What is Stacks (STX)?

Stacks is a Layer 2 network created with the goal of scaling and bringing decentralized applications (dApps) to Bitcoin (BTC).

Stacks uses Bitcoin as its settlement layer and seeks to bring decentralized finance (DeFi) to the Bitcoin network by providing smart contract-compatible infrastructure. 

This allows developers to create an ecosystem of dApps and services on Stacks while inheriting Bitcoin’s robust security.

Stacks was created in 2017, but the majority of its features weren’t introduced until the Stacks 2.0 upgrade in 2021. 

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

Stacks’ native token, STX, is classified as an infrastructure token. These projects focus on enhancing the functionality, efficiency, or security of blockchains (in this case, Bitcoin). More specifically, STX is used as a medium of exchange in the Stacks network to pay for transaction fees.

STX tokens are also paid to miners in return for verifying transactions on the Stacks network.

Stacks users can secure their STX holdings by storing them in cold wallets, such as hardware wallets like Ledger or Trezor.

Kraken offers STX, as well as 250+ other types of crypto assets.

Stacks is a scaling solution designed to improve the Bitcoin layer by offering a faster and more cost-effective environment for smart contract execution while using Bitcoin’s security as its base layer. 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 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 Bitcoin network’s cost-intensive PoW method to secure Stacks.

  • BTC miners transfer BTC to stackers for a chance to receive STX (the more BTC they send, the higher their chance of winning STX).

  • The winning miner is paid in STX crypto tokens to commit a new block to the Stacks blockchain.

  • Stackers lock up their STX for a certain amount of time and must provide a Bitcoin address to receive their BTC rewards.

• Nakamoto Fork: The Nakamoto hard fork aims to accelerate Stacks’ block creation process. Currently tied to Bitcoin’s block time (every ~10 minutes on average), Stacks will transition to producing blocks every few seconds. The upgrade will also enhance Stacks’ security by making transaction reversal as difficult as reversing a Bitcoin transaction. Additionally, this mitigates potential manipulation by Bitcoin miners seeking to exploit the Stacking system for dual rewards.

Stacks seeks to bring DeFi to the Bitcoin network by building smart contract-compatible infrastructure on top of the Bitcoin layer 1 blockchain.

Stacking, a crucial element of Stacks' unique Proof of Transfer (PoX) consensus mechanism, strengthens the connection between the Stacks blockchain and Bitcoin. In this process, STX token holders lock up their tokens for a specified period, participating in the selection of new blocks and earning rewards in return.

While the Bitcoin network revolutionized the field of digital assets, it had a number of inherent limitations:

• Bitcoin sacrifices transaction speed to achieve maximum security and decentralization.

• Prior to BitVM, it was believed that Bitcoin’s infrastructure could not natively support smart contracts, severely limiting its functionality and potential use cases.

Stacks aimed to solve these problems by serving as a “Bitcoin layer for smart contracts.” While it’s a separate blockchain, all transactions made on the Stacks network are secured by the Bitcoin network’s aggregate hash power.

Someone may wish to purchase STX for the following reasons:

• Pay for transaction and gas fees: When you use apps, you’ll pay a small fee in STX to the network. This fee is the reward for miners to maintain and update the state of the network.

• Incentivize miners to maintain the network: Users stack STX on the network to support Stacks' consensus. 

• Participate in the ecosystem: STX can be used in dApps across the Stacks ecosystem, including in non-fungible token (NFT) marketplaces, DeFi applications, domain name registrars, and more.

STX is Stacks’ native digital asset and holders can use it in several ways within the Stacks ecosystem:

• Stake STX: Locking stacks allows users to provide security benefits to the network 

• As a governance token: Holding STX allows token holders to vote on proposals and influence the direction of the network.

• Pay for transaction fees:  STX can be used to pay for transaction fees when interacting with dApps and other services built on the network.

Stacks testnet launched on October 30, 2018 by founding members Muneeb Ali and Ryan Shea.

Originally named Blockstack, the project rebranded in 2020 to Stacks.

Stacks is supported by the Stacks Foundation and Stacks Labs, entities dedicated to supporting the research, development and education around Stacks. 

Key Founders

Muneeb Ali

• Title: Co-founder of Stacks and CEO of Hiro PBC
• Professional Background/Qualifications: Muneeb is a co-founder of Blockstack (which later was renamed to Stacks) and the CEO of Hiro PBC (formerly Blockstack PBC), the company that develops and maintains Stacks. 
• Key Contributions: Ali’s inspiration for building Stacks stemmed from his experience developing Onename, an app that he co-founded in 2014 which enabled names and profile pages to be programmed on Bitcoin.

Ryan Shea 

• Before co-founding Stacks, Ryan has a deep history of early-stage investing in the blockchain space, with some of his investments being Opensea, Lightning, and Cointracker. 

Stacks is also supported by the Stacks Foundation, which helps builders who are working to “activate” the Stacks and Bitcoin economy by enabling scaling solutions and integrating more versatile technology.

To fund the launch and development of the platform, the Stacks team successfully completed several funding rounds: 

• November 16, 2014 – Seed Round – raised $1.3 million @ $0.019/STX from Digital Currency Group and others

• January 5, 2017 – Series A – raised $4 million @ $0.019/STX from Union Square Ventures and others

• September 30, 2017 – Blockstack Employee LLC Round 1 – raised $4,356 @ $0.00012/STX

• November 1, 2017 – SAFT – raised $21.2 million @ $0.12/STX 

• November 1, 2017 – ICO – raised $26.3 million @ $0.12/STX 

• October 31, 2018 – Blockstack Employee LLC Round 2 – raised $500,000 @ $0.0132/STX

• July 11, 2019 – Reg A+ Token Sale 1 – raised $10.9 million @ $0.30/STX from HashKey Capital and others

• July 11, 2019 – Reg A+ Token Sale 2 – raised $4.6 million @ $0.12/STX from HashKey Capital and others

• July 11, 2019 – Reg S Token Sale 1 – raised $7.6 million @ $0.30/STX 

• July 11, 2019 – Reg S Token Sale 2 – raised unknown amount

Stacks’ native cryptocurrency, STX token, was released in 2018 with an initial supply of 1.32 billion tokens, distributed as follows: 

• 30.5% – Treasury

• 5.2% – Seed round

• 13.5% – Founders

• 5.6% – Team

• 3.2% – Development

• 13.3% – ICO

• 15.9% – Series A Round

• 4.6% – Public Round

• 8.2% – Investors

STX follows a token emission system similar to Bitcoin, where miners receive an amount of STX per block found until the maximum supply of 1.81 billion tokens is distributed (around 2050). The distribution will follow the schedule:

• 1000 STX/block for first 4 years.

• 500 STX/block for following 4 years.

• 250 STX/block for subsequent 4 years.

• 125 STX/block in perpetuity thereafter.

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