Learn about Bitcoin L2 Ecosystem Stacks in one article: Nakamoto upgrade will be ushered in
authorship | MT Capital
summary
Looking at historical trends, STX always lags behind the BTC trend, and the rise and fall rate is greater than BTC, which is also relatively strong compared to other currencies in the BTC ecosystem
BTC is about to be halved, and the popularity of the BTC ecosystem concept continues to rise. Stacks, as the leading project in the BTC ecosystem, will welcome Nakamoto's upgrade in Q4. Fast block generation every 5 seconds and trustless sBTC will bring BTCDeFiProbably, it is expected to further prosper the Stacks ecosystem
Among the BTC ecosystem concept coins, STX has the largest number. It is on all mainstream exchanges including Upbit, and is also the target with the best liquidity. It can be used as a phenomenal 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 the Clarity language based on Bitcoin's security, mining Bitcoin and enhancing its functions as a second layer of Bitcoin by locking in Bitcoin, including fast transaction processing and Bitcoin's finality guarantee
The Stacks ecosystem currently has more than 19 million US dollars in TVL, more than 120,000 smart contracts deployed, more than 760,000 wallets, and relatively complete ecosystem projects, including wallets, DeFi, NFTs, DAO, DID, Social, etc.
introduction
Stacks (STX) is aBitcoinThe smart contract layer aims to extend Bitcoin's functionality to support smart contracts and decentralized applications.
Goal: Stacks' main goal is to introduce smart contract functionality to the Bitcoin blockchain, allowing developers to build decentralized applications (dApps) and smart contracts to expand the uses of Bitcoin.
POX consensus: Stacks 2.0 uses the POX consensus. The rewards participants receive are more stable, lower-chain cryptocurrencies. Compared with cryptocurrencies on the new blockchain, lower-chain cryptocurrency rewards motivate early participants more, which helps attract early participants, and the consensus is stronger.
Empowering BTC: Increase the vitality of the Bitcoin economy by turning BTC into an asset for building dApps and smart contracts.
Ecosystem: Currently, Stacks has 79 projects, and the TVL is $24.95M
I. Team Background
Stacks is a project of multiple independent entities and communities, initially led by Blockstack PBC and later renamed Hiro Systems PBC. Based in NYC, the team currently has 49 people, according to Linkedin's latest data.
Key People and Responsibilities:
Muneeb Ali: The co-founder of Stacks, CEO Hiro, has a doctorate degree in computers from Princeton University, focusing on the research and development of distributed applications; he has spoken at TEDx and other forums to spread cryptocurrencies and blockchain, and has written numerous 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, has a PhD in computer science from Princeton University and was a core member of PlanetLab, which received the ACM Test of Time award for implementing planetary-scale experiments and deployments.
Aaron Blankstein: Engineer, he joined the Blockstack engineering team after receiving his doctorate in 2017. He studied computer science at Princeton University and MIT. Its research covers several topics, focusing mainly on web application performance, caching algorithms, compilers, and applied cryptography. His research on CONIKS received the Caspar Bowden Privacy-Enhancing Technology Award in 2017. I've been using Emacs for over 10 years.
Mike Freedman: Hiro Technical Advisor, Professor of Distributed Systems at Princeton University, provided technical guidance for the project. He has received the Presidential Early Career (PECASE) Award and Sloan Scholarship. His research has spawned multiple commercial products and deployed systems at the level of millions of daily users.
Albert Wenger: Hiro is a director and managing partner at Union Square Ventures (USV). Prior to joining USV, he was the president of del.icio.us and an active angel investor, having invested in companies such as Etsy and Tumblr. Albert graduated in economics and computer science from Harvard University and has a doctorate in information technology from MIT.
JP SinghDirector Hiro, Princeton University professor and undergraduate director, specializes in parallel computing systems and applications. He has received the Presidential Early Career (PECASE) Award and Sloan Scholarship, and co-founded the business analysis company FirstTrain Inc. He graduated from Princeton University and has a graduate degree in electrical engineering and a doctorate degree from Stanford University. He is also one of the founders of Trust Machine.
In addition to Hiro, there are several separate entities in the Stacks ecosystem. Includes Stacks Fund, Freehold, New Internet Labs, and Secret Key Labs (Secret Key Labs).
Hiro: focused on providing and maintaining developer tools within the Stacks ecosystem
Stacks Foundation (Stacks Foundation): Supporting the development of the Stacks ecosystem through governance, R&D, education, and funding
Daemon Technologies (Daemon Technologies): Focuses on supporting the Stacks mining and staking (staking) business
Secret Key Labs (Secret Key Labs): Focus on providing a Chinese mobile wallet that can directly participate in stacking
II. Capital relationships
StacksA total of 5 rounds of financing were carried out, totaling $88M
The specific timing and funding sources are as follows:
Trust machine：
Trust Machine was founded by two Princeton computer scientists (Muneeb Ali, one of the founders of Stacks, and JP Singh, Hiro's executive director). They are all big believers in Bitcoin and 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, Hiro's executive director, co-founded Trust Machine.
Trust Machines has three products: Leather (wallet, formerly Hiro wallet), Console (social platform), and LnSwap.
In April 2022, Breyer Capital, Digital Currency Group, GoldenTree, Hivemin and Union Square Venture announced a $150M investment in Trust Machine.
Additionally, in March 2023, Trust Machine and Gossamer Capital announced a $2.5 million investment in Alex (the largest dex on Stacks).
III. Development history and current situation
· Development history
· Current situation
Stacks has implemented the latest v2.1 network upgrade in the first quarter of 2023, which includes updates to improve the Stacking (Stacking) function, improve the Clarity programming language, internal blockchain upgrades, and enhance reliability. Additionally, 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 Q4 2023.
The Nakamoto upgrade introduced a series of technological advancements, combined with the introduction of the 1:1 Bitcoin-backed asset sBTC, and Stacks will soon be able to write to Bitcoin in a completely decentralized manner. sBTC is a trust-minimized way to move Bitcoin between L1 and L2. Furthermore, unlike early sidechain methods, threshold wallets are managed by a group of unauthorized, dynamically changing entities. These entities are economically motivated to maintain links, and they can join or leave pegged maintenance at will. Using this mechanism, it is possible to issue an asset at the Bitcoin layer, and this asset always maintains a 1:1 relationship with Bitcoin. Additionally, the Nakamoto upgrade will drastically reduce execution time, from a few minutes to a few seconds.
The community has previously opened sBTC trial applications for developers, and is actively organizing community members to learn the key points and use cases of this upgrade.
4. Consensus mechanism: POX
Stacks' earliest consensus mechanism was POB (proof-of-burn), proposed by Jude Nelson and Aaron Blankstein in late 2018.
POB allows Stacks miners to compete by destroying cryptocurrencies rather than using electricity. Compared to ordinary proof-of-work blockchains, miners who burn proof-of-work chains do not require dedicated hardware to participate and provide greater transparency to network participants. However, POW, Proof of Burning is also destructive, requiring miners to destroy value in exchange for blockchain security.
Unlike PoS, PoB requires users to permanently burn tokens in exchange for mining rights. Users perform “burning” by sending tokens to an address that cannot be retrieved.
Mining rights are distributed according to a random selection process. Even if users have burned their tokens, there is no absolute guarantee that they will be selected to mine.
This process may reduce the token supply for holders of the original token, but it does create a competitive opportunity with miners.
Since burning BTC by POB is equivalent to permanent destruction, in order to better balance the interests between miners and holders while reducing the impact on the Bitcoin network, Stacks transitioned from a PoB consensus mechanism to PoX.
POX (Proof of Transfer)
POX (Proof of Transfer) is an extension of the combustion proof mechanism. PoX uses proof-of-work cryptocurrencies on established blockchains to ensure the security of the new blockchain. Unlike POB, though, miners don't burn cryptocurrencies, but rather transfer promised cryptocurrencies to other participants in the network.
Key PoX Features and Benefits
1. Rewards based on lower-chain tokens: The rewards participants receive are more stable, lower-chain cryptocurrencies. Compared with cryptocurrencies on the new blockchain, lower-chain cryptocurrency rewards motivate early participants more, which helps attract early participants and has a stronger consensus.
2. Initial value setting: Since it is linked to the underlying cryptocurrency chain, the new token has an initial value that can be referred to.
3. Addressing the dependency value spiral: By providing participants with the underlying chain cryptocurrency incentives, PoX helps solve the dependency value spiral that may occur with new blockchains.
4. Establishing 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, so that the value of the new cryptocurrency is not affected.
POX design
Miners: miners. Pledge BTC in the form of a bid to obtain the right to mine the next block → mine → obtain STX tokens from mining output + platform transaction fees
Stackers: Lock down a certain number of STX users for a certain period of time. Set up staking STX for different periods → build your own pool or join another pool → provide an address to receive rewards → get miner's BTC based on the amount of STX staked
participants
Mining mechanism for miners
Participant (network maintainer) incentives
Reward cycle: During each reward cycle, miners transfer funds to the address receiving the reward. Each reward address only receives one bitcoin from the miner during the reward cycle.
Eligibility for participation：
Stacks wallets have no less than 0.02% of the total number of STX tokens unlocked, and this threshold will be adjusted according to the level of participation in the Stacking Agreement;
A signed message is broadcast before the reward cycle begins, which includes the agreement to lock the corresponding STX token specifying the locking period, specifying the Bitcoin address to receive the funds, and voting to support a block on the Stacks chain.
Address validity: Participants need to be able to verify the address to receive funds, as the reward address for each reward cycle needs to be confirmed as valid.
Preparation phase and reward agreement: Prior to the rewards cycle, participants go through a preparation phase where two key things were decided:
1) Anchor block: In the reward cycle, there is an anchored block, and miners need to transfer their funds to an appropriate reward address. This anchor block is valid throughout the reward cycle.
2) Rewards Collection: A rewards collection is a collection of Bitcoin addresses that will receive funds during the rewards cycle. This collection is determined by the stacks chain state of the anchored block.
Reward address selection rules: Different rules apply to the selection of reward addresses, depending on whether the blockchain tips established by miners are descendants of anchored blocks. If a blockchain tip built by a miner is not a descendant of an anchored block, then all of that miner's promised funds must be destroyed. If a blockchain tip built by a miner is a descendant of an anchored block, then that miner must send promised funds to two addresses in the rewards collection.
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 separate security budget (L1.5) from Bitcoin's L1 and is considered a separate layer (L1.5)
The future Nakamoto version plan will rely entirely on Bitcoin's hashing power, making it a fully dependent layer (L2) of Bitcoin, which means that Stacks will determine the irreversibility of its transactions by Bitcoin's security.
Sidechain?
Stacks is somewhat interoperable with Bitcoin, but it doesn't fit the definition of a traditional sidechain. Stacks' consensus mechanism runs on Bitcoin L1 and is closely tied to Bitcoin's finality (finality), and data and transactions on Stacks are automatically hashed and permanently stored on Bitcoin's blockchain. This is different from traditional sidechains, where their consensus runs on a sidechain, doesn't depend on Bitcoin L1, and doesn't store data on Bitcoin L1. Therefore, Stacks doesn't meet the definition of a traditional sidechain.
Smart contract language - Clarity
Clarity is a decision-making smart contract programming language designed specifically for the Stacks blockchain. It has the following features:
1)Prioritize safety: Clarity's design focuses on security and predictability to protect against common vulnerabilities and attacks in Solidity contracts. It is specifically designed for security and is designed to avoid common problems in the smart contract world.
2)interpretive: Clarity's code is explanatory, meaning it is 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 bugs that the compiler may introduce and maintains the readability of smart contracts, since the Clarity contract code is the executed code, not the compiled bytecode.
3)Decisiveness: Clarity is a decision-making language, which means that from the code itself, you know exactly what the program will do. This avoids issues such as “downtime issues”. Clarity ensures that it doesn't “run out of fuel” during the call because it guarantees that program execution will end in a limited number of steps.
4)Disallow recursive calls: Clarity's design prohibits recursive calls, which can lead to contract flaws, where one contract calls another contract and then pulls back the original contract, which can trigger multiple fetches.
5)Protects against overflows and underflows: Clarity prevents numerical computation overflows and underflows, a common type of vulnerability that can lead to abnormal smart contract behavior.
6)Built-in support for custom tokens: Clarity has built-in support for creating custom fungible and non-fungible tokens, one of the popular use cases for smart contracts. Developers don't need to worry about internal asset management, supply management, or token event launch because these features are already integrated into the Clarity language.
7)Post-condition-based transaction protection: Clarity supports attaching post-conditions to transactions to ensure that the chain state changes as expected after the transaction is completed. If the postcondition check fails, the transaction will be cancelled.
8)Forced return response processing: Public calls to Clarity contracts must return a response indicating success or failure. This helps ensure that errors aren't overlooked, thereby increasing the security of the contract.
9)Combinations are better than inheritances: Clarity uses the principle that composition is superior to inheritance, rather than inheriting other contracts as in languages such as Solidity. Developers can define features and then implement them by different smart contracts, which provides more flexibility.
10)Visit the Bitcoin base chain: The Clarity smart contract can read the state 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 systems
Gaia is a unique decentralized storage system within the Stacks blockchain that emphasizes user ownership and control over data. Unlike some other immutable storage solutions on blockchains (such as IPFS and Arweave), Gaia focuses on user control over data rather than emphasizing immutability.
Gaia storage systems are comprised 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 disk, but the driver model allows support for other backends.
Gaia stores data as simpleKey-value storage. Whenever an identity is created, the corresponding data store is associated with that identity on Gaia. When a user logs in to a decentralized application (dApp), the authentication process will provide the app with a Gaia hub URL, and Gaia then performs storage operations on behalf of that user. Gaia will have a “pointer” saved to the Blockstack chain and the Atlas subsystem. When a user logs in to an application and service using the Blockstack authentication protocol, this storage location information is passed to the application, and then the application interacts with Gaia data at the specified location, that is, the cloud storage service provider cannot directly see the user data, but only the encrypted data block.
Stacks blockchainStore only identity data, while data created by identity operations is stored in Gaia storage systems. Every user has profile data, and when a user interacts with a decentralized dApp, the app stores app data in Gaia on the user's behalf. Since Gaia stores user and application data outside of the blockchain, Stacks dApps are generally more performant than dApps on other blockchains.
Here are some of the key features about Gaia:
1)User ownership and control: Gaia's design focuses on users' ownership and control of their data. This means users can decide where their data is stored and be able to modify or delete their data, unlike some other immutable blockchain storage solutions.
2)Connection to Stacks identity: Gaia connects data access to a user's identity on the Stacks blockchain. This connection enables users to better manage and access their data while being linked to their digital identity.
3)High performance and high availability: Storing user application data outside of the blockchain can provide higher performance and usability because reading and writing data is not limited by blockchain performance.
6. Important Upgrades
Stacks Nakamoto upgrade
The Nakamoto upgrade introduced a series of technological advancements, combined with the introduction of the 1:1 Bitcoin-backed asset sBTC, and Stacks will soon be able to write to Bitcoin in a completely decentralized manner. sBTC is a trust-minimized way to move Bitcoin between L1 and L2. Furthermore, unlike early sidechain methods, threshold wallets are managed by a group of unauthorized, dynamically changing entities. These entities are economically motivated to maintain links, and they can join or leave pegged maintenance at will. Using this mechanism, it is possible to issue an asset at the Bitcoin layer, and this asset always maintains a 1:1 relationship with Bitcoin. Additionally, the Nakamoto upgrade will drastically reduce execution time, from a few minutes to a few seconds.
sBTC: Provides a trustless decentralized two-way anchoring to introduce BTC liquidity into smart contracts
Bitcoin's finality:Once confirmed under the PoX (Proof of Transfer) block, a Stacks blockchain transaction is considered irreversible
Faster blocks:The Stacks blockchain enables faster block confirmation times of 5 seconds per block
7. Token Economy
The total supply of STX tokens is capped at 18.18 billion, and the current circulating supply is around 1.42 billion.
Stacks' Genesis block contains 1.32 billion STX tokens. These STX tokens were issued several times in 2017 and 2019. The 2017 release price was $0.12 per STX, the 2019 issue was $0.25 per STX, and the 2019 SEC-compliant release price was $0.30 per STX.
The mining rewards are distributed as follows: 1000 STX per block for the first 4 years, 500 STX per block for the next 4 years, 250 STX per block for the next 4 years, and 125 STX per block permanently thereafter. The STX assigned to the founders and employees follows a 3-year unlocking schedule.
In October 2020, Stacks changed the minting and burning mechanism for STX tokens. Instead of implementing STX minting and burning, Stacks reduced the number of tokens issued. By 2050, the total supply will reach approximately 1,818 million pieces.
8. Ecological conditions
TVL situation
Trends in the number of wallets
Trends in the number of smart contracts
Ecological map
wallets
Xverse
Xverse is a cryptographic wallet built on Stacks and supports the Ordinals protocol. Users can manage both Bitcoin assets (including BTC and Bitcoin NFTs) and Stack-based assets through this wallet. At the same time, the wallet also has a built-in stack function, and users can earn Bitcoin revenue through stack STX.
The wallet's UI is simple, and the wallet creation process is similar to many EVM compatible wallets. It also uses mnemonic words to back up and restore wallets. For EVM wallet users who are used to little foxes, this has certainly lowered 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 to receive and send Bitcoin assets. The other is the Stacks network address for managing stack-based assets.
leather
Leather's predecessor was Hiro Wallet. Hiro is a development tools company that supports developers on the Stacks blockchain. Hiro Wallet is one of the company's products. Leather is a wallet application built on Bitcoin. It currently supports Ordinals and will soon support the Lightning Network. Leather has many convenient built-in features. Users can buy STX directly from within Leather using a credit card, debit card, or even bank transfer, and then directly participate in the pledge within the wallet.
Currently, the wallet supports extended browser versions of Chrome, Firefox, and Brave, as well as desktop versions for macOS, Windows, and Linux systems.
The browser extension allows you to connect to apps, buy STX, mint, and buy NFTs, and use the Ledger hard wallet. The desktop version can participate in staking to earn bitcoins and protect assets using the Ledger hard wallet.
DeFi
ALEX
ALEX is a DeFi protocol built on the Bitcoin network through Stacks smart contracts, drawing on the Balancer V2 design in development. Currently, the main network version of the platform features include swap, lending, staking, yield mining, and launchpad. Furthermore, in the midst of the BRC20 outbreak, ALEX also launched an order book exchange for BRC20.
Arkadiko
Arkadiko is an open source, non-custodial liquidity protocol built on Stacks smart contracts, where users can stake assets to mint the USDA stablecoin, earn interest on deposits, and borrow assets on Stacks. Arkadiko's governance token is DIKO and can be obtained by adding liquidity to the pool through collateral assets.
LnSwap
LNSwap is an atomic exchange protocol that embodies the foundation of Bitcoin and the security, decentralization, and stability it provides.
Lnswap consists of three parties: users, liquidity providers, and aggregators.
Users are those who want to exchange assets. Their funds are only locked in a very basic hashed time-locked contract (HTLC) during the exchange period, and by using smart contracts, they can be directly traded between the two parties without the participation of a third party.
Liquidity providers are those who use the assets they own to fund the LNSwap protocol to facilitate swaps on our exchange. In return for providing assets, liquidity providers will be rewarded with fees generated from swaps that occur on the platform.
An aggregator essentially collects data and information exchanged on a protocol and integrates them for easy reference and access. Currently, LNSwap's aggregator is a router that forwards and exchanges information between users and liquidity providers. But in the future, the aggregator will actually be an on-chain contract, which actually means that anyone can become an aggregator for this platform through a simple front-end. Additionally, liquidity providers will be able to register to multiple aggregators.
NFTs
Gamma
Gamma, an NFT marketplace on Stacks, was previously named STXNFT, and it was announced that it would change its name to Gamma on April 27, 2022. Gamma is the third letter in the Greek alphabet and represents the third phase of the web: Web 1.0, Web 2.0, and now Web3.
The platform aims to bring collectors, creators, and investors together to explore, trade, and display NFTs within the Bitcoin ecosystem. The Gamma platform consists of three core products: an NFT marketplace, a launchpad, and a social platform. Gamma.io supports both the primary and secondary markets for Bitcoin NFTs.
Users can use the Gamma bot to mint, collect, or sell their own unique digital creations. Users can successfully create Bitcoin NFTs in minutes using a codeless Bitcoin NFT creation tool. Gamma.io addresses the technical, complex, and time-consuming pain points of creating NFTs on the Bitcoin network. However, the secondary market still accounts for most of the platform's sales. Each sale includes artist royalties as well as marketing commissions, and percentages vary by artist and collection.
Boom
Boom is Stacks' native NFT platform, supports Stacks ecosystem token transfers, and will support Stacks NFT transactions in the future.
9. Competitors
Unlike Lightning Network, which focuses on improving Bitcoin's scalability, Stacks is focused 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 doesn't just focus on financial applications. Unlike Rollups, Stacks is a solution built on top of Bitcoin, not 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 2017 Segregated Witness upgrade, which is equivalent to expanding the BTC block data from 1MB to 4MB, but part of this extension can only be used to store signatures. Until the Taproot upgrade at the end of 2021, it was possible to write advanced scripts for the first time in Quarantine Witness, and complex data can be written to BTC. Since then, BTC has made tremendous progress in programmability and scalability. Some protocols containing complex logic have begun to emerge, and the BTC ecosystem has finally begun the next milestone. This is the main reason for the explosion of the BTC ecosystem in 2023.
Ordinals & BRC20
The advent of the Oridnals protocol has completely ignited the BTC ecosystem, and its rapid development is also mutually reinforcing the adoption of Taproot. People can encode the NFT data and write it into the Quarantine Witness expansion space (4 MB per block).
Soon, new developers improved Ordinals and imitated ERC20 to write the full functionality of the Token into the BTC output script, and BRC20 was born.
Atomicals & ARC20
Atomicals is another derivative protocol for engraving data implementation tokens on UTXO.
Unlike Oridnals, which were originally designed for NFTs, it has rethought from the bottom up how to issue tokens in a centralized, immutable, and fair manner on BTC.
When verifying an Atomicals transaction, it is only necessary to check the UTXO of the corresponding sat on the BTC chain. The atomicity of the ARC20 token is consistent with the atomicity of BTC itself, and the calculation of the ARC20 transfer is handled entirely by the BTC basic network.
Atomicals' UTXO binding design cleverly circumvents the complexity faced by BRC20, is more decentralized, more BTC-native, and most importantly, more in line with the culture of the BTC community.
Rune & Pipe
In the midst of the hype, Casey also proposed a way to implement the inscription specifically for the release of FT, called Rune.
Rune's idea was just an idea, and the #Trac founders wrote the first usable protocol based on this and issued $PIPE. Due to Casey's high popularity, $PIPE took on the continued hype enthusiasm of BRC20 and quickly completed the first wave of hype.
Rune is more orthodox than BRC20, but it is still very difficult to be accepted by the BTC community.
Lightning Network
The Lightning Network is the king of orthodoxy in the BTC community. Over a long period of time, starting in 2016, more than half of the developers in the BTC ecosystem have been developing the Lightning Network.
The foundation of the Lightning Network is a payment channel. This concept was first proposed by Satoshi Nakamoto. Both parties lock BTC through multiple signatures, and both parties maintain an off-chain ledger to record transactions.
The two connected payment channels form a network, and two parties that are not directly connected can also switch channels to carry out transactions. The Lightning Network has indeed expanded the performance of BTC transfers, giving users a better experience.
The final BTC settlement can only be carried out on the BTC main network, and all coins are still stored by the public and private key system.
Taproot Assets (Taro)
Unlike BRC20, etc., Taproot Assets only writes token information in the UTXO output script of the BTC main network, and does not store function codes such as transfer or mint for this token.
Taproot Assets sees the BTC mainnet only as a registry for tokens, and does not fully rely on the BTC mainnet to operate, so these assets must be stored in the Lightning Network before they can be traded.
Therefore, Taproot Assets tokens must rely on a third party storage indexer, and without the storage indexer, these tokens will be lost forever.
RGB
RGB is a smart contract system based on BTC and the Lightning Network. It is the ultimate scaling method, but progress is slow due to its complexity.
RGB transforms the state of a smart contract into a short proof, engraving the proof into the BTC UTXO output script.
Users can check the status of the smart contract by verifying this UTXO. When the smart contract status is updated, a new UTXO is created to store this status change certificate.
You can think of RGB as BTC's L2. The benefit of this design is that it uses BTC's security to guarantee smart contracts, but as the number of smart contracts increases, the demand for UTXO encapsulated data will also increase, which will inevitably cause a lot of redundancy on the BTC blockchain.
RSK & RIF
RSK can be thought of as BTC's L2, which is essentially an EVM-structured smart contract chain.
RSK simply uses the main network BTC across the chain to its own face using a hash lock as network gas.
At the same time, RSK uses the same POW consensus algorithm as BTC, so BTC miners can also mine on RSK at the same time to earn a transaction fee of $RBTC
BitVM
BitVM is currently the most BTC-native, most promising, and technologically most hardcore smart contract extension solution.
Without modifying the BTC network, run a VM virtual machine that supports computation through Optimistic Rollup to implement a BTC smart contract. The BTC network was used to run fraudulent proofs for Optimistic Rollup.
Using the most basic hash lock and BTC script operations, OP_BOOLAND and OP_NOT, a simple logic gate was implemented. By combining the logic gates of BTC, a circuit that can be calculated is formed, and proof of fraud is processed on the BTC chain through this circuit.
10. Innovation and Risk
innovations
S (Secured by the entire hash power of Bitcoin): The security of the Stacks smart contract layer is backed by Bitcoin's entire hashing power, which means it is protected by the highly secure and decentralized nature of the Bitcoin network.
T (trust-minimized Bitcoin peg mechanism; write to Bitcoin):Stacks uses a Bitcoin fixation mechanism with minimal trust, which can write information to the Bitcoin blockchain. This ensures interoperability between Bitcoin and Stacks while minimising the need for trust.
A (Atomic BTC swaps and assets owned by BTC addresses):Stacks allows atomic Bitcoin (BTC) exchanges while ensuring that assets in smart contracts belong to Bitcoin addresses. This means assets can be safely transferred from the Bitcoin network to the Stacks blockchain and vice versa.
C (Clarity language for safe, decidable smart contracts):Stacks uses the Clarity programming language, a language designed for writing secure, decidable smart contracts. The Clarity language is characterized by its ability to reduce errors and uncertainties in smart contracts.
K (Knowledge of full Bitcoin state; read from Bitcoin):The 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 keep in touch with the Bitcoin network to understand and validate data on the Bitcoin chain.
(Scalable, fast transactions that settle on Bitcoin):The Stacks smart contract layer supports scalable and fast transactions, which are settled in Bitcoin. Despite its fast transaction speed, Stacks still benefits from Bitcoin's finality and security.
risks
Security: Although Stacks transactions are processed in batches and hashed on the BTC main network, the security of BTC is unquestionable, but like other blockchains, the Stacks network itself may face security threats, such as security breaches and hacking attacks. There are also people questioning the degree of decentralization of the Stacks network. These situations can cause financial losses and compromise the security of the network.
Complexity: While Stacks provides developers with a constantly evolving infrastructure, the Clarity language blocks many great developers, and this complexity can lead to potential bugs and inefficiency.
Interoperability: Although Stacks and BTC are tightly bound, Stacks and other BTC ecosystem projects are still unable to interoperate efficiently. The ability of blockchain networks to work seamlessly together is critical to the adoption and efficiency of the technology. Lack of interoperability can lead to inefficiency and hinder innovation.
11. Liquidity in the secondary market
The k line is STX/USDT, and the orange line is BTC/USDT. It can be seen that regardless of the rise or fall, STX's performance always lags behind BTC, and rises and falls at the same time as BTC.
As can be seen from STX/BTC, STX is equivalent to leveraged BTC.
In summary, STX always lags behind the BTC trend, and the rise and fall rate is greater than that of BTC.
Orange is REN, yellow is BADGER, blue is RIF, purple is ORDI
As can be seen, the currencies in the BTC ecosystem are strongly correlated with BTC, often rising and falling. STX is relatively resistant to falling. Because ORDI is a new coin, it is more flexible.
summed
Stacks is a second-tier solution built on top of Bitcoin that addresses scalability challenges through innovative approaches and drives the development of new applications. It enhances Bitcoin's functionality by introducing smart contracts and decentralized applications (dApps), while leveraging Bitcoin's security and consensus mechanisms. The platform provides a trustless two-way Bitcoin anchoring mechanism and uses Clarity, a smart contract language designed for security and transparency. Stacks provides Bitcoin with a programmable layer of assets, unlocking its potential in a variety of use cases.
Key developments such as the upcoming Nakamoto upgrade position Stacks as a pioneer in the cryptocurrency space. As the broader crypto community realizes the importance of second-tier solutions to Bitcoin's future, Stacks is poised to play a key role in the growing industry. Collaboration, technological innovation, and exploration of new use cases are shaping the Stacks ecosystem, with the goal of releasing $600 billion of Bitcoin liquidity into decentralized finance (DeFi), providing cheaper and faster ways to trade Bitcoin, continuing to develop dApps, and integrating cutting-edge technology. This shows the huge potential of Nakamoto's version of Stacks during development.
