Bankless: Understand the Bitcoin second-layer network Stacks in three minutes

The evolution of Stacks with the PoX consensus mechanism and the upcoming Nakamoto upgrade makes it an innovator on the Bitcoin front.

Original title: "The Bankless Guide to Stacks"

Written by: Bankless

Compiled by: Luccy, BlockBeats

Editor’s note:

*Stacks hopes to create a platform that will be used to explore more complex and sophisticated Bitcoin-denominated utilities, with the ultimate goal of transforming them into a true Bitcoin L2 when technical conditions allow in the future. *

*Bitcoin’s price performance as a store of value is stable, coupled with the broader regulatory clarity that comes with the approval of a BTC ETF. The combination of all these external forces increases demand for what Stacks is building: a high-performance, flexible and secure BTC-denominated environment for exploring more complex BTC applications and completing a true second layer of Bitcoin ( L2) conversion. *

*This vision has gradually made progress, and the Stacks development team plans to complete the Nakamoto upgrade before the Bitcoin halving event in April this year. Bankless wrote an article discussing Stacks' PoX consensus mechanism and the upcoming Nakamoto upgrade in detail. BlockBeats compiled the original article as follows: *

Stacks is a Layer 1 blockchain that supports the Ethereum Virtual Machine (EVM) and implements scaling solutions by extending smart contract functions on Bitcoin. Therefore, Stacks are often referred to as Bitcoin Layer 2.

How Stacks works

Stacks Network uses a proof-of-transfer (PoX) consensus mechanism that is closely tied to Bitcoin to improve functionality without requiring modifications to Bitcoin itself.

PoX is an adaptation of the proof-of-burn concept that involves miners transferring Bitcoin, the base cryptocurrency, to secure the Stacks blockchain and receive rewards. Stacks further improves transaction efficiency through micro-blocks, which are synchronized with Bitcoin transactions, enabling fast settlement independent of Bitcoin speed.

Notably, Stacks’ upcoming Nakamoto upgrade will introduce faster block production rates, further moving away from Bitcoin’s slower block times, creating new Stacks blocks approximately every 5 seconds. The upgrade will also achieve 100% Bitcoin finality, meaning Stacks blocks are expected to become as irreversible as Bitcoin transactions.

The Pulse of Stacks

According to data from DeFiLlama, Stacks currently ranks 38th in the DeFi field with a total value locked (TVL) of $61 million. Although its application scenarios are relatively small, it covers some NFT projects and DeFi protocols in areas such as DEX, lending and liquidity mortgage.

Additionally, Stacks has seen a noticeable increase in activity in recent months due to a surge in interest in inscription-style coin minting. Looking ahead, Stacks' upcoming Nakamoto upgrade will enable the network to handle future demands even more efficiently.

STX Token

Stacks’ native token $STX is used to pay for transaction processing via the network’s Clarity smart contract. $STX holders can also participate in the network through a process called Stacking, where they lock up their tokens and run a full node to participate in consensus and earn Bitcoin rewards.

As for mining on Stacks, the process involves using Bitcoin to mine $STX tokens. Miners participate in leader elections on the Bitcoin blockchain, and the leader for each round is selected via a verifiable random function, giving greater weight to higher $BTC bids. Accordingly, miners receive $STX through transaction fees, and the $BTC they bid are distributed as rewards to $STX holders participating in the consensus.

At the time of writing, $STX is trading at around $1.76 and has a market capitalization of $2.5 billion, making it currently the 40th largest cryptocurrency.

Getting Started with Stacks

To learn more about the Stacks ecosystem, the following resources provide a helpful starting point:

• Leather and Xverse: Wallets for managing Stacks assets.
• Stacks Docs: The official documentation of Stacks.
• Stacks Explorer: A block explorer for analyzing Stacks data.
• Stacks Bridges: A repository of Stacks bridge solutions.
• Stacks Ecosystem: Application database on Stacks.
• Stacks Stacking: A collection of STX Stacking platforms.
• STX20: Inscription-style marketplace on Stacks.
• DefiLlama: Dashboard for Stacks DeFi statistics.
• Gamma: A marketplace for Stacks NFTs.

in conclusion

Overall, Stacks is a network designed to combine the power of Bitcoin with the flexibility and scalability of Ethereum-like smart contracts.

Critical to its evolution are the PoX consensus mechanism and the upcoming Nakamoto upgrade, advancements that position Stacks as an innovator on the Bitcoin front. Currently, the chain's DeFi and NFT ecosystem may still be relatively small, but as Stacks continues to grow, it is expected to become a project worth watching in the crypto space.