Stacks allows the Bitcoin blockchain to be programmable with smart contracts, enabling the building of decentralized apps and an entire DeFi ecosystem.
Stacking (STX) actually pays the holder in Bitcoin and incentivizes tokens to be locked which reduces token price volatility. Currently returns are 13.5% APY!
The trust, network stability and reputation that Bitcoin has maintained is transferred into Stacks and helps with faster adoption of its protocol.
What is Stacks?
Stacks paves the way for a whole new use case for Bitcoin. In order to understand this we must first mention the software language and smart contracts.
Smart contracts are algorithmic based functions that are stored on a blockchain. These functions allow for the building of decentralized applications.
Clarity is the name of the software used to build decentralized apps with Stacks. This software is user friendly, easy to learn and inherently prevents exploitation and bugs due to the simplicity. This is in comparison to the Solidity software, that Ethereum uses which has a reputation for being notoriously hard to use, complicated and easy for mistakes. Solidity slows the learning curve and creates opportunity for exploitation while the Stacks Clarity software eases user adaptation.
“Stacks allows for Bitcoin’s blockchain to use smart contracts, hence allowing for the development of decentralized applications and a whole new use case for Bitcoin.”
Stacks is a layer 1 blockchain solution and works as a programable base layer that operates off of the existing Bitcoin blockchain. By having this capability, Stacks will be able to leverage the established user trust, network security and reputation that Bitcoin has maintained into faster adoption of the Stacks applications and protocols.
With the ability to add smart contracts to Bitcoin, Stacks offers the new development of an entire decentralized ecosystem. By having decentralized applications, the future of Bitcoin could mirror that of Ethereum by allowing the building of protocols that are open to everyone and driven by code instead of companies.
This could change the traditional use case of Bitcoin from a store of value, too that of an entire decentralized internet.
What is it in layman terms? The opportunity to build a decentralized internet on the existing Bitcoin network. This internet would be built through applications that are driven by code and algorithms instead of companies. It would be backed by people’s current trust and the network security that Bitcoin has maintained since its inception.
It increases the value of Bitcoin by expanding its usefulness.
How does it work?
First, Stacks uses a protocol called proof-of-transfer (PoX). This is a protocol that works in parallel with another blockchain, in this case Bitcoin.
The Stacks blockchain works by anchoring itself onto the Bitcoin blockchain and making each Stacks block tied to the hash of a Bitcoin block. The Bitcoin hash is what the Stacks block uses as a fingerprint and allows for all transaction history to be public. In order to change anything in the Stacks block of transactions you would have to change the Bitcoin block.
In other words, Stacks uses the Bitcoin blockchains for storage and record keeping when creating new Stacks blocks. The system is a layer 1 on the Bitcoin blockchain and when Bitcoin transactions are recorded, a new Stacks block is attached to this block via the hash.
This allows for Stacks to leverage the security of Bitcoin and guarantee that all Stacks nodes are public.
Through the PoX process, the miners (block producers) are chosen by transferring Bitcoin to a predetermined list of Bitcoin addresses. In order to become a miner for Stacks the miner must spend Bitcoin. A portion of this Bitcoin is transferred to Stacks holders that currently have their tokens locked in a stacking cycle on the network.
More on the complexities of the mining and proof of transfer PoX process can be found in this article: What Kind of Blockchain is Stacks .
The tokenomics for mining are quite interesting as miners must use Bitcoin to bid for the opportunity to mine Stacks. Because of this, all Stacks holders are inherently Bitcoin holders and therefore have a stake in Bitcoin and Stacks. This is a symbiotic relationship that helps mitigate downward selling pressure for both Bitcoin and Stacks.
As of now, the mining is very centralized and a concern for many potential investors. Only a few miners are mining the majority of Stacks as they have bid the most of Bitcoin and earned the opportunity to mine. This is a known flaw in the Stacks ecosystem and one that the founders are aware of. Future updates are supposed to address this and create mining pools that would decentralize this aspect of the project.
What is the price action?
The Stacks (STX) token had its first sale in 2017 for $0.12. In April 2021 it spiked to an all time high of $2.92 before dropping back under $1 in May. As speculation of Bitcoin’s price dominance swaying in favor of Ethereum, many Bitcoin holders are starting to notice Stacks as a solution. The price has been steadily gaining and has an average of over $1.30 since the start of July 2021.
Out of the total supply, 270 million (12% of tokens) are currently stacked. This supports the network, keeps it more secure and reduces price fluctuations. Stacking is based on cycles, the minimum cycle is two weeks and the maximum is twelve.
Since so many users have locked their tokens in stacking cycles, the price movement of Stacks has becomes less volatile and is likely giving it upward momentum.
Estimated future valuation? If Stacks successfully brings smart contracts to Bitcoin and creates an ecosystem similar to Ethereum, it could go well over $100 per token. Many speculate that because of the tokenomics, it is realistic that Stacks should be 5% - 15% of the market-cap of Bitcoin. In the short term, $3 is definitely possible. A price of $10 - $20 is realistic within a year as more apps are developed.
Stacks received a Chainlink grant to fund an accelerator program that is helping the rapid expansion of new platforms. The creation of many Stacks platforms will start by replicating the current success of Ethereum based platforms, making adoption faster.
In theory, this makes the timeline to be where the Ethereum ecosystem currently is somewhat shorter.
Daily transaction Volume? Between $100 and $200 million per day.
How many investors does this have? This is difficult to determine now. One would need to launch their own Bitcoin node and query all of the addresses to see if they hold any Stacks. This would need to be replicated daily as the wallets are constantly moving. Please Reference daily volume as a more sustainable metric to track.
Where to buy? OKcoin, Binance, KuCoin.
More about the Project:
Who has implemented the project?
Stacks has been SEC Approved: Listed in the whitepaper: Link
What is the total supply of STX? The current circulating supply is 1.18 billion and the total STX are approximately 1.35 billion.
How long has Stacks existed? Since 2013.
Important individuals involved in the project:
Muneeb Ali: Co-Founder
Anthony Pompliano: Co-Founder
Nival Ravikant: Former CEO of AngelList
Kevin Rose: Former co-founder of Revision3, Digg, Pownce and Milk
Stacking rewards (Not “Staking”?)
Stacks is incredibly unique because when holders allow for the network to use their Stacks tokens, the holders are paid in Bitcoin. This is because the miners use Bitcoin to mine Stacks and holders get a percentage of the return. The estimated APY is currently 13.5%.
Users can stake their tokens with wallets and on exchanges. You can find specific rewards per each stacking cycle here.
Directions on how to start stacking: Here
What is the future potential of the project? The future potential is an entire decentralized ecosystem built from Bitcoin that would mirror where Ethereum is now. The Clarity software gives a speed boost for new developers who want to make applications on Stacks. Combine this with the mentorship of the Accelerator program and you have a recipe for success.
This token could easily surpass $100 in the future.
What is the investment timeline? Early adoption is in place now but long term 2 - 5 years.
In closing, our view is that Stacks is highly undervalued. Imagine an entire DeFi ecosystem built on top of the existing power of Bitcoin.
With this insight, the decision to add Stacks to your investment portfolio should be an easy one.