Frequently asked questions

Stacks is a Bitcoin Layer for smart contracts; it enables smart contracts and decentralized applications to use Bitcoin as an asset and settle transactions on the Bitcoin blockchain.

No, the Stacks ecosystem is very decentralized with many independent entities working in it.

Stacks is built on Bitcoin because Bitcoin is the most secure, reliable, and decentralized blockchain. Stacks is a Bitcoin layer that enables smart contracts to use Bitcoin as an “asset" and settle transactions on the Bitcoin blockchain. Bitcoin layers extend Bitcoin’s functionality without changing Bitcoin itself or compromising its security or decentralization.

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:

1. Bitcoin finality, where 100% of the Bitcoin hashpower decides block ordering and transaction finality.
2. Stacks consensus runs on Bitcoin L1, and Stacks L2 cannot operate or survive without Bitcoin L1.
3. 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.
4. 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).
5. 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.

Bitcoin was intentionally designed with a limited script to reduce the blockchain’s attack surface and increase its security and durability. Bitcoin layers, such as Stacks, build programmability on top of Bitcoin. Stacks is a layer linked to Bitcoin by its consensus mechanism that spans the two chains, called Proof of Transfer. This enables Stacks to leverage Bitcoin’s security and enables Stacks apps to use Bitcoin’s state, despite being a separate blockchain. With the Nakamoto release and launch of sBTC, 1-1 Bitcoin backed asset, Stacks will enable decentralized movement of BTC in and out of Bitcoin layers. 

There are several Bitcoin-based DeFi and smart contract platforms, but in general Bitcoin layers are underexplored as compared to other crypto industry advances. Liquid, RSK, Lightning, and Stacks all enable various connections to Bitcoin. With the Nakamoto release, Stacks uniquely offers a) global state for expressive smart contracts, b) contribution to Bitcoin’s security budget via mining, c) decentralized movement of Bitcoin in and out of Bitcoin layers. The chain that Stacks is most comparable to is Bitcoin, as it has a similar Nakamoto style consensus and open membership.

Stacks, as we defined earlier, is a Bitcoin layer. Rollups are a different type of scaling solution, but they are not layers. In recent months, comparisons have been made between Stacks and sovereign rollups, in particular, with key differences highlighted in a GitHub entry. Most notably, rollups require tokens to be moved in and out of L1 (in this case, the Bitcoin L1). This is why the development and launch of sBTC will be crucial for new technologies like rollups that require BTC to be moved in and out of the Bitcoin L1.

Additionally, sovereign rollups, in particular, publish the full rollup data on to L1. Stacks, on the other hand, publishes hashes of data to every Bitcoin block.

Stacks (STX) tokens are the native tokens on the Stacks layer. STX tokens enable smart contracts and apps for Bitcoin and allow holders to earn BTC by 'Stacking' (see more below). Stacks are used as fuel for smart contract execution, transaction processing, and digital asset registrations on the Stacks layer. STX was the first cryptocurrency to receive SEC qualification for a sale in the United States. The Stacks cryptocurrency has a predefined future supply that reaches approx. by year 1,818M STX 2050.

The Stacks token (STX) is primarily meant to be used for two things (details in Stacks paper):

1. Incentives for Stacks L2 miners
2. Incentives for peg-out signers

The only way to remove the token is to build Stacks as a federated network like Liquid. In a federation, a pre-selected group of companies controls mining and block production, and a pre-selected group of companies needs to be trusted for peg-out transactions. Stacks developers wanted to design an open and permissionless system. The only way to have a decentralized mining process is through incentives. This is how Bitcoin works as well, where newly minted BTC are used as incentives to mine new blocks, and anyone in the world can decide to become a miner. Anyone with BTC can mine the Stacks L2 chain; it is open and permissionless.

Github: Why does Stacks need a token?

Stacking, a critical part of the Stacks network, is the process of STX holders locking STX temporarily to support the network’s security and consensus. This helps Stacks reach consensus, stay secure, and process transactions. As a reward, Stackers earn the Bitcoin that miners transfer as part of the Proof of Transfer consensus mechanism.

You can find reports from numerous 3rd parties and outlets via search. Recommended are Messari reports, Xangle, and others linked below. Typically these are shared in Discord, Twitter, and newsletter channels in real-time. You can also find quarterly recaps created by the Stacks Foundation at stacks.co/updates and you can review 3rd-party audits of the Stacks blockchain here.

Messari:

• State of Stacks Q1 2023 by Messari
• State of Stacks Q4 2022 by Messari
• All reports by Messari

Xangle

• Prime Asset Grade
• Stacks 2.1 Outlook

Other: 

• Stacks Thesis/Report from Northrock Digital
• Stacks Is the #1 Web3 Project on Bitcoin For Second Year in a Row & Top 30 Developer Community by Electric Capital

On Bitcoin Layers/Ecosystem:

• Ordinals a $5b market, Galaxy Research
• Bitcoin: Beyond the Base Layer by The Block

Proof-of-Transfer is a mining mechanism that uses the proof-of-work cryptocurrency of an established blockchain to secure a new blockchain. To participate in the consensus algorithm of a public blockchain, one must commit computational or financial resources. Mining mechanisms specify how resources are committed. For example, on a Proof-of-Work (PoW) blockchain, participants known as miners do some “work” that requires significant computing power and, in turn, are rewarded with that blockchain’s newly minted cryptocurrency. On a PoX blockchain, rather than committing computational resources, miners commit financial resources by transferring the PoW cryptocurrency of the more established blockchain to some other participant in the network. In turn, these miners are rewarded the new blockchain’s cryptocurrency.

Bitcoin is the largest, most valuable, and most durable decentralized asset. The Stacks layer unlocks $500B in BTC capital using the Bitcoin L1 as settlement for decentralized applications. Recent traction with Ordinals (nearly 1M inscriptions) has demonstrated that projects will migrate to Bitcoin and be more valuable on Bitcoin. For example, DeGods (#1 Solana NFT project) moved to Bitcoin, and Yuga Labs. Projects such as Uniswap (with more liquidity than ETH Uniswap) are possible on Bitcoin with sBTC and the Nakamoto release.

The Stacks ecosystem is a collection of independent entities, developers, and community members working to build a user-owned internet on Bitcoin. By design, no one entity is in control of the other, but collectively these entities participate in a governance process to develop, vote on, and implement strategies. This entity formation approach is one of the most understated innovations in the blockchain space. No Stacks entity in the space holds >10% of the circulating STX supply. Even the early investors/entities generally hold less than 5%. These stats are self-reported and from on-chain data and naturally update over time.

Today there are 30+ companies in the ecosystem, including a non-profit Stacks Foundation, a developer tooling company called Hiro, Trust Machines, Xverse, Mechanism, ALEX, Arkadiko, Gamma etc. (the list goes on!) — it is a truly decentralized ecosystem.

The Stacks project started in 2017 when Muneeb Ali finished his PhD (his thesis laid out the foundations for the Stacks layer for Bitcoin), released the original whitepaper, and raised $50M. Before this, the early team built protocols and apps on Bitcoin. 

Clarity is a programming language for writing smart contracts on the Stacks 2.0 blockchain. It is an open-source project that gives developers a safe way to build complex smart contracts. Clarity was developed with contributors from Algorand and more. 

sBTC is the non-custodial, programmable 1:1 Bitcoin-backed asset that enables decentralized movement of BTC in/out of Bitcoin layers. Learn more through:

• sBTC Whitepaper
• sBTC Roadmap
• Overview deck
• One page overview

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Stacks Improvement Proposals (SIPs) describe the design, implementation, and governance of the Stacks 2.0 blockchain. The SIP process (SIP-000) describes how to make a SIP and get it ratified. Anyone in the Stacks community may submit a SIP.