Stacks Blockchain: Unlocking Bitcoin's Potential in 2024

Bitcoin is the most well-known blockchain and biggest cryptocurrency. However, its smart contract use cases have been limited due to its syntax limitation, scalability, and speed. Stacks blockchain aims to change this by providing a blockchain that utilizes the high security of Bitcoin while allowing the creation of smart contracts. 

After reading this article blockchain enthusiasts will have a clearer understanding of this new blockchain and its possible use cases for businesses.

What is Stacks blockchain?

Stacks is a layer 1 blockchain that uses a new and innovative consensus mechanism called proof-of-transfer(PoX). However, Stacks founder refers to Stacks as a layer 1.5 as it also relies on another blockchain (Bitcoin) like a Layer 2 network.

Stacks use a smart contract language called Clarity. Clarity has an easy-to-read syntax and allows developers and users to read the source code in near plain English. Most importantly Stacks enables the creation of smart contracts that are secured by Bitcoin. 

History 

The stack project was initially formed by Muneeb Ali and Ryan Shea. The name of the project initially was Blockstack. In 2018 Stacks 1.0 was launched. Stacks was able to do the first initial coin offering (ICO) that was qualified by SEC in 2019. In early 2021 Stacks 2.0 main net went live. Blockstack has changed its name to Hiro and focuses on creating developer tools.

How it works

Stacks uses Bitcoin as its anchored blockchain to create a new and secure blockchain that has its own rules. The transaction history gathered in Stacks blocks is recorded on the Bitcoin base-layer blockchain, which means that the Stacks blockchain leverages Bitcoin as a secure medium for storing and broadcasting. 

Stacks blockchain produces blocks at the same rate as Bitcoin, which is almost every 10 minutes. However, Stacks uses a feature called microblocks to lower latency transactions. Microblocks enable the current block leader to stream transactions and incorporate state changes into the current epoch (see Figure 1).

Figure1. Microblocks

There are 2 parties in the Stacks blockchain, miners and Stacks native token(STX) holders.

Miners

Miners have to send BTC to a predetermined address to be able to produce a new block. The winner among miners is selected randomly; however the probability of being selected increases based on how much BTC the miner has transferred (see Figure 2).

Figure 2. STX mining flow

Each block can be mined by only one miner and the miner has the option to make any existing block the parent of their own block. This gives Stacks blockchain the following features:

• Miners do not need specialized hardware or STX to mine.
• Miners are encouraged monetarily to build on a canonical chain fork that the rest of the network follows, but they are not obligated to do so. Being able to recover the chain in the event of catastrophic network splits or periods of dishonest mining activity makes this a desirable attribute.
• All miner’s activities on all forks are public.

The mining rewards are halved every 4 years and they are synchronized with the Bitcoin halving ( see Figure 3).

Figure 3. Stacks mining rewards 

Stackers

Eligible STX holders can temporarily lock up their STX coins and receive BTCs that were pledged by miners ( see Figure X).  Stacking happens in cycles and each cycle has 3 phases (see Figure 4).

Figure 4. Stacking phases

Due to its unique features, many applications are being created on the Stacks blockchain. 

Stacks is enabling the creation of many projects and applications. The most notable examples are Stacks-based NFTs and DeFis. 

NFT

NFTs were one of the biggest trends in 2021 and even though the initial hype has dialed down we believe they will increase their importance due to their unique use cases.  NFTs that are secured by Bitcoin can be created on the Stacks blockchain. To understand where you can buy Stacks NFTs, read  Top 3 Stacks NFT Marketplaces. 

DeFi

DeFi total value locked (TVL) reached  $94 billion by the end of 2021. DeFi has enabled its users to access financial services without a middle man. DeFi platforms that are built on the Stacks blockchain can utilize the security of Bitcoin. Some of the DeFi platforms on the stacks blockchains are :

• Alex
• Arkadiko

Possible future b2b use cases of Stacks blockchain

Blockchains can provide substantial benefits to various sectors because of their great security, high transparency, and instant traceability. They can be used for : 

• Cross border transactions
• Trade finance
• Budgeting
• Digital voting
• Investment management

In order to understand more about blockchain use cases, read Top 17 Blockchain Applications & Use Cases.