Stacks is a Bitcoin Layer that shares some components with L1s and L2s. L1 chains are sovereign, meaning that (a) they have their own security budget, and (b) they can survive without the need for any other L1 chain. L2 chains typically do not have their own security budget and share the security of the underlying L1 chain, and they cannot live without the underlying L1 chain.
Users and developers organically call Stacks a Bitcoin L2, since it is a simpler concept to understand. There are certain properties of Stacks layer that also help the concept of Stacks as a Bitcoin L2:
- Bitcoin finality, where 100% of the Bitcoin hashpower decides block ordering and transaction finality.
- Stacks consensus runs on Bitcoin L1, and Stacks L2 cannot operate or survive without Bitcoin L1.
- With the upcoming decentralized Bitcoin peg, called sBTC (see sBTC paper), most of the economy on Stacks layer will likely use BTC as the unit of economy. It is expected that most users will simply use Bitcoin in wallets and apps and then peg out their BTC to Bitcoin L1.
- All data and transactions on Stacks are automatically hashed and permanently stored on Bitcoin L1 on every Bitcoin block. Anyone can verify that some data on Stacks is valid by checking the corresponding hash on Bitcoin L1. This compact storage of hashes on L1 is somewhat similar to rollups (although there are other differences).
- Contracts on Stacks layer can read Bitcoin L1 transactions and respond to them. Assets on Stacks layer can be moved simply through Bitcoin L1 transactions.