Stacks (STX) Project Review

Richard Knight -

What is Stacks (STX)?

Stacks (STX) is a cryptocurrency and a blockchain network that is designed to bring smart contracts and decentralized applications (dApps) to the Bitcoin (BTC) network. The Stacks network is built on top of the Bitcoin blockchain and uses its security and stability to power its operations.

The Stacks network allows developers to build dApps and smart contracts using the familiar programming language of JavaScript, which can be executed on the Stacks Virtual Machine (VM). This enables developers to leverage the security and stability of the Bitcoin blockchain, while also benefiting from the flexibility and functionality of smart contracts and dApps.

The Stacks cryptocurrency (STX) is used to pay transaction fees on the Stacks network and to incentivize miners to process transactions and validate blocks. STX can also be used to participate in the governance of the Stacks network, allowing STX holders to vote on proposals for protocol upgrades and changes.

Overall, Stacks aims to provide a more secure and decentralized alternative to other smart contract platforms, while also leveraging the network effects and existing user base of the Bitcoin network.

Primary Use Case:

As a smart contract platform, Stacks help introduce many new features not previously possible on the Bitcoin network and enables access to Web3.

The primary purpose of the Stacks network is to expand the Bitcoin functionality without using the help of scalability solutions (i.e., layer-2 and side-chains), which have been the go-to solutions for competing networks (like ETH).

Stacks being a standalone blockchain, therefore, competes directly with other leading smart contract platforms, the most direct competition being Ethereum (ETH) and other smart contract-based blockchains.

Like its smart contact rivals, Stacks supports the development and running of decentralized apps designed for various use cases such as decentralized finance (DeFi), web3 gaming, decentralized naming services (DNS), and NFTs.

Below are some of the use cases that have already been implemented or currently under active development:

  • Bitcoin NFTs
  • Bitcoin DeFi
  • Blockchain Naming System (BNS)

Bitcoin NFTs

With the Stacks blockchain, NFTs created on the platform are linked to the Bitcoin blockchain, which is designed not to run decentralized apps. With the help of Stacks, NFTs will be able to be derived from Bitcoin.

Bitcoin DeFi

Similar to how NFTs are not natively supported on Bitcoin, neither are DeFi apps. Stacks enables the introduction of DeFi to Bitcoin, leveraging its security and settlement assurances.

Leading Bitcoin DeFi apps on the Stacks platform include Arkadiko, Alex, and LNSwap.

Blockchain Naming System (BNS)

The Blockchain Naming System (BNS) is an alternative system to assigning domain names to the conventional domain naming system (DNS). Unlike DNS, which relies on centralized registries to assign and allocate the domains, BNS is controlled and managed within a decentralized ecosystem, ensuring an open and uncensorable platform.

The biggest advantage BNS has over its counterpart is that its domain names are single purchase names meaning that they are only paid for once at the time of claiming. Once the domain has been claimed, there are no annual renewal fees, as with the DNS.

Challenges to Adoption

Stacks blockchain is bringing much-needed features to Bitcoin such as decentralized applications, NFTs, and a vibrant DeFi ecosystem allowing BTC to participate in Web3.

Up until now, Bitcoin for many has been seen as simply a speculative investment or store of value. However, now with Stacks, it can now compete with other, newer blockchains that offer smart contracts. While the world is well acquainted with Bitcoin as it's the most well-known and largest cryptocurrency (by market cap) in the world, the biggest challenge to adoption is the development of the ecosystem and community for worldwide adoption for these smart contracts.

While Stacks is positioned well by leveraging the world's most well-known cryptocurrency, it will be up to the team, developers, and community to bring large-scale adoption to the platform.

Technology:

Stacks uses the Bitcoin blockchain as its base layer. As a Proof of Work (PoW)-based blockchain, Bitcoin uses the combined efforts of thousands of miners and nodes to protect the network against attacks by making it computationally and economically unfeasible to subvert the network.

On top of this, Stacks introduces its own consensus model, known as proof-of-transfer (PoX), which is a novel mining mechanism that sees users transfer the base currency (BTC) to mine STX — effectively bootstrapping the security of the Stacks blockchain using BTC.

PoX - Proof of Transfer

Popular consensus mechanisms in modern blockchains include proof of work, in which nodes dedicate computing resources, and proof of stake, in which nodes dedicate financial resources to secure the network.

Proof of burn is another, less-frequently used consensus mechanism where miners compete by ‘burning’ (destroying) proof of work cryptocurrency as a proxy for computing resources.

Proof of transfer (PoX) is an extension of the proof of burn mechanism. PoX uses the proof of work cryptocurrency of an established blockchain to secure a new blockchain. However, unlike proof of burn, rather than burning the cryptocurrency, miners transfer the committed cryptocurrency to some other participants in the network

The PoX algorithm is in essence a generalization of Proof-of-Burn. In PoX the Proof-of-Work cryptocurrency of an already established blockchain is not burned, but instead, it is used to secure the new blockchain. Rather than burning the existing cryptocurrency, it is transferred by miners to other participants in the network.

The miners receive some of the new cryptocurrency and the other network participants receive the established cryptocurrency in the transfer. This allows network participants who are adding value to the new cryptocurrency network to earn a reward in a base cryptocurrency by actively participating in the consensus algorithm.

This new consensus mechanism will encourage the use of an already extremely secure blockchain such as Bitcoin to secure new chains without introducing new Proof-of-Work chains and cryptocurrencies.

This also introduces a new way of allowing network participants to receive payouts in an existing, stable cryptocurrency while participating in the new blockchain network. This helps to solve the bootstrapping problem typically faced by new blockchains by giving early participants a solid incentive to join.

Ecosystem Development

The Stacks ecosystem is a decentralized group of independent entities working on the research, development, growth, and education of the Stacks Network. It is comprised of an international team across many countries working on three core elements, community, partners and integrators, and tools & utilities.

Community

Stacks have adopted an international community to help build out its development.

via Stacks

Partners & Integrators

Stacks has partnered with many well-known exchanges and blockchain facilitators to assist with the integration of its blockchain with many of the leading providers within the cryptocurrency space.

via Stacks

Tools & Utilities

via Stacks

Executive Team

Stacks began back in 2013 in the Princeton Computer Sciences Department. A year later co-founders Ryan Shea and Muneeb Ali went through Y Combinator and recruited a group of other computer scientists from Princeton for the initial R&D efforts.

In 2017 Muneeb’s Ph.D. thesis laid out the framework for a user-owned internet that would be built on blockchains.

Fast forward to 2023 and Stacks is now being developed by a globally distributed team that includes leading researchers from MIT, Princeton, and Stanford. The project is owned by Hiro Systems PBC (formerly Blockstack PBC) and is overseen by the Stacks Open Internet Foundation.

Investors

Stacks was initially funded by multiple well-known venture capital funds, including Y Combinator, Digital Currency Group, and Winklevoss Capital. The project was developed by Blockstack PBC, which is headquartered in New York.

Blockstack PBC now operates under the name Hiro Systems PBC and joins a wide range of companies developing and building out the Stacks platform (including the Stacks Open Internet Foundation).

Also, it is worth noting that 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.

Token Economics

Circulating supply: 1.36B STX | Total Supply: 1.35B STX |  Max supply: 1.81B STX

According to the recently revamped economic policy launched with Stacks 2.0, the supply of the newly unlocked STX in circulation will be reduced by around 10% between now and 2020 compared to the original schedule.

In total, around 1.82 billion STX are expected to be in circulation by 2050, compared to around 739.7 million in circulation as of January 2021.

As per the Stacks 2.0 whitepaper, a total of 1,000 STX per block will be released in the first four years, decreasing to 500 STX/block in the subsequent 4 years, 250 STX/block in the next four years, and then 125 STX/block after that in perpetuity.

In total, 6.6% of the initial genesis supply (1.32 billion STX) was allocated to the founder and a further 7.9% to the Stacks team. These are subject to a three-year unlock schedule, with tokens next scheduled to unlock in November 2021.

Coin Performance

As of the time of writing (February 26th, 2022), the price of STX is at $0.85, with a market capitalization of $1.162B (USD).

Price History After ATH

STX had an all-time high of $3.61 a year ago (Nov 16, 2021) and has since fallen in value and currently trading for less than one dollar making it an excellent opportunity to buy into this project at beginning of its price appreciation.

Last 30 Days

Over the last month, we have seen a decent recovery in the price from a low of $0.26 to now trading at $0.85, a 226% increase in just the last month. This price recovery is expected to continue.

Current Price & History

Profit / Loss on Investment:

STX is currently trading at $0.77 (February 26th, 2023). A $1,000 investment would equate to 1,298 STX.

The current value of $1,000 invested into this project would now be:

Where to Buy:

STX is available from many of the large exchanges, including:

If you own a Ledger Hardware wallet, you will need to install the Stacks app on your Ledger device to manage STK with the Stack Wallet.

Final Grade:

B+ (80%)

The project has excellent fundamentals but has yet to be fully implemented.

This project exhibits strong tech development, a strong leadership team and ecosystem growth in line with all milestones. However, the project has yet to prove commercial viability or gain widespread market adoption.

Project development has been consistent in moving toward the proposed governance structure of the network, though full implementation has not yet occurred. The coin retains a moderate level of vulnerability to adverse market conditions. While there still are factors present and mitigating factors inherent in future growth, at present the path toward full-scale adoption is considered to be medium risk.

Conclusion

Stacks is a unique and innovative project that promises to enhance the utility of the Bitcoin network and unlock the massive value of Bitcoin by making it more useful in the DeFi ecosystem through the inclusion of smart contracts, dApps and allowing it to participate in Web3. When combined with the already formidable store of value promise for Bitcoin this is expected to increase the value of Bitcoin even further (and as a consequence the value of Stacks as well).

The platform is also unique in creating a way for users to earn Bitcoin without mining or participating in shady schemes. By locking STX tokens, users are able to directly earn BTC. This is the first time it’s become possible to earn BTC passively by locking tokens from another blockchain.

What will be interesting to see (especially for the investor) is how rapidly the blockchain community adopts Stacks, and whether adding smart contracts to Bitcoin actually causes people to move away from other networks that were designed for dApps, such as Ethereum.

With its strong executive team, developers, and financial backing as well as leveraging the world's most popular cryptocurrency (BTC), Stacks is well-positioned to perform well in the upcoming months and years to come.