1. Abstract
This research report takes an in-depth look at the Stacks project, an innovative blockchain technology that aims to achieve a high degree of decentralization and Scalable without adding additional environmental impact. Stacks
By providing smart contract functions, Bitcoin can become a fully programmable asset, which can provide a wider range of application scenarios for decentralized applications (dApps).
This report details the main components of Stacks, including how it leverages Bitcoin’s state and security, as well as its features and benefits of using the Clarity language to create smart contracts. Additionally, the report will discuss how the Proof of Transfer (POX) consensus mechanism works and how it leverages Bitcoin’s proof-of-work mechanism.
2. Project introduction
Stacks is a blockchain project that links itself to the Bitcoin blockchain. Its goal is to provide a platform that can share security with the Bitcoin chain and settle transactions on the Bitcoin chain. By extending the functionality of Bitcoin, Stacks makes Bitcoin a fully programmable asset, which will unlock hundreds of billions of dollars in passive Bitcoin capital and provide a wider range of application scenarios for decentralized applications.
The Stacks project is linked to Bitcoin through its unique consensus mechanism proof of transfer (POX). PoX allows the Stacks chain to use the security of the Bitcoin chain, while also enabling Stacks token holders to earn Bitcoin rewards through the act of "Stacking." This mechanism enables the addition of new features, such as smart contracts and fast transactions, to the security foundation of Bitcoin, thereby greatly enhancing the usability and scalability of Bitcoin.
Stacks’ vision is to build a fully decentralized network and application ecosystem based on Bitcoin. By providing new tools and technologies such as smart contracts and fast transactions, the Stacks project hopes to promote the further development of Bitcoin and its ecosystem, and ultimately achieve a safer, fairer, and more open Web3.
3. Project structure
The Stacks project uses its unique consensus mechanism Proof of Transfer (PoX) to link itself to the Bitcoin chain. This allows Stacks to use the state and security of the Bitcoin chain to provide a more secure and reliable platform for decentralized applications (dApps) and smart contracts. On this platform, all transactions are settled on the Bitcoin chain, thereby borrowing from Bitcoin’s strong security.
Stacks’ smart contract layer has the following innovative features:
S (secured), Stacks transactions are finally confirmed by Bitcoin.
After approximately 100 Bitcoin blocks or approximately one day of confirmations, transactions occurring on the Stack layer will be secured by the full hash power of Bitcoin. This means that in order to reverse these transactions, the attacker needs enough computing power to reorganize the Bitcoin chain. Stack's transactions are settled on the Bitcoin blockchain and have Bitcoin finality. In addition to this, the Satck layer completely forks Bitcoin, which means that any forks on the Bitcoin chain (such as soft or hard forks) will be reflected on the Stacks chain. This ensures that the Stacks chain can evolve with the Bitcoin chain without conflicting with its forks.
T (Trust-minimized) trustless Bitcoin anchoring mechanism; writable Bitcoin
Stacks introduces a new decentralized, non-custodial Bitcoin-pegged asset, sBTC. This allows smart contracts to run faster and cheaper using Bitcoin-pegged assets without having to compromise security. Additionally, this enables contracts at the Stacks layer to write to Bitcoin trustlessly via pegged transactions.
A (Atomic) Bitcoin atomic interaction and assets owned by Bitcoin addresses
Atomic swaps and assets: Stacks already has atomic swaps for Bitcoin, enabling Bitcoin addresses to own and move assets defined at the Stacks layer. Magic Swap and Binary Swap are examples of already-live, trustless atomic swaps between Bitcoin L1 and assets in the Stacks layer. In addition, users can own Stacks layer assets, such as STX, stablecoins, and NFTs, on a Bitcoin address if they wish, and transfer them using Bitcoin L1 transactions.
C (Clarity) Clarity language, more secure and decidable smart contracts
Stacks supports a secure, decidable smart contract language called Clarity. With Clarity, developers can know with mathematical certainty what a contract can and cannot do before executing it. Decentralized anchor contracts will benefit from the security properties of the Clarity language. As of December 2022, 5,000+ Clarity contracts have been deployed on the Stacks layer. Clarity's design also avoids the "gas fee estimation" problem, a common problem with many other smart contract languages such as Solidity. In Clarity, the execution fee of a transaction can be accurately known before the transaction occurs, thus avoiding transaction failure due to insufficient fees. On Stacks, the creation and management of Bitcoin-anchored assets (such as sBTC) is achieved through a special smart contract, the decentralized anchor contract. This contract leverages the security of the Clarity language to ensure the security and reliability of the creation and management process of anchored assets.
K (Knowledge) Knowledge proof of the entire state of Bitcoin; Readable Bitcoin
Stacks has complete knowledge of Bitcoin state, it can read Bitcoin transactions and state changes trustlessly, and execute smart contracts triggered by Bitcoin transactions. Bitcoin’s read functionality helps keep the decentralized peg consistent with the BTC locked on Bitcoin L1, and more. Stacks’ Bitcoin reading feature ensures that the decentralized peg state (i.e. the state of sBTC) is consistent with the BTC locked on Bitcoin L1. This is because whenever a transaction occurs on the Bitcoin chain, Stacks can read those changes and update the state of sBTC accordingly. This way, users can ensure that their sBTC is always in sync with their BTC locked on the Bitcoin chain.
S (Scalable) scalability, fast transactions on the Bitcoin settlement layer
Stacks improves the processing speed of transactions by generating Stacks blocks faster between Bitcoin blocks. This means transactions on the Stacks network can be completed and confirmed faster than Bitcoin. Additionally, subnets are a scalable layer of the Stacks network that can make different trade-offs between performance and decentralization. This means that subnets can be optimized according to their specific needs and priorities, such as faster transaction speeds or greater decentralization. Subnets of Stacks can support other programming languages and execution environments, such as Ethereum’s Solidity language and the EVM (Ethereum Virtual Machine). This means that smart contracts developed on the Ethereum network can run on the Stacks network and can use Bitcoin to anchor assets and be settled on the Bitcoin chain. This greatly increases the compatibility and application scope of Stacks.
Proof of Transfer (PoX) consensus mechanism
Proof of Transfer (PoX) is a core component of the Stacks project. This is a new consensus mechanism that leverages Bitcoin’s Proof of Work (PoW) to achieve a high degree of decentralization and scalability. In PoX, the nodes of the Stacks chain will participate in the creation of blocks by "burning" Bitcoins. This means that nodes will send Bitcoin to an unreachable address, thereby proving that they have contributed to the security of participating in the network. These nodes may then be selected as nodes to create new blocks, thereby being rewarded with Stacks tokens.
The Stacks layer relies on STX and BTC for its novel consensus mechanism called Proof of Transfer (PoX), which utilizes both Stacks and Bitcoin layers. PoX is similar in spirit to Bitcoin’s Proof of Work (PoW) consensus: just like Bitcoin PoW miners spend electricity and are rewarded with BTC, Stacks PoX miners spend (mined) BTC and are rewarded with STX. Like PoW, PoX uses a Nakamoto-style single leader election: PoX miners bid by simply spending BTC, and they have a leader with bid weights as random probabilities. Leader election takes place on the Bitcoin chain, and new blocks are written on the Stacks layer. In this way, PoX reuses work already done by Bitcoin miners and does not consume any significant additional electricity: only a functioning laptop/computer is required to conduct Stacks node bidding using BTC.
Another part of PoX is "Stacking", which allows holders of Stacks tokens to participate in the security of the network. If holders choose to "Stack" their tokens, they are periodically rewarded with Bitcoins. This is a unique mechanism that allows participants on the Stacks chain to receive Bitcoin directly as rewards, further strengthening the Stacks network’s connection to Bitcoin.
Stacks is a smart contract Bitcoin layer with a deep, continuous connection to the Bitcoin chain, unlike sidechains such as RSK and Liquid. The Stacks layer allows applications and smart contracts to use Bitcoin (BTC) as their asset or currency and settle their transactions on the Bitcoin main chain. The goal of the Stacks layer is to expand the Bitcoin economy by transforming BTC from a passive asset to a productive asset, as well as enabling a variety of decentralized applications. Like sidechains like RSK and Liquid, the Stacks layer has its own global ledger and execution environment to support smart contracts and prevent the Bitcoin blockchain from being overburdened with additional transactions. However, the Stacks layer is unique in that it has most of the desirable Bitcoin smart contract properties. It also provides high-performance mechanisms such as fast blocks, decentralized anchoring, and subnets.
4. Project application
Leverage Bitcoin to become a fully programmable asset
Stacks provides new functions and application scenarios for Bitcoin. By leveraging Stacks, Bitcoin can be used as a fully programmable asset in decentralized applications and smart contracts. This innovative application allows Bitcoin to be widely used in various decentralized financial products and services, such as lending, insurance, prediction markets, etc.
Using the Stacks layer, developers can build any application they can build on other smart contract platforms such as Ethereum, Solana, Avalanche, etc., but using BTC as their asset/currency and settled on the Bitcoin blockchain their deal. They will be able to do this on the Clarity VM or on an EVM or other virtual machine in Solidity or other languages using subnets. Users can also natively exchange BTC for stablecoins and NFTs directly from the Bitcoin chain.
Unlock Passive Bitcoin Capital
Stacks, through its smart contracts and decentralized applications, is able to unlock passive Bitcoin capital, allowing that capital to generate greater value. For example, by using Stacks, Bitcoin holders can put their Bitcoin into a decentralized lending platform and earn interest income. In addition, Bitcoin holders can also use their Bitcoins for the security of the network and receive Bitcoins as rewards by participating in Stacks' "Stacking" mechanism.
Provides fast transactions for Bitcoin
In addition to the above features, Stacks also provides Bitcoin with the ability to conduct fast transactions. Due to the nature of Bitcoin's design, its transaction speeds are slow, which may limit its application in some cases.
The Stacks Bitcoin layer provides additional functionality for higher performance, as well as greater versatility and security. Although the performance mechanism of the Stacks layer has been described above, the Stacks layer, like Bitcoin, is optimized for decentralization rather than low latency or high network throughput: in remote areas, users with ordinary laptops and home Internet connections should Able to run full Stacks and Bitcoin nodes. However, the Stacks chain subnet layer can orchestrate higher performance. Subnets also support smart contracts and can make different tradeoffs between decentralization and performance than the main Stacks chain or other subnets. Additionally, a single subnet can support smart contracts in different programming languages and execution environments. Some subnets may support Clarity and Clarity VM, which have security advantages, while others may support Ethereum's Solidity language and EVM compatibility, or compatibility with the Ethereum Virtual Machine, which have the advantages of ease of integration and development, And can take advantage of all Ethereum smart contracts and tools. Through Stacks, users can conduct faster Bitcoin transactions, allowing Bitcoin to be widely used in daily transactions and micropayments.
5. Team background
Currently, Stacks is a project composed of multiple independent entities and communities. In the early days, Stacks was primarily led by Blockstack PBC (now renamed Hiro Systems PBC, or Hiro for short). Hiro has 66 team members, including Muneeb Ali, the founder. The main members of the project team have many years of R&D experience in the field of distributed systems, including 6 PhD recipients in the field of distributed systems and 2 scientists who have won the U.S. Presidential Career Award.
Muneeb Ali, co-founder of Stacks and CEO of Hiro, has a PhD in computer science from Princeton University and focuses on building full-stack solutions for distributed applications.
Jude Nelson, a Stacks Foundation research scientist and former Hiro engineering partner, received a PhD in computer science from Princeton University and was a core member of PlanetLab, which won the ACM Test of Time Award for its implementation of planetary scale experiments and deployments.
Aaron Blankstein, engineer, joined the Blockstack engineering team in 2017 after receiving his Ph.D.
Mike Freedman, Hiro technical consultant, professor of distributed systems at Princeton University.
Albert Wenger, Director of Hiro, Managing Partner of Union Square Ventures (USV). Before joining USV, Albert was the president of del.icio.us until the company was sold to Yahoo. He was also an angel investor and had invested in Etsy and Tumblr.
6. Financing information
The number of tokens raised and sold was 609.2 million, and the total raised was approximately US$75.6 million. The number of founder and team rewards is 253.1 million. By the end of 2019, 441 million STX tokens will be unlocked, 36% of which are held by employees, founders and Series A investors, and 52% are held by Reg D investors.
7. Development results
Currently, the more famous projects of Stacks network include:
wallet:
Hiro Wallet is the most commonly used open source wallet on the Stacks chain, helping users store, receive or send assets on the Stacks network. It supports Ordinals, but has not yet integrated the Lightning Network.
Xverse supports non-custodial wallets for users to store, receive or send assets on the Stacks blockchain, supports Ordinals, and has added biometric features to improve wallet security and convenience, but has not yet integrated the Lightning Network.
GoSats is an Indian community-focused Bitcoin wallet developed by an Indian team with the vision of making BTC accessible to every shopper, consumer, and saver, and has launched the GosSats Visa card, loyalty program, and more.
DEFI：
ALEX is a Dex built on the Stacks chain supported by the non-profit organization ALEX Lab Foundation. Users can conduct trading, staking, liquidity mining, cross-chain, and Launchpad including lottery and IDO on the platform.
Stackswap claims to be the first fully functional Dex on the Bitcoin chain, allowing users to perform asset trading, liquidity mining, staking, cross-chain, Launchpad and NFT and other functions, and has issued STSW Token.
UWU is a lending protocol based on the UWU Cash stablecoin built on the Stacks chain. It was designed by nickole.btc of BitAcademy. It is currently in the testing phase. You can obtain test qualifications by joining the community and filling out the form.
Liquidity Staking:
Planbetter is a liquidity staking protocol on the Stack chain. More than 88,000 Stackers users have pledged 280 million STX and received a cumulative reward of 25.42 BTC.
NFT：
The NFT trading market built by Gamma for Bitcoin NFT has integrated Stacks and Ordinals.
Boom is the NFT platform native to the Stacks chain and has launched a new type of NFT: Boomboxes. It allows users to delegate to lock their STX and receive an NFT as an automatic claim certificate for the reward portion of the lock.
TradePort is a multi-chain aggregation NFT trading market that currently supports Stacks and Near chains, and plans to expand to Aptos and Sui.
8. Economic Model
Its initial supply is 1.32 billion. And additional issuance will be carried out at a certain inflation rate every year, and it is expected to reach 1.842 billion by 2050 (v1 is 2.052 billion).
STX is the fee required to register digital assets (such as usernames, software licenses, podcasts or other digital products) on Stack 2.0 and publish and run smart contracts. It is similar to the gas fee in the Ethereum network. Operating in the network will consume STX. At the same time, STX can be used to pay transaction fees and is also an incentive for miners to run mining nodes and developers to develop DApps.
The main attribute of STX is to cooperate with Stack 2.0 for network operation, adjusting and balancing various mechanisms. The long-term value of STX essentially depends on the growth of the Stacks network and the demand for the Clarity smart contract.
In Stack 2.0, the main way to obtain STX is to participate in the PoX consensus mechanism, submit BTC to obtain STX, or pledge STX to obtain BTC. In each reward cycle of STX locking, Bitcoins transferred from miners will be received as part of the transfer proof. Once the number of locked periods has been completed, STX is unlocked and can be freely spent or participated in staking again.
9. Advantages and Risks
Advantage
Bitcoin’s smart contract capabilities: Stacks provides smart contract and dApps capabilities for Bitcoin, which may attract a large number of users and developers. This could trigger the development of a new ecosystem of developers and users, increasing the use and value of Bitcoin.
New applications and use cases: Stacks allows Bitcoin to be used as the underlying asset for smart contracts, which could open up a range of new applications and use cases, such as decentralized finance (DeFi) and non-fungible tokens (NFTs) ).
Contribution to the Bitcoin Economy: Stacks may have a positive impact on the Bitcoin economy by enabling Bitcoin to participate in smart contracts and dApps. This could increase the demand for Bitcoin, thereby increasing its value. At the same time, by bringing transaction fees to the Bitcoin network, Stacks may also help keep the Bitcoin network secure in the long term.
risk
Technology Development and Acceptance: Although Stacks adds smart contract and dApps capabilities to Bitcoin, the development and acceptance of this technology still faces challenges. Although the Clarity language is safe, not all developers are familiar with it. Additionally, while subnets offer higher performance and greater versatility, implementing and maintaining these subnets can present technical and governance challenges.
Network effects and user adoption: Stacks needs to attract a large number of users and developers to realize its potential. This will take time and will require overcoming the challenges of network effects, where existing platforms such as Ethereum may already attract large numbers of users and developers.
Regulatory Risk: Some features of Stacks, such as STX mining and Stacking, may be subject to regulatory restrictions in certain jurisdictions. In addition, the global regulatory environment for cryptocurrencies and smart contracts is still changing, which may have an impact on Stacks.
Overall, despite some challenges, Stacks' prospects look promising. If it can successfully solve these challenges, Stacks could have a profound impact on Bitcoin and the entire cryptocurrency ecosystem.
ps, the above report is transferred from the Internet and can be used as popular science information to understand STX. Big pie and STX hedging transactions are very stable arbitrage models. I hope STX will develop better and better and stand out in the second-layer Bitcoin network.