What is STACKS?

Stacks: Bringing Smart Contracts & Apps to the Bitcoin Network

Stacks is a layer 2 network that allows for the development of complex smart contracts and applications on the Bitcoin network. Leveraging a novel consensus mechanism, Proof-of-Transfer (PoX), and programming language, Clarity, Stacks allows for robust applications previously not possible on Bitcoin, while benefiting from the network's security, finality, deep liquidity, and capital. 

Enhancing Functionality within the Bitcoin Network

Launched in 2009, Bitcoin maintains its position as the number one cryptocurrency by market cap. Its simple yet elegant design focuses on decentralization and security, and since inception, Bitcoin has maintained an uptime of 99.98%. All and all, Bitcoin fulfills the requirement of a medium-of-exchange, and if you zoom out, a store of value.  

The flipside however, is limited functionality. Bitcoin is only able to process around 7 transactions per second, and its programming language, Script, is not able to support complex smart contracts and decentralized applications, similar to the ones we see on other leading layer 1s like Ethereum and Solana. Attempts have been made to increase Bitcoin usability through increased transaction throughput, but there have been limited solutions that would allow the build out of the Bitcoin ecosystem. 

The introduction of Stacks, and implementation of PoX and Clarity, look to enhance the functionality of the flagship cryptocurrency, and allow for the exploration of DeFi, SocialFi, NFTs, and other applications within the Bitcoin ecosystem. With more than $10 billion USD of wrapped Bitcoin (wBTC) on the Ethereum network, it is clear that there is not only demand to expand the utility of Bitcoin, but to mobilize the network's capital for more and more robust applications. 

Proof-of-Transfer Consensus 

PoX is a novel consensus algorithm for confirming blocks on Stacks, and is a variation of Proof-of-Burn (PoB). In PoB consensus, miners earn the right to mine the next block by burning an asset (can be native or another cryptocurrency), and are rewarded in BTC (or another asset) for doing so. This can be loosely compared to Proof-of-Work, where miners utilize or “burn” computational energy in order to mine the next block, and are rewarded in Bitcoin. 

In PoX, instead of burning the asset, miners send BTC to participants staking STX (Stack’s native token), and are rewarded in STX for successfully mining a block. The protocol partially considers how much BTC has been transferred, and partially selects at random. This ends up being a highly sustainable solution, where Stacks is less energy intensive when compared to PoW, and more capital efficient in that assets are redistributed instead of burned. 

Stacks is able to interact with the Bitcoin network without modifying its data, using the network as its final settlement layer. The Stacks network can read the state of the Bitcoin, and  similar to Ethereum scaling solutions, Stacks bundles groups of transactions and transmits them to Bitcoin to be verified and validated. As a result, each Stack block is immutably recorded on the Bitcoin blockchain. 

Gaia: Decentralized Data Storage

While smart contracts on Stacks are executed and verified using the Stacks blockchain, the storage of application data presents different challenges, especially considering the need for scalability, privacy, and user control. Gaia is designed to give users control over their data by allowing them to store it on personal storage systems or any storage provider of their choice. Let’s dive in!

• User-Controlled Data: Instead of storing data directly on the blockchain, which can be costly and inefficient, Gaia enables dApps to store data in off-chain storage that the user controls. This approach maintains the decentralized nature of the application while avoiding the scalability issues associated with on-chain storage.
• Storage Flexibility: Gaia allows for the storage of data on various backends, including traditional cloud storage providers or decentralized storage networks. The key is that the user, not the dApp, chooses where their data resides.
• Privacy and Security: Data stored with Gaia can be encrypted with keys that the user controls, ensuring privacy and security. Only the user, or those the user grants access, can decrypt and access their data.
• Efficiency and Scalability: By leveraging off-chain storage solutions, Gaia ensures that Stacks can scale efficiently. dApps can handle large amounts of data without bloating the Stacks blockchain or incurring high transaction fees.
• Integration with Blockstack ID: Gaia works seamlessly with Stacks ID (previously Blockstack ID, a decentralized identity protocol. This integration allows users to access and control their data across different applications using a single identity, enhancing both user experience and privacy.

The Role of STX?

STX is the native token of the Stacks ecosystem, and performs a variety of functions within the network:

• Mining Rewards: Stacks miners are rewarded for successfully mining a new block with newly minted STX tokens.
• Staking: STX can be staked, or stacked, in order to earn a share of the BTC committed by miners. 
• Governance: STX can be used to vote on protocol upgrades and parameters.
• Fees: STX is used to pay for fees when conducting transactions, publishing new smart contracts etc.

Developments & Upcoming Releases

A large amount of time has gone into developing Stacks, with Stacks 2.0, which introduced smart contracts and PoX, only going live in January 2021. The team has continued to work hard, with two exciting upcoming releases, the Nakamoto Release and sBTC, explored below. 

Nakamoto Release

The Nakamoto release is an upcoming hardfork that looks to significantly improve the Stacks protocol, notably increased transaction throughput, 100% Bitcoin finality. To learn more, you can explore the whitepaper here.

sBTC

sBTC is a non-custodial, programmable, 1:1 Bitcoin-backed asset that can allow for the decentralized movement of BTC in and out of Bitcoin layers. To learn more, check out the sBTC paper here.

The Origins of Stacks

Stacks was co-founded in 2013 by computer scientists and Princeton alumni Muneeb Ali and Ryan Shea, with the initial concept put forward in Ali’s doctoral dissertation titled: Trust-to-Trust Design of a New Internet. The token was initially distributed via a $50 million ICO in 2017 - however, Stacks would go on to make history following the launch of Stacks 2.0 in 2020, becoming the first cryptocurrency project to be endorsed by the SEC, allowing for the distribution of their token through a Regulation A+ offering. This subsequent sale raised an additional $23 million.   

Bringing New Horizons to Bitcoin

Stacks represents a significant step forward in the evolution of Bitcoin, transforming it from a pure digital currency into a foundational layer for a decentralized and user-owned internet. By enabling smart contracts and dApps on Bitcoin, Stacks not only expands the utility of the world's first cryptocurrency but also opens up a new realm of possibilities for developers, entrepreneurs, and users within the blockchain ecosystem.

Expanding the Uphold Ecosystem

The integration of the Stacks Blockchain demonstrates Uphold’s continued commitment to Web3 ecosystems and their communities. Having already launched support for a number of Ethereum scaling solutions (Arbitrum, Optimism, Starknet), and layer 1 networks (Avalanche, Tron, etc.), the addition of Stacks further expands Uphold’s pervasiveness throughout Web3, and facilitates more dynamic movement to and from our platform. 

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