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What Is Stacks (STX)?
Stacks is a cryptocurrency project that seeks to unlock the full potential of the Bitcoin blockchain by bringing smart contracts and decentralized applications to Bitcoin. Originally known as Blockstack but rebranded to Stacks in 2020, the project was designed as a layer-1 solution that uses Bitcoin as its base layer. The platform is powered by the Stacks (STX) token, which fuels the execution of smart contracts, the processing of transactions, and the registration of new digital assets.
The philosophy behind Stacks comes from a feeling held by some that the internet is not the decentralized means of exchange it could be and that big players like Google and Facebook have too much power over ordinary users. It is this power that led Google to adopt the unofficial motto, “don’t be evil”, which it later dropped in 2018. The idea behind Stacks is to design online architecture in such a way that companies “can’t be evil” – a motto the developers adopted and even pasted onto a billboard across the road from Google’s California headquarters.
Because Stacks is a layer-1 ecosystem anchored to Bitcoin, the smart contracts it brings to Bitcoin do not change any of Bitcoin’s features – including the very things that make it so popular, its security and stability.
Stacks dApps are open and modular so that developers can build on top of each other’s apps and generate features that wouldn’t be possible otherwise. Additionally, because Stacks uses Bitcoin as its base layer, everything that happens in the Stacks ecosystem is backed by the most secure blockchain out there.
Who Are The Founders Of Stacks?
Stacks was initially funded by a range of prominent venture capital funds, including Y Combinator, Digital Currency Group and Winklevoss Capital. It was developed by Blockstack PBC, which has its headquarters in New York.
Blockstack PBC now operates under the name Hiro Systems PBC and joins a wide range of companies building on Stacks’ platform.
Blockstack PBC was founded by Muneeb Ali and Ryan Shea. After graduating from Princeton University with an MA and PhD in computer science, Muneeb Ali co-founded Stacks in 2013, and still works with the platform today as the CEO of Hiro Systems PBC.
The second co-founder of the platform, Ryan Shea, also served co-CEO between 2013 and 2018, before disembarking from the project to pursue other ventures — including co-founding a new tech startup that is currently operating in stealth. Prior to his role at Stacks, Shea worked as a software engineer.
Blockstack founders Muneeb Ali (left) and Ryan Shea (right).
How Exactly Does Stacks Interlink With Bitcoin?
Various projects nowadays claim that they are building on top of Bitcoin and they all seem to be doing it differently. The key concept behind Stacks and its relation to Bitcoin is its unique consensus mechanism called Proof-of-Transfer (PoX). Via this consensus mechanism, Stacks is tethered to Bitcoin by settling all Stacks transactions on Bitcoin.
Proof-of-Transfer is an adaptation of Proof-of-Burn (PoB), which was originally proposed as a consensus mechanism for the Stacks blockchain. With Proof-of-Burn, miners that participate in the consensus algorithm burn a cryptocurrency of an already established blockchain (by sending it to a burn address). It is their way of proving that they have incurred costs for proposing new blocks. With Proof-of-Transfer, this mechanism is slightly amended: The cryptocurrency used is not burned (i.e., destroyed) but distributed to a set of participants that help secure the new chain.
So, in Stacks’ case, miners that want to mine Stacks’ native coin (STX) and participate in consensus need to send a Bitcoin transaction (containing Bitcoin units) to predefined Bitcoin addresses. Only by transferring Bitcoin to a predetermined randomized list of Bitcoin addresses can blocks be produced within the Stacks blockchain. Whichever miners get to produce a block is ultimately decided by sortition. However, the probability of being chosen increases with the amount of bitcoin a miner transfers to the list of Bitcoin addresses.
In a sense, Stacks’ consensus mechanism is mimicking Bitcoin’s Proof-of-Work mechanism. But instead of using energy to produce new blocks, Stacks miners use bitcoin — that they need to buy at the market rate — to maintain the Stacks blockchain. Since this approach incurs costs for Stacks miners, they are compensated accordingly. Compensation is also similar to Bitcoin as it is provided in the form of block rewards and transactions fees from the Stacks network. The compensation is issued by the protocol in STX, Stacks’ native blockchain coin. The block rewards are as follows:
- 1,000 STX per block are released in the first 4 years of mining after the mainnet launch
- 500 STX per block are released during the following 4 years
- 250 STX per block are released during the following 4 years
- 125 STX per block are released from then on indefinitely
Since Stacks block rewards also halve every four years for three consecutive periods, these Stacks “halvings” are synchronized with Bitcoin halvings.
Understanding Blockstack (Stacks)
With Blockstack, users do not have to upload data to an external site, like Facebook, or to an application, like WhatsApp. However, they can still share their data and media feed with friends and other users. This is achieved using decentralized applications (also called dApps) that are based on blockchain technology. DApps are run locally on the user’s browser, and users continue to own their data (text, images, videos, files, etc.).
Using the decentralized security granted by blockchain technology, a Blockstack user gets digital keys to create their identity on the Blockstack network. User data can be stored locally or connected to their storage hosting providers, which allows the user to retain full control.
Data processing is run on a client’s local machine, which is connected to the network (but not via a platform’s centralized servers). A networked storage system, called “Gaia,’ enables what Blockstack describes as “user-controlled private data lockers.”3
Users connect their “data lockers” to Blockstack’s client software, and applications write to the lockers directly. The locker acts as storage for all the information attached to a user’s account (also called a user’s “universal ID”).4
Sharing of content is achieved through a secure and encrypted medium. The Blockstack network supports tokens, like bitcoin, and other cryptocurrencies and is available for peer-to-peer (P2P) transfer or charging for downloads, subscriptions, and more.
How Does Stacks Work?
The way Stacks works centers on the interaction of two parties: miners and stackers (not stakers!). Their interaction is regulated by a unique consensus mechanism called Proof of Transfer, or PoX, for short.
It might come as a bit of a surprise but in the Stacks blockchain, miners don’t actually mine anything. Instead, they exchange BTC that has already been mined from the Bitcoin blockchain and commit it for a chance to earn STX coins. The way this kind of mining works is governed by its own rules, so check out the Stacks Mining section further down in this article.
The thing to know here is that each block mined on the Stacks blockchain stores user identity and transactional metadata, and uses this to interact with all of the applications in the Stacks ecosystem. Because it is connected to Bitcoin, any changes made to Stacks IDs or wallet balances can be verified using the Bitcoin blockchain. This also applies to Stacks smart contracts, which are written in a special coding language developed and tested for Stacks by Algorand.
What Makes Stacks Unique?
Stacks looks to take what makes Bitcoin so powerful, and extends it with additional functionality, without needing to fork or change the original Bitcoin blockchain.
It does this by connecting directly with the Bitcoin blockchain through its proof-of-transfer (PoX) consensus mechanism, which has miners pay in BTC to mint new Stacks (STX) tokens. Moreover, STX token holders can also stack (not stake) their tokens to earn Bitcoin as a reward.
Stacks introduces a new smart contract programming language known as Clarity, which is designed to be both secure and easy to build with thanks to its unambiguous syntax. This smart contract-centric programming language is also used by the Algorand (ALGO) blockchain.
On top of this, Stacks was the first cryptocurrency to receive SEC qualification for a sale in the United States, allowing it to launch a $28 million Reg A+ sale cash offering for its STX tokens in July 2019.
How Many Stacks (STX) Coins Are There In Circulation?
According to the recently revamped economic policy launched with Stacks 2.0, the supply of the newly unlocked STX in circulation will be reduced by around 10% between now and 2020 compared to the original schedule.
In total, around 1.82 billion STX are expected to be in circulation by 2050, compared to around 739.7 million in circulation as of January 2021.
As per the Stacks 2.0 whitepaper draft (v0.1), a total of 1,000 STX per block will be released in the first four years, decreasing to 500 STX/block in the subsequent 4 years, 250 STX/block in the next four years, and then 125 STX/block after that in perpetuity.
In total, 6.6% of the initial genesis supply (1.32 billion STX) was allocated to the founder and a further 7.9% to the Stacks team. These are subject to a three year unlock schedule, with tokens next scheduled to unlock in November 2021.
How Is The Stacks Network Secured?
Stacks leverages Bitcoin’s Proof of Work consensus for security, which uses the combined efforts of thousands of miners and nodes to protect the network against attack – primarily by making it unfeasible to undermine the network, both in terms of computing power and in terms of financial incentive.
To bulwark this further, Stacks introduces its own consensus model, the aforementioned Proof of Transfer, which sees miners committing BTC to mint STX – to all intents and purposes linking the security of the Stacks platform to BTC because all transactions can be verified via Bitcoin.
In the latest iteration of Stacks, the blockchain’s transactions are capable of scaling independently of Bitcoin, on which it relies. The Bitcoin blockchain is used only to provide a final verification and to ensure security. The end result of this is that thousands of transactions on the Stacks blockchain produce just a single hash on Bitcoin’s blockchain.
How To Use Stacks
The primary use case for the STX token is to fuel the connection between Stacks and Bitcoin via the Proof of Transfer consensus. In addition to powering the consensus mechanism, STX also supports the creation of smart contracts, dApps, and the creation of indelible and transferable virtual assets. STX can be used to publish new contracts to the blockchain and to pay the transaction fees that underpin the execution of these contracts. STX tokens used in this way are burned in the process.
Other functions of the STX token include voting on upgrades to the Stacks protocol and participating in the selection of app reviewers.
Finally, users can stack their STX in a form of staking – yes the two terms are easily mixed up but the way it works is relatively simple. Users need to hold a certain minimum amount of STX, which they can then ‘lock up’ on the network in return for rewards. The rewards are paid out in BTC and are made available at the end of each reward cycle, which is approximately two weeks. The rewards are sourced from the BTC that miners commit in order to earn the right to mine new blocks of STX.
How To Choose A Stacks Wallet
Stacks has its own dedicated wallet for storing STX but the tokens are compatible with a broad range of third-party wallets. Those wishing to invest in or mine STX are therefore advised to do their own due diligence when selecting a wallet.
Hardware wallets or cold wallets like Ledger or Trezor provide the most secure option for storing cryptocurrencies with offline storage and backup. However, they can require more technical knowledge and are a more expensive option. As such, they may be better suited to storing larger amounts of STX for more experienced users.
Software wallets provide another option and are free and easy to use. They are available to download as smartphone or desktop apps and can be custodial or non-custodial. With custodial wallets, the private keys are managed and backed up on your behalf by the service provider. Non-custodial wallets make use of secure elements on your device to store the private keys. While convenient, they are seen as less secure than hardware wallets and may be better suited to smaller amounts of STX or more novice users.
Online wallets or web wallets are also free and easy to use and accessible from multiple devices using a web browser. They are, however, considered hot wallets and can be less secure than hardware or software alternatives. As you are likely trusting the platform to manage your STX, you should select a reputable service with a track record in security and custody. As such, they are most suited for holding smaller amounts of cryptocurrencies or for those making more frequent trades.
Kriptomat offers a secure storage solution, allowing you to both store and trade your STX tokens without hassle. Storing your STX with Kriptomat provides you with enterprise-grade security and user-friendly functionality.
Buying and selling STX, or trading it for any other cryptocurrency, is done in mere moments when you choose our secure platform as your storage solution.
Because Stacks relies on BTC to fuel the minting of STX, it needs miners. In this case, the miners don’t mine STX directly, instead they commit already mined BTC to generate new STX tokens. Miners need to commit BTC just to have the chance to mine STX and this chance is partly random and partly based on how much BTC an individual miner has committed.
How lucrative this operation is depends on two critical factors. One is whether the miner is awarded the right to mine a block of STX in the first place and, as has been stated, this right will likely go to those miners able to commit greater quantities of BTC. The second factor is the relative price of STX vs BTC. If the Bitcoin price goes up while STX stagnates, this could lead to mining becoming unprofitable until such a time when the relative price sees some recovery. Another possible outcome is that a miner who commits BTC to the mining process could see the value of STX drop in the time it takes to mine it (approximately sixteen hours) – cutting into their profits.
The issuance of STX tokens follows a halving schedule that mirrors that of BTC and means that a miner’s reward per block will drop from its current 1,000 STX down to 500 STX, then 250 STX, and finally, 125 STX. Once it reaches 125 STX, this will remain the reward for mining indefinitely.
Whether you’ve just given it a cursory glance or looked at it in detail, there is no aspect of Stacks that will leave you feeling that the developers have lacked ambition. Their initial vision for the project is to revolutionize the use case for the biggest and most powerful blockchain in the world, Bitcoin itself.
The way they have gone about achieving this vision has also been incredibly bold and ambitious. Little wonder then that theirs was the first SEC-backed ICO in US history. How their ambition will pan out – whether they will manage to reach for the stars or whether theirs is the fate of Icarus – is still something that remains to be seen.
As cryptocurrencies see another bullish swing in the markets, there is much skepticism about whether anyone will still be willing to exchange BTC in return for a chance to mine STX. Either way, the fate of Stacks is something we will all be watching closely going forward.
Pros And Cons
Expert’s Opinion On The Stacks Price Prediction
Several factors apart from sentiment are instrumental in the price action of crypto. For now, Stacks is being recommended by some of the leading crypto price forecasters based on sentiment and the latest news stories. To invest in crypto without knowing the expert’s cryptocurrency projections on it would be a foolish decision whether it is a short-term investment or a long-term investment.
As per their STX price prediction, it is projected that the STX price to surpass $3.50 levels by the end of 2022 but holds a more robust stance and bullish trend by 2026 with an expectation of STX hitting $8.30. Wallet Investors
Based on STX price prediction of Priceprediction.net is promoting a much higher return, with Stacks STX breaching $15.30 levels by the end of 2026. That is, within the next five years. While their short-term price prediction for the end of 2022 stands at $3.74 above 90% above the current price. Price Prediction
As per Coinskid’s STX price prediction, it has mentioned more reserved levels of $7.80 by the end of 2025 in the next four years. While the $3.50 level Stacks price prediction by the end of 2022 means a small rise expectation of less than 75%. CoinsKid
Tech News Leader’s STX price prediction has indicated a strong possibility of trading between $12 to $16 by the end of 2026. It can be measured as a return capability of 650%. For the next year, the end of 2022, the STX price prediction of all major crypto prediction experts is at the same level between $3 – $3.75. Tech News Leader
Stacks STX price forecast of ICOcreed mentions the least possibility of crossing $3.51 by 2022, while it has predicted the valuation of STX to rise above $15 by the next five years, i.e., 2026. ICO Creed
As per the STX Price predictions, investing in Stacks (STX) will be profitable as it has a bullish trend. The price of a single STX can be approximately around $3.09 in the next one year. Hence, investors can earn hefty money by investing at the current price levels. Digital Coin Price
STX will surely turn out to be a good portfolio addition and profitable investment for investors’ future. As per our Stacks price predictions, it is expected that the Stacks price may be 59.335% more after a year. Gov Capital