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What is Stacks?

Stacks is a Layer 2 network that was created with the aim of scaling up and bringing decentralised applications (dApps) to the Bitcoin (BTC) network.

It uses Bitcoin as its settlement layer and aims to introduce decentralised finance (DeFi) to the Bitcoin network by providing infrastructure compatible with smart contracts.

This enables developers to create a range of dApps and services on Stacks that benefit from Bitcoin’s robust security.

Although Stacks was created in 2017, the majority of its features were not introduced until the Stacks 2.0 upgrade in 2021.

Thanks to the Clarity smart contract programming language, Stacks 2.0 brought smart contract functionality to Bitcoin, giving developers a safe way to build complex applications.

How does Stacks work?

Designed to improve the Bitcoin layer, Stacks offers a faster and more cost-effective environment for smart contract execution, using Bitcoin’s security as its base layer. The Stacks ecosystem includes:

Proof of Transfer Consensus: Stacks uses a novel consensus mechanism called Proof of Transfer (PoX), which leverages Bitcoin’s Proof of Work (PoW) consensus mechanism to secure the Stacks blockchain.

Block rewards: PoX provides incentives for Bitcoin miners as well as ‘stackers’ on the Stacks network. This mechanism links the Bitcoin and Stacks blockchains, reusing the costly PoW method of the Bitcoin network to secure Stacks.

• BTC miners transfer BTC to stackers in exchange for the opportunity to receive STX (the more BTC they send, the greater their chance of winning STX).
• The winning miner is paid STX crypto tokens for adding a new block to the Stacks blockchain.
• Stackers must provide a Bitcoin address to receive their BTC rewards and lock up their STX for a certain amount of time.

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 secure. 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.

How to Buy the STX Token?

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