What is Stacks?

Stacks is an open-source, Layer-1 blockchain network that leverages the security and capital of Bitcoin for decentralised apps (dapps) and smart contracts. STX is the native cryptocurrency of the Stacks network.

In its first white paper in 2017, Stacks said that it created “a new Internet for decentralised applications” that “enables users to own their application data directly.” Its network is “an open-source effort to re-decentralise the Internet.” Stacks has since evolved, and in its newest white paper (released in December 2020), it describes itself as a network that “brings apps and smart contracts to Bitcoin without modifying it.”

A brief history of Stacks

Muneeb Ali introduced Stacks, then known as Blockstacks, in 2017 through a white paper explaining its solution to Bitcoin’s scalability issues. The Blockstacks ecosystem consisted of a collection of independent entities, developers, holders, and communities working together to build a user-owned Internet by taking Bitcoin beyond a simple store of value. In its inaugural white paper, Blockstacks said that its blockchain was deployed in production, with several companies and open-source contributors actively developing new services.

In 2019, Blockstacks distributed the STX cryptocurrency to the general public through the first-ever token offering approved by the U.S. Securities and Exchange Commission (SEC), allowing the project to raise US$52.8 million. When the Stacks v1 genesis block launched in 2019, it had 1.3 billion STX minted and a maximum planned supply of 1.818 billion tokens. Pre-launch customers received 866,827,880 STX out of the initial 1.32 billion, while 453,172,120 STX remained unallocated. Participants of the 2019 token sale received the leftover funds during the network’s genesis hard fork in October 2019, which marked the start of the first version of Blockstacks’ blockchain. Major institutions that have invested in Stacks include zkCapital, YouBi Capital, Y Combinator, Visary Capital, Version One Ventures, and many more.

In October 2020, Blockstacks rebranded into Stacks, and Blockstack PBC, the blockchain software firm that drives much of the development for the project, was renamed Hiro Systems PBC. In December 2020, Stacks unveiled a new white paper outlining the major changes in its blockchain technology; one month later, the Stacks 2.0 blockchain was launched.

How Stacks works

The Stacks blockchain seeks to resolve Bitcoin’s scalability challenges. Since Bitcoin has a limited amount of transaction space, Stacks helps to increase transaction capacity. Specifically, the Stacks ecosystem offers additional features to the Bitcoin network, which can be static and inflexible. Stacks users can launch new network features via Stacks’ integration with Bitcoin without needing to alter the Bitcoin network itself. The Stacks platform also uses Bitcoin’s efficient security and finality to secure transactions inside the ecosystem. For each block created, the network utilises Bitcoin to settle transactions on the Bitcoin blockchain.

Users on Stacks have ownership over their data using a unique ID system stored on the blockchain. This ID enables users to independently store data in their chosen media and eliminates the need to keep passwords for authentication.

Furthermore, the interaction of two parties (i.e., miners and stackers) is crucial for the proper functioning of the Stacks project. To govern this interaction, Stacks uses a Proof-of-Transfer (PoX) consensus mechanism — the first consensus algorithm between two blockchains (Bitcoin and Stacks).

Interestingly, miners do not mine anything on the Stacks blockchain. Instead, they swap already mined coins off the Bitcoin (BTC) blockchain and commit them for a chance to win STX.

What is Stacks (STX) used for?

STX is used as fuel for transactions and rewards for miners while enabling holders to earn BTC by ‘Stacking’, ​​the mechanism that rewards STX token holders for participating in the Stacks blockchain’s consensus process. STX is used to register digital assets, such as user IDs and smart contracts, to the Stacks blockchain. It is also a popular method of farming Bitcoin holdings. Users can stake their STX tokens to get rewarded in BTC.