Editor | Chainchen@Web3CN.Pro

Table of contents

1. Summary

2. Project introduction

3. Project structure

4. Project application

5. Team Background

6. Financing Information

VII. Development Achievements

8. Economic Model

9. Advantages and risks

1. Summary

This research report takes an in-depth look at the Stacks project, an innovative blockchain technology that aims to link itself to the Bitcoin chain through its unique consensus mechanism, Proof of Transfer (POX), to achieve a high degree of decentralization and Scalability without adding additional environmental impact. By providing smart contract functions, Stacks enables Bitcoin to become a fully programmable asset, which in turn can provide a wider range of application scenarios for decentralized applications (dApps).

This report details the main components of Stacks, including how it leverages the state and security of Bitcoin, and the features and advantages of using the Clarity language to create smart contracts. Additionally, the report will discuss how the Proof of Transfer (POX) consensus mechanism works and how it leverages Bitcoin’s proof-of-work mechanism.

2. Project introduction

Stacks is a blockchain project that links itself to the Bitcoin blockchain. Its goal is to provide a platform that can share security with the Bitcoin chain and settle transactions on the Bitcoin chain. By extending the functionality of Bitcoin, Stacks makes Bitcoin a fully programmable asset, which will unlock hundreds of billions of dollars of passive Bitcoin capital and provide a wider range of application scenarios for decentralized applications.

The Stacks project is linked to Bitcoin through its unique consensus mechanism proofoftansfer (POX). PoX allows the Stacks chain to use the security of the Bitcoin chain, while also enabling Stacks token holders to earn Bitcoin rewards for the act of "Stacking". This mechanism realizes the addition of new functions on the security basis of Bitcoin, such as smart contracts and fast transactions, thus greatly enhancing the usability and scalability of Bitcoin.

The vision of Stacks is to build a fully decentralized network and application ecosystem based on Bitcoin. By providing new tools and technologies, such as smart contracts and fast transactions, the Stacks project hopes to promote the further development of Bitcoin and its ecosystem, and ultimately achieve a safer, fairer and more open Web3.

3. Project Architecture

The Stacks project links itself to the Bitcoin chain using its unique consensus mechanism, Proof of Transfer (PoX). This allows Stacks to use the state and security of the Bitcoin chain, providing a more secure and reliable platform for decentralized applications (dApps) and smart contracts. On this platform, all transactions are settled on the Bitcoin chain, thus borrowing the strong security of Bitcoin.

The smart contract layer of Stacks has the following innovative features:

**S (secured), Stacks transactions are finally confirmed by Bitcoin. **

After about 100 Bitcoin blocks, or about a day of confirmation, transactions that occur on the Stack layer will be secured by the full hash power of Bitcoin. This means that in order to reverse these transactions, the attacker needs enough computing power to reorganize the bitcoin chain. Stack transactions are settled on the Bitcoin blockchain and have Bitcoin finality. In addition to this, the Satck layer completely forks Bitcoin, which means that any fork (such as a soft fork or hard fork) on the Bitcoin chain will be reflected on the Stacks chain. This ensures that the Stacks chain can evolve with the Bitcoin chain without conflicting with its forks.

T (Trust-minimized) de-trusted bitcoin anchoring mechanism; writable bitcoin

Stacks introduces a new decentralized, non-custodial Bitcoin-pegged asset, sBTC. This allows smart contracts to run faster and cheaper using bitcoin-backed assets without compromising security. In addition, this also enables contracts at the Stacks layer to trustlessly write Bitcoin through anchor transactions.

A (Atomic) bitcoin atomic interaction and assets owned by bitcoin addresses

Atomic Swaps and Assets: Stacks already has atomic swaps for Bitcoin, enabling Bitcoin addresses to own and move assets defined at the Stacks layer. Magic swaps and two-body swaps are examples of live, trustless atomic swaps between Bitcoin L1 and assets at the Stacks layer. In addition, users can own Stacks layer assets, such as STX, stablecoins, and NFTs, on Bitcoin addresses if they wish, and transfer them using Bitcoin L1 transactions.

C (Clarity) Clarity language, more secure, decidable smart contracts

Stacks supports a safe, decidable smart contract language called Clarity. With Clarity, developers can know with mathematical certainty what a contract can and cannot do before the contract is executed. Decentralized anchor contracts will benefit from the security properties of the Clarity language. As of December 2022, 5,000+ Clarity contracts have been deployed on the Stacks layer. Clarity's design also avoids the problem of "gas cost estimation", which is a common problem with many other smart contract languages such as Solidity. In Clarity, the transaction execution fee can be accurately known before the transaction occurs, thus avoiding transaction failure due to insufficient fees. On Stacks, the creation and management of Bitcoin-anchored assets (such as sBTC) is realized through a special smart contract, the decentralized anchor contract. This kind of contract utilizes the security of the Clarity language to ensure the security and reliability of the creation and management process of anchor assets.

K (Knowledge) knowledge proof of the full state of Bitcoin; readable Bitcoin

Stacks have full knowledge of the Bitcoin state, it can trustlessly read Bitcoin transactions and state changes, and execute smart contracts triggered by Bitcoin transactions. Bitcoin's read functionality helps keep the decentralized peg state consistent with the BTC locked on Bitcoin L1, among other things. Stacks’ bitcoin read function ensures that the decentralized peg state (i.e. the state of sBTC) is consistent with the locked BTC on Bitcoin L1. This is because whenever a transaction occurs on the Bitcoin chain, Stacks can read those changes and update the state of sBTC accordingly. This way, users can ensure that their sBTC is always in sync with their locked BTC on the Bitcoin chain.

S (Scalable) scalability, fast transactions on the btc settlement layer

Stacks increases the processing speed of transactions by generating Stacks blocks faster between Bitcoin blocks. This means transactions on the Stacks network can be completed and confirmed much faster than Bitcoin. Additionally, subnets are a scalable layer of the Stacks network that allow for different trade-offs between performance and decentralization. This means that subnetworks can be optimized according to their specific needs and priorities, such as faster transaction speeds or greater levels of decentralization. The Stacks subnet can support other programming languages and execution environments, such as Ethereum's Solidity language and EVM (Ethereum Virtual Machine). This means that smart contracts developed on the Ethereum network can run on the Stacks network, and can use Bitcoin to anchor assets and settle on the Bitcoin chain. This greatly increases the compatibility and application range of Stacks.

Proof of Transfer (PoX) consensus mechanism

Proof of Transfer (PoX) is a core component of the Stacks project. This is a new type of consensus mechanism that utilizes Bitcoin's proof-of-work (PoW) to achieve a high degree of decentralization and scalability. In PoX, the nodes of the Stacks chain will participate in the creation of blocks by "burning" bitcoins. This means that nodes send bitcoins to an unreachable address, thereby proving that they have contributed to the security of the participating network. These nodes then have the potential to be selected to create new blocks, earning Stacks tokens as a reward.

The Stacks layer relies on STX and BTC for its novel consensus mechanism called Proof of Transfer (PoX), which utilizes both Stacks and Bitcoin layers. PoX is similar in spirit to Bitcoin's Proof-of-Work (PoW) consensus: just like Bitcoin PoW miners spend electricity and get rewarded in BTC, Stacks PoX miners spend (mined) BTC and get rewarded in STX. Like PoW, PoX uses Nakamoto-style single leader election: PoX miners bid by simply spending BTC, and they have a leader with bid weights of random probability. Leader election is performed on the Bitcoin chain, and new blocks are written on the Stacks layer. In this way, PoX reuses work already done by Bitcoin miners, and doesn't consume any significant additional power: only a functioning laptop/computer is required to do the bidding of Stacks nodes using BTC.

Another part of PoX is "Stacking", which allows holders of Stacks tokens to participate in the security of the network. If holders choose to "Stack" their tokens, they are regularly rewarded with bitcoins. This is a unique mechanism that allows participants in the Stacks chain to receive Bitcoin directly as a reward, further strengthening the Stacks network's connection to Bitcoin.

Stacks are a smart contract Bitcoin layer with a deep, continuous connection to the Bitcoin chain, unlike sidechains such as RSK and Liquid. The Stacks layer allows applications and smart contracts to use Bitcoin (BTC) as their asset or currency and settle their transactions on the Bitcoin main chain. The goal of the Stacks layer is to expand the Bitcoin economy by transforming BTC from a passive asset to a productive asset, and enabling various decentralized applications. Like sidechains like RSK and Liquid, the Stacks layer has its own global ledger and execution environment to support smart contracts and prevent overburdening the Bitcoin blockchain with additional transactions. However, the Stacks layer is unique in that it has most of the desirable properties of a Bitcoin smart contract. It also provides high-performance mechanisms such as fast blocks, decentralized pegs, and subnets.

4. Project application

Using Bitcoin to be a Fully Programmable Asset

Stacks provides Bitcoin with brand new functions and application scenarios. By leveraging Stacks, Bitcoin can be used as a fully programmable asset in decentralized applications and smart contracts. This innovative application allows Bitcoin to be widely used in various decentralized financial products and services, such as lending, insurance, prediction markets, etc.

Using the Stacks layer, developers can build any application they can build on other smart contract platforms such as Ethereum, Solana, Avalanche, etc., but use BTC as their asset/currency and settle on the Bitcoin blockchain their deal. They'll be able to do so on the Clarity VM or on the EVM or other virtual machines in Solidity or other languages using subnets. Users can also natively swap BTC for stablecoins and NFTs directly from the Bitcoin chain.

Unlock Passive Bitcoin Capital

Stacks, through its smart contracts and decentralized applications, is able to unlock passive Bitcoin capital so that it can generate greater value. For example, by using Stacks, bitcoin holders can put their bitcoins on a decentralized lending platform and earn interest income. In addition, Bitcoin holders can also use their Bitcoins for network security by participating in Stacks' "Stacking" mechanism, and receive Bitcoins as rewards.

Provide fast transactions of Bitcoin

In addition to the above features, Stacks also provides Bitcoin with the ability to conduct fast transactions. Due to Bitcoin's design characteristics, its transaction speed is slow, which may limit its application in some cases.

The Stacks Bitcoin layer provides additional functionality for higher performance, as well as greater versatility and security. Although the performance mechanism of the Stacks layer has been described above, the Stacks layer, like Bitcoin, is optimized for decentralization rather than low latency or high network throughput: in remote areas, users with ordinary laptops and home Internet connections should Ability to run full Stacks and Bitcoin nodes. However, the Stacks chain subnet layer can coordinate higher performance. Subnets also support smart contracts, and can make different trade-offs between decentralization and performance than the main Stacks chain or other subnets. Furthermore, a single subnet can support smart contracts in different programming languages and execution environments. Some subnets may support Clarity and Clarity VM, which have the advantages of security, while others may support Ethereum's Solidity language and EVM compatibility, or compatibility with the Ethereum Virtual Machine, which have the advantages of easy integration and development, And can take advantage of all Ethereum smart contracts and tools. Through Stacks, users can conduct faster bitcoin transactions, so that bitcoin can be widely used in scenarios such as daily transactions and micropayments.

5. Team background

Currently, Stacks is a project comprised of several independent entities and communities. In the early days, Stacks was mainly led by Blockstack PBC (now renamed Hiro s PBC, or Hiro for short). Hiro has 66 team members, the founder of which is Muneeb Ali. The main members of the project team have many years of research and development experience in the field of distributed systems, including 6 doctoral degree holders in the field of distributed systems, and 2 scientists who have won the US President's Career Award.

Muneeb Ali, co-founder of Stacks, CEO of Hiro, is a Ph.D. in computer science from Princeton University, focusing on the research of full-stack solutions for building distributed applications.

Jude Nelson, Stacks Fund Research Scientist, former Hiro Engineering Partner, received a Ph.D. in Computer Science from Princeton University, and was a core member of PlanetLab, which won the ACM Test of Time Award for enabling planetary-scale experiments and deployment.

Aaron Blankstein, engineer, joined the Blockstack engineering team in 2017 after earning his Ph.D.

Mike Freedman, Hiro Technical Advisor, Professor of Distributed Systems at Princeton University.

Albert Wenger, Director of Hiro, Managing Partner of Union Square Ventures (USV). Before joining USV, Albert was the president of del.icio.us until the company was sold to Yahoo. He was also an angel investor and had invested in Etsy and Tumblr.

6. Financing Information

The number of token fundraising sales is 609.2 million, and the total fundraising is about 75.6 million US dollars. The number of founder and team rewards is 253.1 million. By the end of 2019, 441 million STX tokens will be unlocked, of which 36% are held by employees, founders and Series A investors, and 52% are held by Reg D investors.

VII. Development Achievements

At present, the well-known projects of the Stacks network are:

wallet:

• Hiro Wallet is the most commonly used open source wallet on the Stacks chain, which helps users store, accept or send assets on the Stacks network, supports Ordinals, but has not yet integrated Lightning Network.
• Xverse supports non-custodial wallets where users store, accept or send assets on the Stacks blockchain, supports Ordinals, and adds biometric features to improve wallet security and convenience, but has not yet integrated Lightning Network.
• GoSats is a Bitcoin wallet focused on the Indian community developed by the Indian team. Its vision is to allow every shopper, consumer and saver to use BTC, and has launched the GosSats Visa card, loyalty program, etc.

DEFI：

• ALEX is a Dex built on the Stacks chain supported by the non-profit organization ALEX Lab Foundation. Users can conduct transactions, pledges, liquidity mining, cross-chain, and Launchpad including lottery and IDO on this platform.
• Stackswap claims to be the first fully functional Dex on the Bitcoin chain, allowing users to perform functions such as asset trading, liquidity mining, pledge, cross-chain, Launchpad and NFT, and has issued STSWToken.
• UWU is a lending protocol based on the UWU Cash stablecoin built on the Stacks chain. It is designed by nickole.btc of BitAcademy and is currently in the testing phase. You can obtain testing qualifications by joining the community and filling out the form.

Liquidity pledge:

• Planbetter is a liquidity staking protocol on the Stack chain. More than 88,000 Stackers users have pledged 280 million STX and received 25.42 BTC rewards in total.

NFT：

• The NFT trading market built by Gamma for Bitcoin NFT has integrated Stacks and Ordinals.
• Boom is the native NFT platform on the Stacks chain and has launched a new type of NFT: Boomboxes. It allows users to delegate to lock their STX and receive an NFT as an automatic claim certificate as part of the locked reward.
• TradePort is a multi-chain aggregated NFT trading market. It currently supports Stacks and Near chains, and plans to expand to Aptos and Sui.

8. Economic Model

Its initial supply is 1.32 billion. In addition, a certain inflation rate will be issued every year, and it is expected to reach 1.842 billion by 2050 (v1 is 2.052 billion).

STX is the fee required to register digital assets (such as user names, software licenses, podcasts, or other digital products) and publish and run smart contracts on Stack 2.0. It is similar to the gas fee in the Ethereum network. Operations in the network will consume STX. At the same time, STX can be used to pay transaction fees, and it is also an incentive for miners to run mining nodes and developers to develop DApps.

The main attribute of STX is to cooperate with Stack 2.0 for network operation, adjust and balance various mechanisms. The long-term value of STX basically depends on the growth of the Stacks network and the demand for Clarity smart contracts.

The acquisition of STX in Stack 2.0 is mainly to participate in the PoX consensus mechanism, submit BTC to obtain STX, or pledge STX to obtain BTC. In each reward cycle locked by STX, the bitcoin transferred by the miner will be received as part of the transfer certificate. Once the number of locked cycles has been completed, STX will be unlocked, and STX can be used freely or participate in staking again.

9. Advantages and risks

Advantage

• Bitcoin's smart contract capabilities: Stacks provides Bitcoin with the capabilities of smart contracts and dApps, which may attract a large number of users and developers. This could lead to the development of a new ecosystem of developers and users, increasing the use and value of Bitcoin.
• New applications and use cases: Stacks allow Bitcoin to be used as the underlying asset for smart contracts, which may open up a range of new applications and use cases, such as decentralized finance (DeFi) and non-fungible tokens ( NFTs).
• Contribution to the Bitcoin economy: By enabling Bitcoin to participate in smart contracts and dApps, Stacks may have a positive impact on the Bitcoin economy. This could increase the demand for Bitcoin and thus its value. At the same time, by bringing transaction fees to the Bitcoin network, Stacks may also help keep the Bitcoin network secure in the long run.

risk

• Technology development and acceptance: Although Stacks adds smart contract and dApps capabilities to Bitcoin, the development and acceptance of this technology still faces challenges. The Clarity language is safe, but not all developers are familiar with it. Additionally, while subnets offer higher performance and greater versatility, implementing and maintaining these subnets can present technical and governance challenges.
• Network effects and user adoption: Stacks needs to attract a large number of users and developers to realize its potential. This will take time and the challenge of overcoming the network effects that existing platforms (such as Ethereum) may already be attracting large numbers of users and developers.
• Regulatory risk: Some functions of Stacks, such as STX mining and Stacking, may be restricted by regulations in certain jurisdictions. Additionally, the global regulatory environment for cryptocurrencies and smart contracts is still in flux, which could have an impact on Stacks.

Overall, the prospects for Stacks look promising, despite some challenges. If these challenges can be successfully addressed, Stacks could have a profound impact on Bitcoin and the entire cryptocurrency ecosystem.

references

Stacks: A Bitcoin Layer for Smart Contracts