The breakthrough of Bitcoin at $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 have not performed impressively, US compliant trading platforms like Coinbase and Kraken have recently issued cbBTC and KBTC, and industry giants have never stopped exploring the Bitcoin ecosystem. The Bitcoin ecosystem still has a long way to go compared to other chains or its own nearly $2 trillion market cap, but it also holds tremendous development opportunities.
The percentage of total TVL occupied by each chain, the Bitcoin ecosystem only accounts for 3.4%
From a secondary market perspective, market hot money has always had the demand for rotation and switching from high to low positions. In the Bitcoin ecosystem, Stacks stands out as a leader in the field, and its iterative journey has become the best representation of exploration in the Bitcoin ecosystem. Stacks continues to build technology and ecology from zero to one, particularly solid and impressive in the current market environment.
Recently, the Ripple and SEC case has temporarily concluded, and the resignation of the SEC chairman has triggered 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 technological iteration journey of Stacks
The dream of smart contracts on Bitcoin: from Blockstack to Stacks
The history of Stacks can be traced back to Blockstack, which was 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 as a full-stack alternative to traditional cloud computing. At that time, Blockstack hosted a large number of DApps.
By 2021, the v2 version of Blockstack, namely the Stacks mainnet, was officially launched. At that time, the team's goal underwent a significant shift—from serving the 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 consistently conveyed the philosophy of Stacks to the community.
PoX and Clarity: Deep Integration of Bitcoin and Stacks
Stacks' ability to integrate securely with Bitcoin is due to its innovative Proof of Transfer (PoX) consensus mechanism. The core idea of the PoX mechanism is to allow miners to participate in Stacks block mining by transferring Bitcoin, rather than relying on computationally intensive competition. As a result, 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 better with the decentralized spirit of Bitcoin. It uniquely transfers the value of Bitcoin into the Stacks ecosystem, forming a close economic bond between the two. For miners, the PoX mechanism offers a new way to capture value, while for developers, this deep integration gives them greater confidence in implementing smart contracts on the Bitcoin network.
Along with the launch of the Stacks mainnet, there is also the smart contract language Clarity, specifically designed for Bitcoin. Clarity is a non-Turing complete language, meaning it focuses on implementing verifiable functions while avoiding uncertainties in complex computations. Developers using Clarity can preview the execution results of smart contracts in advance, greatly reducing the risk of unexpected behaviors due to this transparency. In addition, Clarity runs directly on-chain, avoiding vulnerabilities that traditional smart contract compilers may introduce. This language designed specifically 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 on its path to expanding Bitcoin.
Stacks' original design tied block production to Bitcoin block production. This led to high latency due to slow block production, and even with microblocks, the problem could not be completely resolved. Meanwhile, the security of the Stacks network was not entirely bound to Bitcoin, as the cost of reorganizing the last N blocks in the Stacks blockchain was lower than the cost of generating the next N + 1 Stacks blocks, making it easier to attack Stacks compared to Bitcoin's 51% attack cost.
In light of this, Stacks launched the 'Nakamoto Upgrade' in 2024, officially completing the upgrade on October 29. The significance of this upgrade goes beyond mere technical optimization; it is a key step towards the prosperity of the Bitcoin ecosystem.
In the recently concluded month of November, the number of on-chain transactions on 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 confirmation on Stacks. Microblocks and Bitcoin anchor blocks will be eliminated, replaced by continuously produced Stacks blocks, allowing miners to produce multiple blocks during a single Bitcoin block interval, significantly increasing transaction speed.
The time required for user-submitted transactions to be included in a block is no longer 10 to 40 minutes, but only about 5 seconds, which not only improves network efficiency but also opens the door to high-frequency trading and instant payment scenarios.
Two-Way Verification: Enhanced Security
After the upgrade, Stacks adopted a two-way verification mechanism that requires miners to remain active on both the Bitcoin and Stacks networks. This design enhances the security of the network while ensuring collaboration between the two chains. For attackers, altering Stacks data would require simultaneous control of the consensus of the Bitcoin network, significantly increasing costs. This upgrade also addressed the MEV issue, modifying the cryptographic selection algorithm to ensure that Bitcoin miners cannot gain unfair block rewards due to their advantages. It raised the cost for Bitcoin miners to participate in Stacks mining, making it necessary for 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 implemented as planned. According to the latest news, the testnet 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 function for users to deposit BTC and mint sBTC, where early depositors will be eligible to participate in the sBTC reward program.
Phase Two (expected to launch 6-8 weeks after Phase One, between February 1 and 15, 2025): Unlock the sBTC withdrawal function, allowing users to exchange sBTC for BTC.
Phase Three (exact timing TBD): Open the signer pool, gradually forming a fully decentralized, open, 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 custodial solutions. Through a Dynamic Signer Group, sBTC ensures the security and transparency of the exchange process between Bitcoin and sBTC. Users can lock BTC on the Bitcoin network and generate an equivalent amount of sBTC on the Stacks chain. When redemption is needed, users can 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, Figment, and others.
The advantages and innovations of sBTC
The design of sBTC integrates multiple innovations, showcasing significant advantages. First, it employs a dynamic signer group for management, completely avoiding the risks associated with traditional centralized custodial solutions, aligning closely with the decentralized philosophy advocated by Bitcoin. Second, sBTC grants programmability to Bitcoin, enabling seamless interaction with smart contracts on Stacks. Additionally, all operations of sBTC are executed through Clarity smart contracts, ensuring that users can transparently understand every process and state. This transparency not only reduces trust costs but also enhances operational security, providing users with higher assurance.
The impact of sBTC on the Stacks ecosystem
Recently, wBTC has faced skepticism from the community. BA Labs proposed in August to lower the liquidation threshold of wBTC to 0% at Sky (formerly MakerDAO), but after discussions with BitGo, decided to indefinitely suspend this divestment plan. Recently, Coinbase announced it would delist wBTC. Perhaps due to the impact of these events, the TVL of wBTC has dropped from 152,000 Bitcoin in August to 136,000 Bitcoin now.
As mentioned above, there are still incentive programs in the early stages of sBTC. Perhaps sBTC can rely on both internal and external forces not only to fill the existing BTC market gap on-chain but also to attract more native Bitcoin to join the L2 and DeFi fields, injecting strong vitality into the Stacks ecosystem. sBTC gives Bitcoin programmability, enabling it to participate in various DeFi applications, including decentralized lending, yield farming, and synthetic asset trading, greatly enriching the diversity of the Stacks ecosystem. Additionally, sBTC provides developers with new opportunities to build complex applications on the Bitcoin network, sparking more innovative ideas and further driving the rapid development of the Stacks ecosystem. Through sBTC, Bitcoin successfully transforms from a single value storage tool into a programmable asset.
New Developments in the Stacks Ecosystem
The world’s leading Bitcoin ATM operator Coinflip announced plans to integrate with Stacks and support sBTC, enhancing the programmability and accessibility of Bitcoin. sBTC will also be launched 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 announced a collaboration with Asymmetric Research and Bitcoin L2 Labs, aiming to enhance the security of sBTC through the upcoming 'Attackathon' hackathon event, facilitating seamless transfers of Bitcoin between the main chain and Stacks.
The Bitcoin accelerator Bitcoin Frontier Fund (BFF) announced plans to invest in teams building projects using sBTC, and the Stacks on-chain lending protocol Zest also announced this year it completed investments involving Tim Draper, Binance Labs, Bitcoin Frontier Fund, and Flow Traders.
In 2024, the TVL of the Stacks ecosystem also saw significant growth, mainly 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, tools for DAO organizations Console, NFT platform Gamma, Bitcoin-supported payment system GoSats, and Skullcoin, which brings On Chain Game to Stacks. Not only existing projects, but also at the recent Harvard hackathon hosted by EasyA and Stacks, the number of Bitcoin projects set a record.
With the gradual rollout of sBTC, the Stacks ecosystem will see more innovation and development. 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 cooperation with other blockchain networks, Stacks and sBTC are expected to gain widespread adoption globally, promoting the prosperous development of the Bitcoin ecosystem.
