The Stacks blockchain
What is Stacks (STX)?
The Stacks blockchain provides a blockchain technology that uses Bitcoin's high security while allowing the creation of smart contracts, using a smart contract language called Clarity, which has an easy to read syntax.
Despite Bitcoin (BTC) being the most well-known blockchain and biggest cryptocurrency, its smart contract use cases have been limited due to its scalability, speed and syntax limitations. The Stacks network aims to change this, and unlock Bitcoin's potential.
Stacks is a layer 1 blockchain that uses a consensus mechanism called Proof of Transfer (PoX), which has miners pay in BTC to mint new Stacks tokens. It relies on the Bitcoin blockchain, like a layer 2 would, but it is distinct from Bitcoin and is maintained by and for Stacks nodes. Stacks has its own rules and its transactions are separate from Bitcoin transactions. This is by design, as Stacks developers want to enable programmability of Bitcoin without changing Bitcoin itself. Stacks blocks are recorded on the Bitcoin base-layer blockchain. Additionally, STX token holders can also stack (not stake) their tokens to earn Bitcoin as a reward.
The Stacks blockchain is enabling the creation of many projects and applications. The most notable examples are Stacks-based NFTs (non-fungible tokens) and DeFis. On top of this, Stacks was the first cryptocurrency to receive SEC qualification for a sale in the United States, allowing it to launch a $28 million Reg A+ sale cash offering for its STX tokens in July 2019.
Despite its increasing use as sovereign money, Bitcoin hasn't been as productive an asset as other cryptos for DeFi (Decentralized Finance). Thanks to its natural ability to exploit Bitcoin's security and settlement assurances, Stacks is uniquely positioned to change this and enable Bitcoin DeFi. Considering Bitcoin's market cap, this is a vast industry to explore.
Native BTC swaps to new assets are a foundational building block of Bitcoin DeFi. Essentially, Ethereum-like functionality is now possible directly on Bitcoin, leading to an explosion of advanced decentralized apps, trust-less BTC swaps and the ability to purchase digital assets such as NFTs and decentralized domains.
How does the Stacks blockchain work?
The Stacks blockchain leverages Bitcoin as a secure medium for storing and broadcasting. It has the same block time as Bitcoin, which is almost every 10 minutes. However, Stacks uses microblocks to lower latency transactions, they enable the current block leader to stream transactions and incorporate state changes.
In a sense, Stacks' consensus mechanism mimics Bitcoin's Proof-of-Work mechanism, which while extremely secure, has limitations when it comes to programmability and syntax. Proof-of-transfer (PoX) solves this. It is an extension of the proof-of-burn mechanism, but rather than burning the cryptocurrency, miners transfer the committed cryptocurrency to other participants in the network.
There are 2 parties in the Stacks blockchain: miners and Stacks native token(STX) holders.
Miners: Instead of using energy to produce new blocks, Stacks miners use bitcoin --- that they need to buy at the market rate --- to maintain the Stacks blockchain. This approach incurs costs for Stacks miners, so they are encouraged monetarily, with compensation in the form of block rewards and transaction fees from the Stacks network. The compensation is issued by the protocol in STX, Stacks' native blockchain coin. The mining rewards are halved every 4 years and they are synchronized with the Bitcoin halving.
Stackers: Eligible STX holders can temporarily lock up their STX coins and receive BTCs that were pledged by miners.
History of Stacks
After graduating from Princeton University with an MA and PhD in computer science, Muneeb Ali co-founded Stacks in 2013 with Ryan Shea, as Blockstack. Muneeb Ali still works with the platform today as the CEO of Hiro Systems PBC, which has its headquarters in New York.
The second co-founder of the platform, Ryan Shea, disembarked from the project in 2018 to pursue other ventures --- including co-founding a new tech startup that is currently operating in stealth.
Stacks' vision is to build a full-stack solution for decentralized applications (dApps) and replace the reliance on centralized apps and service providers that require the storage of user information.
Blockstack was rebranded to Stacks in Q4 2020 in order to "separate the ecosystem and open source project from Blockstack PBC. Blockstack PBC is now officially Hiro Systems PBC. The change to Hiro PBC marked a renewed focus on developer tools for the user-owned internet on Bitcoin.
The governance is of the Stacks ecosystem is coordinated and its growth is supported by the non-profit Stacks Foundation, which also offers guidance, technical support for grantees, PR support for founders, partnership introductions, legal resources and more.