by Xinwei & Awood
TLDR
Observing the historical trend, STX always lags behind the trend of BTC, and its fluctuations are more pronounced than those of BTC. It is also relatively strong compared to other currencies in the BTC ecosystem.
The BTC halving is approaching, and the popularity of the BTC ecosystem concept continues to rise. Stacks, as the leading project in the BTC ecosystem, will usher in the Nakamoto upgrade in Q4. The fast block generation every 5 seconds and the trustless sBTC will bring great benefits to BTC. The possibility of DeFi is expected to further prosper the Stacks ecosystem.
Among the concept coins in the BTC ecosystem, STX has the largest number of listings and is listed on all mainstream exchanges including Upbit. It is also the most liquid target and can be used as a phenomenon-level indicator to observe the entire BTC ecosystem.
Stacks uses the Proof of Transfer (PoX) consensus mechanism to implement smart contracts and decentralized applications based on Clarity language based on the security of Bitcoin, by locking Bitcoin to mine and enhance its performance as Bitcoin The functions of the second layer of the currency include fast processing of transactions and guarantee of Bitcoin finality.
The current TVL of the Stacks ecosystem exceeds 19 million US dollars, the number of deployed smart contracts exceeds 120,000, and the number of wallets exceeds 760,000. The ecosystem projects are relatively complete, including wallets, DeFi, NFT, DAO, DID, Social, etc.
Introduction
Stacks (STX) is a Bitcoin smart contract layer designed to extend the functionality of Bitcoin to support smart contracts and decentralized applications.
Goal:Â The main goal of Stacks is to introduce smart contract functionality on the Bitcoin blockchain, allowing developers to build decentralized applications (DApps) and smart contracts to expand the uses of Bitcoin.
POX Consensus:Â Stacks 2.0 adopts the POX consensus mechanism. Participants are rewarded with a more stable, underlying chain cryptocurrency. Compared with the cryptocurrency of the new blockchain, the underlying chain cryptocurrency rewards are more motivating for early participants. This has Helps attract early participants and creates stronger consensus.
Empower BTC:Â Increase the vitality of the Bitcoin economy by converting BTC into assets used to build DApps and smart contracts.
Ecology:Â Currently, there are 79 projects in the Stacks ecosystem, boasting a Total Value Locked (TVL) of $24.95M.
1. Team background
Source: Linkedin
Stacks is a project composed of multiple independent entities and communities, initially led by Blockstack PBC and later renamed Hiro Systems PBC. According to the latest information from Linkedin, the headquarter is in NYC and the team currently has 49 people.
Key team members and their responsibilities:
Muneeb Ali: Co-founder of Stacks and CEO of Hiro. He holds a Ph.D. in computer science from Princeton University and focuses on the research and development of distributed applications. He has spoken at TEDx and other forums to spread the word about encrypted digital currency and blockchain. , and has written a large number of academic journals and white papers on related topics. Muneeb is also the CEO of Trust machine.
Jude Nelson: Stacks Foundation research scientist, former Hiro engineering partner, holds a PhD in computer science from Princeton University, and was a core member of PlanetLab, which was awarded for its implementation of planet-scale experiments and deployments won the ACM Test of Time Award.
Aaron Blankstein: Engineer, he joined the Blockstack engineering team after receiving his PhD in 2017. He studied computer science at Princeton University and Provincial University of Science and Technology. His research covers a variety of topics, focusing primarily on web application performance, caching algorithms, compilers, and applied cryptography. His research on CONIKS won the Caspar Bowden Privacy-Enhancing Technology Award in 2017. Emacs has been used for more than 10 years.
Mike Freedman: Hiro technical consultant. He is a professor of distributed systems at Princeton University and provides technical guidance for the project. He has received the Presidential Early Career (PECASE) Award and the Sloan Scholarship. His research has spawned multiple commercial products and deployed systems with millions of daily users.
Albert Wenger: Director of Hiro and managing partner of Union Square Ventures (USV). Before joining USV, he served as president of del.icio.us and was an active angel investor, having invested in companies such as Etsy and Tumblr. Albert graduated from Harvard University with majors in economics and computer science, and holds a PhD in information technology from the Provincial University of Science and Technology.
JP Singh, director of Hiro, professor and undergraduate director of Princeton University, mainly researches parallel computing systems and applications. He has won the Presidential Early Career (PECASE) Award and the Sloan Scholarship. He also co-founded a business analysis company, FirstRain Inc. . He graduated from Princeton University and holds a graduate degree in electrical engineering and a Ph.D. from Stanford University. He is also one of the founders of Trust machine.
In addition to Hiro, there are multiple independent entities in the Stacks ecosystem. Including Stacks Foundation, Diling Technology, Freehold, New Internet Labs, and Secret Key Labs.
Source: stackschina
Hiro: Focus on providing and maintaining developer tools in the Stacks ecosystem.
Stacks Foundation: Supports the development of the Stacks ecosystem through governance, R&D, education, and funding.
Daemon Technologies: Focus on supporting Stacks mining and staking business.
Secret Key Labs: Focus on providing Chinese mobile wallets that can directly participate in Stacking.
2. Fundraising
Stacks has conducted a total of 5 rounds of financing, totaling $88M.
The specific time points and resources are as follows:
Source: Rootdata
Trust machineïŒ
Trust Machine was founded by two Princeton computer scientists (Muneeb Ali, co-founder of Stacks, and JP Singh, executive director of Hiro), both Bitcoin.
A true believer in Bitcoin, I believe that the Bitcoin layer can unlock a wide range of new use cases for Bitcoin. Muneeb Ali, one of the founders of Stacks, and JP Singh, executive director of Hiro, Trust machine was established.
Trust Machines has three products: Leather (wallet, formerly known as Hiro wallet), Console (social platform), and LNswap In April 2022, Breyer Capital, Digital Currency Group, GoldenTree, Hivemind and Union Square Venture announced investments in Trust Machine $150M [1]
In addition, in March 2023, Trust Machine and Gossamer Capital announced a $2.5 million investment in Alex (the largest dex on Stacks).
Source: Compiled by Awood & Xinwei
3. Development History and Current Situation
Source: Public information
Status quo
Dedicated hardware enables participation and provides greater transparency to network participants. However, POW and proof-of-burning are also destructive, requiring miners to destroy value in exchange for blocks. Stacks has carried out the latest v2.1 network upgrade in the first quarter of 2023, which includes improving the stacking function, improving the Clarity programming language, Stacks underwent its latest v2.1 network upgrade in Q1 2023, which included improvements to the stacking function, enhancements to the Clarity programming language, internal blockchain upgrades, reliability enhancements, and more. In addition, the Hiro Developer Platform was launched, enabling developers to build and deploy smart contracts on Stacks through a hosted experience.
Currently, the community is actively preparing for the Nakamoto upgrade, which is expected to occur in 2023 Q4.
The Nakamoto upgrade introduces a number of technological advancements that, in combination with the introduction of the 1:1 Bitcoin-backed asset sBTC, will soon enable Stacks to write Bitcoin in a completely decentralised manner. sBTC is a trust-minimising way to move Bitcoin between L1 and L2. Additionally, unlike earlier sidechain approaches, Threshold wallets are managed by a set of unprivileged, dynamically changing entities that are economically incentivised to maintain pegs, and they can join or leave peg maintenance at will. Using this mechanism, it is possible to issue an asset on the bitcoin layer that always maintains a 1:1 peg with bitcoin. In addition, the Nakamoto upgrade will dramatically reduce execution time from minutes to seconds. The community has previously opened its doors to developers.
The community has previously opened a trial application opening for sBTC for developers and is actively organising community members to learn the key points and use cases of this upgrade.
4. Consensus mechanism: POX
The earliest consensus mechanism of Stacks was POB (Proof of Burn), proposed by Jude Nelson and Aaron Blankstein at the end of 2018.
POB allows Stacks miners to compete by destroying cryptocurrency instead of consuming electricity. Compared to ordinary proof-of-work blockchains, miners on proof-of-burn chains do not require specialized hardware to participate and provide greater transparency to network participants. However, POW, proof-of-burn is also destructive, requiring miners to destroy value in exchange for the security of the blockchain.
Unlike PoS, PoB requires users to permanently destroy their tokens in exchange for mining rights. Users âburnâ by sending tokens to an address that cannot be retrieved.
Mining rights are allocated based on a random selection process, and even if users have burned tokens, there is no absolute guarantee that they will be selected for mining.
This process may result in a reduction in the token supply for holders of the original token, but it does create an opportunity for competition with miners.
Since the BTC burned by POB is equivalent to permanent destruction, in order to better balance the interests between miners and currency holders while reducing the impact on the Bitcoin network, Stacks transitioned from the PoB consensus mechanism to PoX.
POXïŒProof of TransferïŒ
POX (Proof of Transfer) is an extension of the burn proof mechanism. PoX uses the proof-of-work cryptocurrency of the established blockchain to secure the new blockchain. However, unlike POB, instead of burning cryptocurrencies, miners transfer committed cryptocurrencies to other participants in the network.
Main Features and Benefits of PoX
Rewards based on underlying chain tokens: The rewards obtained by participants are more stable, underlying chain cryptocurrencies. Compared with the new blockchainâs cryptocurrencies, the rewards of underlying chain cryptocurrencies can better motivate early participants, which helps In attracting early participants, consensus is stronger.
Initial value setting: It is thought to be linked to the underlying chain cryptocurrency, so the new token has an initial value that can be referenced.
Solve the dependent value spiral problem: PoX helps solve the dependent value spiral problem that may arise in new blockchains by providing participants with underlying chain cryptocurrency incentives.
Establish developer funds: PoX can also be used to establish developer funds to support the development of new blockchain ecosystems. These funds can use another cryptocurrency, such as Bitcoin, without affecting the value of the new cryptocurrency.
POX DESIGN
Participants
Miners: miners. Pledge BTC in the form of bidding to obtain the mining rights of the next block â Mining â Obtain the STX tokens produced by mining + platform transaction fees.
Stackers: Users who lock a certain number of STX within a certain period of time. Set up different periods of staking STX â Build your own pool or join other pools â Provide an address to receive rewards â Obtain the minerâs BTC based on the amount of STX pledged.
Mining mechanism of miners, Source: Stacks white paper
Participant (network maintainer) incentives, Source: Stacks white paper
Reward Period:
During each reward period, miners transfer funds to the address that receives the reward. Each reward address receives only one Bitcoin from miners during the reward cycle.
Eligibility:
The Stacks wallet has no less than 0.02% of the total unlocked STX tokens, this threshold will be adjusted based on the level of participation in the Stacking protocol;
A signed message is broadcast before the start of the reward cycle, which includes the protocol to lock the corresponding STX token specifying the locking period, specifying the Bitcoin address to receive the funds, and voting for a certain block on the Stacks chain.
Address Validity:Â Participants need to be able to verify the address receiving funds, as the reward address needs to be confirmed as valid each reward cycle.
Preparation Phase and Reward Consensus:Â Before the reward cycle, participants go through a preparation phase, where two key things are decided:
Anchored block: During the reward cycle, there is an anchor block that miners need to transfer their funds to the appropriate reward address. This anchor block is valid throughout the reward period.
Reward Set: The reward set is the collection of Bitcoin addresses that will receive funds during the reward cycle. This set is determined by the Stacks chain state of the anchor block.
Rules for Selection of Reward Addresses:Â Different rules apply to the selection of reward addresses depending on whether the blockchain tip established by the miner is a descendant of the anchor block. If a miner builds a blockchain tip that is not a descendant of the anchor block, then all of that minerâs committed funds must be destroyed. If a miner builds a blockchain tip that is a descendant of the anchor block, then the miner must send committed funds to two addresses in the reward set.
5. Technical Architecture
L1 or L2?
Stacks is described as a smart contract layer built on top of Bitcoin.
The initial version (released in 2021) of Stacks has a security budget separate from Bitcoin L1 and is treated as an independent layer (L1.5)
Future Nakamoto versions are planned to rely entirely on Bitcoinâs hashing power, making it a fully affiliated layer (L2) of Bitcoin, meaning that Stacks will have Bitcoinâs security determine the irreversibility of its transactions.
Sidechain?
Stacks is interoperable with Bitcoin to some extent, but it does not meet the definition of a traditional sidechain. Stacksâ consensus mechanism runs on Bitcoin L1 and is closely related to Bitcoinâs finality, and data and transactions on Stacks are automatically hashed and permanently stored on the Bitcoin blockchain. This is different from traditional sidechains, whose consensus runs on the sidechain and does not rely on Bitcoin L1 and does not store data on Bitcoin L1. Therefore, Stacks does not meet the definition of traditional sidechains.
Smart Contract Language â â Clarity
Clarity is a decision-making smart contract programming language designed specifically for the Stacks blockchain with the following features:
Security First: Clarity is designed with a focus on security and predictability to protect against common vulnerabilities and attacks in Solidity contracts. It is specifically designed for security and aims to avoid common problems in the smart contract world.
Interpretability: Clarityâs code is interpretive, which means that it will be interpreted and executed line by line when submitted to the chain, unlike other languages (such as Solidity) that need to be compiled into bytecode first. This reduces the vulnerabilities that compilers can introduce and keeps smart contracts readable, because the code of the Clarity contract is the code that is executed, there is no compiled bytecode.
Decision-making: Clarity is a decision-making language, which means from the code itself, you can know exactly what the program will do. This avoids problems such as âdowntime issuesâ. Clarity ensures that it does not ârun out of fuelâ during a call because it guarantees that program execution will end in a limited number of steps.
Recursive calls are prohibited: Clarityâs design prohibits recursive calls, which is a situation that may lead to contract vulnerabilities, in which one contract calls another contract and then calls back to the original contract, which can trigger multiple extraction operations.
Prevent overflow and underflow: Clarity prevents numerical calculation overflow and underflow situations, which is a common type of vulnerability that may lead to abnormal behavior of smart contracts.
Built-in support for custom tokens: Clarity has built-in support for creating custom fungible and non-fungible tokens, which is one of the popular use cases for smart contracts. Developers donât need to worry about internal asset management, supply management, or the emission of token events, as these features are already integrated into the Clarity language.
Post-condition based transaction protection: Clarity supports attaching post-conditions to transactions to ensure that the chain status changes in the expected way after the transaction is completed. If the postcondition check fails, the transaction will be reversed.
Forced return response handling: Public calls to the Clarity contract must return a response indicating success or failure. This helps ensure errors are not overlooked, increasing the security of the contract.
Composition over inheritance: Clarity adopts the principle of composition over inheritance instead of inheriting other contracts as in languages like Solidity. Developers can define features that are then implemented by different smart contracts, which provides greater flexibility.
Access Bitcoin Base Chain: Clarity smart contracts can read the status of the Bitcoin base chain, which means you can use Bitcoin transactions as triggers in smart contracts. Clarity also provides a number of built-in functions to verify secp256k1 signatures and recovery keys.
Gaia Storage System
Gaia is a unique decentralized storage system in the Stacks blockchain that emphasizes user ownership and control of data. Unlike some other immutable storage solutions on the blockchain (such as IPFS and Arweave), Gaia focuses on user control over data rather than emphasizing immutability.
The Gaia storage system consists of Hub services and storage resources on cloud software providers. The storage provider can be any commercial provider such as Azure, DigitalOcean, Amazon EC2, etc. Gaia currently supports S3, Azure Blob Storage, Google Cloud Platform, and local disks, but the driver model allows support for other backends.
Gaia stores data as a simple key-value store. Whenever an identity is created, the corresponding data store is associated with that identity on Gaia. When a user logs into a decentralized application (dApp), the authentication process provides the application with the URL of the Gaia hub, and Gaia then performs storage operations on the userâs behalf. There will be a âpointerâ saved in Gaia to the Blockstack chain and Atlas subsystem. When users use the Blockstack authentication protocol to log in to applications and services, this storage location information is passed to the application, and then the application interacts with the Gaia data at the specified location. That is, the cloud storage service provider cannot directly see the user data and can only See the encrypted data block.
The Stacks blockchain only stores identity data, while data created by operations on identities is stored in the Gaia storage system. Each user has profile data, and when the user interacts with the decentralized dApp, the application stores the application data in Gaia on the userâs behalf. Because Gaia stores user and application data outside of the blockchain, Stacks dApps generally perform better than dApps on other blockchains.
Source: stacks white paper
Here are some key features about Gaia:
User Ownership and Control: Gaia is designed with a focus on user ownership and control of their data. This means users decide where their data is stored and are able to modify or delete their data, unlike some other immutable blockchain storage solutions.
Connection to Stacks identity: Gaia connects access to data to the userâs identity on the Stacks blockchain. This connection enables users to better manage and access their data while being tied to their digital identity.
High performance and high availability: Storing user application data outside the blockchain can provide higher performance and availability, because data reading and writing will not be limited by the performance of the blockchain.
6. Important upgrade
Stacks Nakamoto Upgrade
The Nakamoto upgrade introduces a series of technological advancements that, combined with the introduction of sBTC, a 1:1 Bitcoin-backed asset, will soon enable Stacks to write to Bitcoin in a fully decentralized manner. sBTC is a trust-minimized way to move Bitcoin between L1 and L2. In addition, unlike early sidechain methods, threshold wallets are managed by a group of dynamically changing entities without permissions. These entities are economically motivated to maintain the peg, and they can join or exit the peg maintenance at will. Using this mechanism, an asset can be issued at the Bitcoin layer that is always pegged 1:1 to Bitcoin. In addition, the Nakamoto upgrade will significantly reduce execution time from minutes to seconds.
sBTC: Provides a trustless, decentralized two-way anchoring, introducing BTC liquidity into smart contracts.
Bitcoin Finality:Â Stacks blockchain transactions are considered irreversible once confirmed under a PoX (Proof of Transfer) block.
Faster Blocks:Â Stacks blockchain implements faster block confirmation times, with a confirmation time of 5 seconds per block.
7. Token Economy
The total supply of STX tokens is capped at 1.818 billion, and the current circulating supply is approximately 1.42 billion.
Stacksâ genesis block contains 1.32 billion STX tokens. These STX tokens were issued and distributed multiple times in 2017 and 2019. The 2017 issuance was priced at $0.12 per STX, the 2019 issuance was at $0.25 per STX, and the 2019 SEC-compliant issuance was priced at $0.30 per STX.
Mining rewards are distributed as follows: 1000 STX per block in the first 4 years, 500 STX per block in the next 4 years, 250 STX per block in the next 4 years, and 125 STX per block permanently after that. STX allocated to founders and employees follows a 3-year unlocking schedule.
In October 2020, Stacks changed the minting and burning mechanism of STX tokens. Instead of implementing STX minting and burning, Stacks is reducing token issuance. By 2050, the total supply will reach approximately 1.818 billion coins.
8. Ecological situation
TVL situation
Wallet number trend
Smart contract quantity trend
Ecological map
Wallet
Xverse
Xverse is a crypto wallet built on Stacks and supports the Ordinals protocol. Users can manage both Bitcoin assets (including BTC and Bitcoin NFTs) and Stacks-based assets through the wallet. At the same time, the wallet also has a built-in stack function, and users can earn Bitcoin income by stacking STX.
The UI of this wallet is simple, and the wallet creation process is similar to that of many EVM-compatible wallets. The wallet is also backed up and restored through mnemonic words. For EVM wallet users who are used to the little fox, this undoubtedly lowers the threshold for using the wallet. After the wallet is created, two addresses will be generated at the same time, one is a Bitcoin address, which is used to receive and send Bitcoin assets. The other is the Stacks network address used to manage Stacks-based assets.
Leather
Leatherâs predecessor was Hiro Wallet. Hiro is a development tools company that powers developers on the Stacks blockchain. Hiro Wallet is one of the companyâs products. Leather is a wallet application built on Bitcoin that currently supports Ordinals and will soon support the Lightning Network. Leather has many convenient built-in functions. Users can directly use credit cards, debit cards or even bank transfers to purchase STX in Leather, and then directly participate in staking in the wallet.
Currently, the wallet supports browser extensions for Chrome, Firefox, and Brave, as well as desktop versions for MacOS, Windows, and Linux systems.
The browser extension version can connect to the application, purchase STX, mint and NFT, and use the Ledger hard wallet. The desktop version allows you to participate in staking to earn Bitcoin and protect assets using a Ledger hard wallet.
DeFi
ALEX
ALEX is a DeFi protocol built on the Bitcoin network through Stacks smart contracts, and draws on the design of Balancer V2 during development. The current mainnet version of the platform features Swap, lending, staking, revenue mining and Launchpad. In addition, with the popularity of BRC20, ALEX also launched the BRC20 order book exchange.
Arkadiko
Arkadiko is an open source, non-custodial liquidity protocol built on Stacks smart contracts, where users can mortgage assets to mint the stablecoin USDA, earn interest on deposits, and borrow assets on Stacks. Arkadikoâs governance token is DIKO, which can be obtained by pledging assets to add liquidity to the pool.
LNSwap
LNSwap is an atomic swap protocol that embodies the foundation of Bitcoin and the security, decentralization, and stability it provides.
Lnswap is composed of three parties: users, liquidity providers and aggregators.
Users are those who want to exchange assets. Their funds are locked in a very basic Hash Time Lock Contract (HTLC) only for the duration of the exchange, and through the use of smart contracts, direct transactions can be made between the two parties without the involvement of a third party.
Liquidity providers are those who use the assets they own to provide funds to the LNSwap protocol to facilitate swaps on our exchange. In return for providing assets, liquidity providers will be rewarded with fees generated by swaps occurring on the platform.
Aggregators essentially collect the data and information exchanged on a protocol and consolidate them for easy reference and access. Currently, LNSwapâs aggregator is a router that forwards exchange information between users and liquidity providers. But in the future, the aggregator will actually be an on-chain contract, which effectively means that anyone can become an aggregator on the platform through a simple front-end. Additionally, liquidity providers will be able to register to multiple aggregators.
NFT
Gamma
Gamma, the NFT market on Stacks, was originally named STXNFT. On April 27, 2022, it was announced that it would be renamed Gamma. Gamma is the third letter of the Greek alphabet and represents the third phase of the web: Web 1.0, Web 2.0 and now Web3.
The platform is designed to bring collectors, creators, and investors together to explore, trade, and showcase NFTs within the Bitcoin ecosystem. The Gamma platform consists of three core products: NFT market, Launchpad and social platform. Gamma.io supports both the primary and secondary markets for Bitcoin NFTs.
Users can use Gamma bot to mint their own unique digital works, collect them or sell them. Users can create a Bitcoin NFT in minutes using a code-free Bitcoin NFT creation tool. Gamma.io solves the technical, complex, and time-consuming pain points of creating NFTs on the Bitcoin network. However, the secondary market still accounts for the majority of platform sales. Each sale includes artist royalties as well as marketing commissions, with percentages varying by artist and collection.
Boom
Boom is Stacksâ native NFT platform, supports Stacks ecological token transfer, and will support Stacks NFT transactions in the future.
9. Competitors
Unlike Lightning Network, which focuses on improving Bitcoinâs scalability, Stacks focuses on introducing new smart contract features. Unlike RSK, Stacks has its own miners and mining process, rather than relying on Bitcoin miners. Unlike Liquid, Stacks is an open, decentralized network that doesnât just focus on financial applications. Unlike Rollups, Stacks is a solution built on top of Bitcoin rather than a new network outside of Bitcoin.
Why was the value of the BTC ecosystem suddenly discovered this year?
Two important technical updates need to be mentioned here:
The first is the Segregated Witness upgrade in 2017, which is equivalent to expanding the BTC block data from 1MB to 4MB, but the expanded part can only be used to store signatures. Until the Taproot upgrade at the end of 2021, advanced scripts can be written in Segregated Witness for the first time, and complex data can be written on BTC. Since then, BTC has made great progress in programmability and scalability. Some protocols containing complex logic have begun to appear. The BTC ecosystem has finally begun the next phase of milestones. This is the main opportunity for the explosion of the BTC ecosystem in 2023.
Ordinals & BRC20
The emergence of the Oridnals protocol has completely ignited the BTC ecosystem, and its rapid development has also promoted each other with the adoption of Taproot. People can encode the NFT data and write it into the extended space of Segregated Witness (4MB per block).
Soon, new developers improved Ordinals, imitating ERC20 and writing the complete functions of Token into the BTC output script, and BRC20 was born.
Atomics & ARC20
Atomics is another derivative protocol that engraves data on UTXO to implement Token.
Different from Oridnals, which was originally designed for NFT, it rethinks how to issue tokens on BTC in a centralized, non-tamperable and fair manner from the bottom up.
When verifying an Atomics transaction, just query the UTXO of the corresponding sat on the BTC chain. The atomicity of the ARC20 token is consistent with the atomicity of BTC itself. ARC20âs transfer calculations are handled entirely by the BTC base network.
The design of Atomics binding UTXO cleverly avoids the complexities faced by BRC20, making it more decentralized, more native to BTC, and most importantly, more in line with the culture of the BTC community.
Rune and Pipe
Under the general trend of hype, Casey also proposed an inscription implementation method specifically for issuing FT, namely Rune.
Rune was just an idea, and the founders of #Trac wrote the first usable protocol on top of it, issuing $PIPE. Due to Caseyâs high popularity, $PIPE took over the hype carried over from BRC20 and quickly completed the first wave of hype.
Runeâs legitimacy is stronger than BRC20, but it is still difficult to be accepted by the BTC community.
Lightning Network
The Lightning Network is the king of legitimacy in the BTC community. Starting in 2016, over a long period of time, more than half of the developers in the BTC ecosystem were involved in the development of the Lightning Network.
The foundation of the Lightning Network is payment channels. This concept was first proposed by Satoshi Nakamoto. Both parties to the transaction lock BTC through multi-signatures, and both parties maintain an off-chain ledger to record the transaction.
Payment channels connected in pairs form a network, and two parties who are not directly connected can also jump to the channel to complete transactions. The Lightning Network has indeed expanded the performance of BTC transfers, giving users a better experience.
The final BTC settlement can only be done on the BTC mainnet, and all currencies are still saved by the public and private key system.
Taproot Assets (Taro)
Unlike BRC20 and others, Taproot Assets only writes the Token information in the UTXO output script of the BTC main network, and does not store the Tokenâs transfer, mint and other functional codes.
Taproot Assets only regards the BTC main network as a registry of Tokens and does not completely rely on the BTC main network to operate. Therefore, these assets must be deposited into the Lightning Network before they can be traded.
Therefore, the Tokens of Taproot Assets must rely on a third-party storage indexer. Without the storage indexer, these tokens will be lost forever.
RGB
RGB is a smart contract system based on BTC and Lightning Network. It is the ultimate expansion method, but its progress is slow due to its complexity.
RGB converts the state of a smart contract into a short proof and engraves the proof into the BTC UTXO output script.
Users can check the status of the smart contract by validating this UTXO. When the smart contract status is updated, a new UTXO is created to store the proof of this status change.
RGB can be regarded as the L2 of BTC. The advantage of this design is that it uses the security of BTC to guarantee smart contracts. However, as the number of smart contracts increases, the demand for UTXO encapsulated data will also increase, which will eventually become unavailable. Avoid creating a lot of redundancy in the BTC blockchain.
RSK&RIF
RSK can be regarded as the L2 of BTC, which is essentially a smart contract chain with an EVM structure.
RSK just cross-chains the main network BTC to itself through the Hash lock and uses it as network gas.
At the same time, RSK adopts the same POW consensus algorithm as BTC, so BTC miners can also mine in RSK at the same time and earn transaction fees of $RBTC.
BitVM
BitVM is currently the most BTC-native, most promising, and most technically hard-core smart contract expansion solution.
Without modifying the BTC network, Optimistic Rollup runs a VM virtual machine that supports calculations to implement BTC smart contracts. The BTC network is used to run Optimistic Rollupâs fraud proofs.
Using the most basic Hash lock and BTC script operations OP_BOOLAND and OP_NOT, a simple logic gate is implemented. By combining the logic gates of BTC, a circuit that can operate is formed, and fraud proof is processed on the BTC chain through this circuit.
10. Innovation and Risk
Innovation
S (Secured by the entire hash power of Bitcoin):Â The security of Stacks smart contract layer is supported by the entire hash power of Bitcoin, which means it is protected by the high security of the Bitcoin network and Protection of decentralized features.
T (Trust-minimized Bitcoin peg mechanism; write to Bitcoin):Â Stacks adopts a minimum-trust Bitcoin peg mechanism that can write information to the Bitcoin blockchain. This ensures interoperability between Bitcoin and Stacks while minimizing trust requirements.
A (Atomic BTC swaps and assets owned by BTC addresses):Â Stacks allow for atomic Bitcoin (BTC) swaps while ensuring that assets in smart contracts belong to Bitcoin addresses. This means assets can be securely transferred from the Bitcoin network to the Stacks blockchain and vice versa.
C (Clarity language for safe, decidable smart contracts):Â Stacks uses the Clarity programming language, a language designed for writing safe, decidable smart contracts. The Clarity language is characterized by its ability to reduce errors and uncertainty in smart contracts.
K (Knowledge of full Bitcoin state; read from Bitcoin):Â Stacks smart contract layer has knowledge of the complete state of Bitcoin and can read information from the Bitcoin blockchain. This allows Stacks smart contracts to stay connected to the Bitcoin network, understanding and validating data on the Bitcoin chain.
S (Scalable, fast transactions that settle on Bitcoin):Â Stacks smart contract layer supports scalable, fast transactions that settle on Bitcoin. Despite its faster transaction speeds, Stacks still benefits from Bitcoinâs finality and security.
RISK
Security: Although Stacks transactions are processed in batches and hashed on the BTC main network, there is no doubt about the security of BTC. However, like other blockchains, the Stacks network itself may face security threats, such as security holes and hacker attacks, and some people have questioned it. How decentralized the Stacks network is. These situations can result in financial losses and compromise the security of the network.
Complexity: Although Stacks provides developers with an evolving infrastructure, the Clarity language still blocks many good developers. This complexity can lead to potential errors and inefficiencies.
Interoperability: Although Stacks and BTC are closely bound, Stacks and other BTC ecological projects are still unable to interoperate efficiently. The ability of blockchain networks to work together seamlessly is critical to the adoption and efficiency of the technology. A lack of interoperability can lead to inefficiencies and hinder innovation.
11. Secondary market liquidity
The candlestick is STX/USDT, and the orange line is BTC/USDT. It can be seen that no matter whether it rises or falls, the performance of STX always lags behind that of BTC, and rises and falls with BTC.
It can be seen from STX/BTC that STX is equivalent to BTC with added leverage.
To sum up, STX always lags behind the trend of BTC, and its rise and fall are greater than that of BTC.
Orange is REN, yellow is BADGER, cyan is RIF, purple is ORDI
It can be seen that the currencies in the BTC ecosystem are strongly related to BTC, often rising and falling at the same time. STX is relatively resilient, and ORDI is more flexible because it is a new currency.
Summary
Stacks is a second-layer solution built on top of Bitcoin with innovative approaches to address scalability challenges and drive the development of new applications. It enhances the functionality of Bitcoin by introducing smart contracts and decentralized applications (DApps) while leveraging Bitcoinâs security and consensus mechanisms. The platform provides a trustless two-way Bitcoin peg and uses Clarity, a smart contract language designed for security and transparency. Stacks provides a programmable asset layer for Bitcoin, unlocking its potential in multiple use cases.
Key developments like the upcoming Nakamoto upgrade position Stacks as a pioneer in the cryptocurrency space. As the broader crypto community recognizes the importance of second-layer solutions to Bitcoinâs future, Stacks is poised to play a key role in the growing industry. Collaboration, technological innovation, and the exploration of new use cases are shaping the Stacks ecosystem, with the goal of unlocking $600 billion in Bitcoin liquidity into decentralized finance (DeFi), providing cheaper and faster ways to trade Bitcoin, and continuing Develop DApps and integrate cutting-edge technologies. This shows the huge potential in the development process of Nakamotoâs version of Stacks.
ReferenceïŒ
[1]Â https://hackernoon.com/trust-machine-raises-$150-million-in-funding-from-breyer-capital-dcg-and-hivemind-to-expand-web-3
[2]Trust machine:Â https://trustmachines.co/blog/hello-trust-machines/
[3]https://decrypt.co/82019/bitcoin-defi-thing-says-stacks-founder-muneeb-ali
https://mp.weixin.qq.com/s/eJ36c6kBV18fgH259XDiMg
https://mp.weixin.qq.com/s/u-i-oZf2bFAuItTUBYxosA
https://mp.weixin.qq.com/s/vFyz4kylLJ2S1yVohbzXTQ
https://mp.weixin.qq.com/s/uxaPnzjPjJlCLmwakPIY_A
https://mirror.xyz/0x0bF07321af1bF1F77b3E96C63628192640A38206/cQl_kK3ETuLaAvo9Gn9mcuI04043GS9bCO7PVFLkTrk
https://www.stackschina.com/stacks-ecosystem-map
https://www.blocktempo.com/the-bitcoin-scalability-solution-stacks/
https://mirror.xyz/arsenal-fc.eth/ujrApyfn40YOBKAZ9mz5sWNCZjWig2x1IZESAn0QvFg
https://mirror.xyz/0x0bF07321af1bF1F77b3E96C63628192640A38206/cQl_kK3ETuLaAvo9Gn9mcuI04043GS9bCO7PVFLkTrk
https://www.stackschina.com/stacks-ecosystem-map
https://www.blocktempo.com/the-bitcoin-scalability-solution-stacks/
https://mirror.xyz/arsenal-fc.eth/ujrApyfn40YOBKAZ9mz5sWNCZjWig2x1IZESAn0QvFg)
sBTCïŒhttps://stx.is/sbtc-pdf
https://gaia.blockstack.org/hub/1Eo6q4qLMcSSpkhoUADxRAGZhgUyjVEVcK/stacks-zh.pdf
https://www.theblockbeats.info/news/35143
MT Capital
Transforming Visions into Value, We Empower the Next Generation of Crypto Innovations.
MT Capitalâs vision is to emerge as a globally leading investment firm, focused on backing early-stage technology ventures that generate substantial value. We are not just investors, we are the driving force behind founding teams. We believe that the bond and trust built between a fund and its portfolio companies are essential to mutual success.
TwitterïŒhttps://twitter.com/MTCapital_US
WebsiteïŒhttps://mt.capital/
