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What is Stacks?

Stacks, a layer-2 Bitcoin solution, allows smart contracts and DApps on the blockchain. Its design emphasizes Bitcoin’s security and resilience while adding Ethereum-like features. As a layer, Stacks lets developers build atop Bitcoin without modifying its essential structure, enabling an extended environment that leverages Bitcoin’s decentralisation and trustlessness.

Stacks’ independent token, STX, incentivizes block production and network upkeep, unlike Bitcoin’s primary chain. This token paradigm provides incentivized validation while keeping Bitcoin’s simplicity. Stacks, unlike Lightning, maintains a permanent state, which is necessary for data-consistent applications like smart contracts. Lightning is transaction-focused and transitory.

Stacks also makes Bitcoin a productive asset in Decentralized Finance (DeFi) without third-party custodians or asset wrapping on non-Bitcoin chains. Stacks helps Bitcoin evolve from a store of value to a platform for decentralized financial products by anchoring on its security and employing a token-based incentive system. This approach allows Bitcoin’s network to innovate without the complexity and security risks of programmability straight to the core protocol.

Stacks is creating a scalable ecosystem that uses Bitcoin as a decentralized monetary base to secure financial applications and software. This layered approach keeps Bitcoin simple while Stacks adds enhanced programmability, making Bitcoin the foundation for more decentralized applications and financial services.

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.

What is the STX Token?

The STX token incentivises and funds network participants to protect and develop the layer-2 platform within the Stacks ecosystem. Unlike Bitcoin, which only functions as a store of wealth and a decentralised currency, STX supports the unique features and economic incentives of Stacks. Proof of Transfer (PoX) enables STX holders to ‘stack’ their tokens in order to receive Bitcoin incentives and secure the network. By committing STX, participants maintain the integrity of the Stacks blockchain and indirectly support the layer-2 ecosystem of Bitcoin, combining the security paradigm of Bitcoin with additional economic incentives for developers and consumers.

STX’s unique approach to improving the Stacks network involves aligning the incentives of the two networks through the PoX mechanism. STX holders participate in a consensus process that uses Bitcoin’s Proof-of-Work security as a secondary chain. This increases the decentralised nature of the Stacks architecture and enables the network to reward STX holders with Bitcoin, thereby strengthening the economic ties between Bitcoin and Stacks. This arrangement promotes network security without the need for Proof-of-Work mining, which wastes resources and complicates matters.

STX fuels transactions and smart contracts on Stacks, helping the ecosystem to develop. STX pays transaction fees when users engage with decentralised applications (dApps) or initiate smart contract operations on the network, thereby keeping it running and safe. Like Ethereum does for gas, the ecosystem discourages spam and encourages efficient use by charging for transaction processing. STX is therefore essential to the network’s functionality and usability, enabling Stacks to grow the number of use cases for Bitcoin without compromising security or decentralisation.

By offering staking and investment, STX expands the developer and user community. Its economic design encourages developers to build apps since STX rewards offset platform deployment expenses and efforts. STX allows investors and ecosystem members to engage in Bitcoin’s layer-2 expansion, establishing economic value related to the network’s performance. STX supports infrastructure and economic growth, making the Stacks ecosystem a flexible, Bitcoin-powered environment for decentralized innovation.

How to buy STX tokens?

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STX Tokenomics

In order to promote ecosystem growth and development, the Stacks STX token was introduced in 2021 with a genesis block that produced an initial supply of 1.32 billion tokens. A 2017 token sale was used to distribute 32% of this initial allocation, with the remaining tokens going to the Stacks Foundation (15%), Hiro PBC (25%), and the Stacks ecosystem fund (28%). In order to maintain long-term ecosystem sustainability, this allocation model was designed to guarantee balanced funding for development, community projects, and operating expenses.

Every block sees the minting of new STX tokens, which are mostly used as prizes for miners and stackers. The inflation rate is originally set at 10% and is expected to drop by 0.5% annually until it reaches a stable rate of 2.5%. The goal of encouraging early adopters while maintaining a limited token supply for the future is in line with this steady inflation decrease. This approach will result in a final STX supply of roughly 2.04 billion over a 20-year timeframe, offering a stable tokenomics framework to encourage network engagement and sustain a token ecosystem.