase and Kraken have recently issued cbBTC and KBTC, and industry giants have never stopped exploring the Bitcoin ecosystem. The Bitcoin ecosystem has a long way to go, whether compared to other chains or its own nearly $2 trillion market value, but it also holds enormous development opportunities.
The percentage of total TVL of each chain, the Bitcoin ecosystem only accounts for 3.4%
From the perspective of the secondary market, there has always been a demand for capital rotation and switching from high to low positions. In the Bitcoin ecosystem, Stacks, as a leader in the field, has become the best representative of exploration in the Bitcoin ecosystem. Stacks continues to build its technology and ecosystem from scratch, particularly solid and impressive in the current market environment.
Recently, the Ripple and SEC case has come to a temporary conclusion, coupled with the resignation of the SEC chair, triggering a super bull market for XRP. Like Ripple, Stacks is also a representative of compliance in the crypto industry. In July 2024, the U.S. Securities and Exchange Commission (SEC) terminated its investigation into Stacks and Hiro. Moreover, Stacks is the first token issuance project approved by the SEC in history.
The Technical Iteration Journey of Stacks
The Dream of Smart Contracts on Bitcoin: From Blockstack to Stacks
The history of Stacks dates back to Blockstack, founded in 2013 by Muneeb Ali and Ryan Shea from Princeton. Blockstack, as the initial v1 version, aimed to create a decentralized internet ecosystem using a distributed computing network, serving as a full-stack alternative to traditional cloud computing. At that time, there were many DApps on Blockstack.
By 2021, the v2 version of Blockstack, namely the Stacks mainnet, officially launched. At this point, the team's goal underwent a significant shift—from serving a decentralized internet to empowering Bitcoin. Through the Stacks protocol, developers can build applications with smart contract functionality on the Bitcoin network without modifying Bitcoin itself. In this process, Stacks inevitably faced criticism from Bitcoin 'maximalists', but Muneeb remained steadfast in communicating the vision of Stacks to the community.
PoX and Clarity: Deep Integration of Bitcoin and Stacks
Stacks' ability to securely integrate with Bitcoin is attributed to its innovative Proof of Transfer (PoX) consensus mechanism. The core idea of PoX is to allow miners to participate in Stacks block mining by transferring Bitcoin rather than relying on energy-intensive competition. This way, Stacks not only inherits the security of the Bitcoin network but also allows Bitcoin holders to become direct participants in the ecosystem.
Compared to traditional Proof of Stake (PoS), the design philosophy of PoX aligns more closely with Bitcoin's decentralized spirit. It uniquely transfers the value of Bitcoin into the Stacks ecosystem, creating a close economic bond between the two. For miners, the PoX mechanism offers a new value capture method, while for developers, this deep integration gives them greater confidence when implementing smart contracts on the Bitcoin network.
Along with the launch of the Stacks mainnet, there is also the Clarity smart contract language designed specifically for Bitcoin. Clarity is a non-Turing complete language, meaning it focuses on implementing verifiable functions while avoiding uncertainty in complex computations. Developers using Clarity can preview the execution results of smart contracts in advance, significantly reducing the risk of unexpected behavior due to this transparency. In addition, Clarity runs directly on-chain, avoiding vulnerabilities that traditional smart contract compilers may introduce. This language designed for Bitcoin lays the foundation for DeFi, NFTs, and other complex applications.
Nakamoto Upgrade: Faster, More Stable, More Secure
Just as there is no perfect code, Stacks also has room for improvement in expanding Bitcoin.
The initial design of Stacks linked block production to Bitcoin block production. This caused slow block production to lead to high latency, which could not be completely resolved even with microblocks. At the same time, the security of the Stacks network was not fully bound to Bitcoin, as the cost of reorganizing the last N blocks of the Stacks blockchain was lower than generating the next N + 1 Stacks blocks compared to the cost of a 51% attack on Bitcoin.
In light of this, Stacks launched the 'Nakamoto Upgrade' in 2024, officially completing the upgrade on October 29. The significance of this upgrade is not only a technical optimization but also a key step towards the prosperity of the Bitcoin ecosystem.
In the recently passed November, the number of on-chain transactions for Stacks reached a recent high.
Fast Block Confirmation: Optimizing User Experience
The Nakamoto upgrade introduces a fast block confirmation mechanism, allowing users to achieve near real-time transaction confirmations on Stacks. It will eliminate microblocks and Bitcoin anchor blocks, instead replacing them with continuously produced Stacks blocks, allowing miners to produce multiple blocks during a single Bitcoin block period, significantly increasing transaction speed.
The time required for user-submitted transactions to be confirmed in blocks is no longer 10 to 40 minutes, but only about 5 seconds, which not only improves network efficiency but also opens the door for high-frequency trading and instant payment scenarios.
Two-Way Verification: Enhanced Security
After the upgrade, Stacks adopts a two-way verification mechanism, requiring miners to remain active on both the Bitcoin and Stacks networks. This design increases the security of the network while ensuring cooperation between the two chains. For attackers, altering Stacks data necessitates controlling the consensus of the Bitcoin network simultaneously, significantly increasing costs. This upgrade also addresses the MEV issue, modifying cryptographic selection algorithms to ensure Bitcoin miners cannot gain unfair block rewards due to their advantages. It raises the cost for Bitcoin miners to participate in Stacks mining, requiring them to invest resources comparable to other miners.
sBTC and the Stacks Ecosystem: Unlocking Bitcoin's Potential
After the completion of the Nakamoto upgrade, the sBTC roadmap released in 2023 will also be launched as planned. According to the latest news, the testing phase of sBTC has been completed, and the mainnet launch will be divided into three phases:
Phase One (expected to launch on December 16, 2024): Introduce the functionality for users to deposit BTC and mint sBTC, with early depositors eligible to participate in the sBTC reward program.
Phase Two (expected to be launched 6-8 weeks after the first phase, between February 1 and 15, 2025): Unlock sBTC withdrawal functionality, allowing users to convert sBTC back to BTC.
Phase three (specific date to be determined): Open the signer pool, gradually forming a fully decentralized, open, and permissionless signer network.
The Design and Working Principle of sBTC
The core of sBTC lies in its decentralized design, avoiding the trust risks of traditional centralized custody solutions. Through a Dynamic Signer Group, sBTC ensures the security and transparency of the exchange process between Bitcoin and sBTC. Users can generate an equivalent amount of sBTC on the Stacks chain after locking BTC on the Bitcoin network. When redemption is needed, users destroy sBTC to release the corresponding amount of BTC. This process is entirely managed by smart contracts, ensuring operational transparency and security. sBTC has an elite signer network, including industry leaders like Blockdaemon, Kiln, Luganodes, Copper, and Figment.
The Advantages and Innovations of sBTC
The design of sBTC incorporates multiple innovations, showcasing significant advantages. First, it uses a dynamic signer group for management, completely avoiding the risks associated with traditional centralized custody solutions, aligning with Bitcoin's decentralized philosophy. Secondly, sBTC grants Bitcoin programmability, allowing seamless interaction with smart contracts on Stacks. Furthermore, all operations of sBTC are executed through Clarity smart contracts, ensuring users can transparently understand each process and status. This transparency not only reduces trust costs but also enhances operational security, providing users with greater assurance.
The impact of sBTC on the Stacks ecosystem
Recently, wBTC faced community skepticism. BA Labs proposed in August to lower the liquidation threshold of wBTC to 0% in Sky (formerly MakerDAO), but after discussions with BitGo, they decided to indefinitely suspend this divestment plan. Recently, Coinbase decided to delist wBTC. Perhaps due to the impact of these events, the TVL of wBTC has decreased from 152,000 Bitcoin in August to 136,000 Bitcoin now.
As mentioned earlier, there are incentive programs in the early stage of sBTC. Perhaps sBTC can rely on internal and external forces to not only fill the existing BTC market gap on-chain but also attract more native Bitcoin to join L2 and DeFi fields, injecting strong vitality into the Stacks ecosystem. sBTC grants Bitcoin programmability, enabling it to participate in a variety of DeFi applications, including decentralized lending, yield farming, and synthetic asset trading, greatly enriching the diversity of the Stacks ecosystem. Additionally, sBTC provides developers with a new opportunity to build complex applications on the Bitcoin network, sparking more innovative ideas and further promoting the rapid development of the Stacks ecosystem. Through sBTC, Bitcoin successfully transforms from a single value storage tool to a programmable asset.
New developments in the Stacks ecosystem
The world's leading Bitcoin ATM operator Coinflip has announced integration with Stacks, planning to support sBTC to enhance Bitcoin's programmability and accessibility. sBTC will also land on the Aptos Network and Solana to further enhance Bitcoin's role in the evolving cross-chain DeFi ecosystem. Through Stacks' Best & Brightest initiative, Immunefi has announced collaboration with Asymmetric Research and Bitcoin L2 Labs, aiming to enhance the security of sBTC through the upcoming 'Attackathon' hackathon event, promoting seamless transfers between Bitcoin's main chain and Stacks.
The Bitcoin accelerator Bitcoin Frontier Fund (BFF) announced plans to invest in teams building projects using sBTC. The Stacks lending protocol Zest also announced this year that it completed investments from Tim Draper, Binance Labs, Bitcoin Frontier Fund, and Flow Traders.
The TVL of the Stacks ecosystem in 2024 has also seen significant growth, primarily supported by liquid staking protocols StackingDAO, DEX ALEX, and lending platform Zest. In addition to the aforementioned well-known projects, the Stacks ecosystem also includes over-collateralized stablecoin protocol Arkadiko, domain platform .locker, DAO organization service tool Console, NFT platform Gamma, Bitcoin-supporting payment system GoSats, and Skullcoin, which introduces On Chain Game to Stacks. Not only existing projects but also at the recent Harvard Hackathon held in collaboration with EasyA and Stacks, the number of Bitcoin projects set a record.
With the gradual rollout of sBTC, the Stacks ecosystem will welcome more innovations and developments. In the future, Stacks plans to further optimize network performance, reduce transaction costs, and increase throughput to attract more developers and users, creating a comprehensive Bitcoin smart contract ecosystem. Through collaboration with other blockchain networks, Stacks and sBTC are expected to be widely adopted globally, promoting the prosperous development of the Bitcoin ecosystem.
