Stacks: What It Is and How It Works

stacks

Although it uses Bitcoin as a base layer, Stacks isn’t a sidechain or a layer-2 solution tied to this blockchain. It’s an independent platform that aims to secure new uses for Bitcoin.

Stacks is a platform that uses STX as the native currency. Stacks and Bitcoin are deeply connected, so is it a wise idea to make an STX to BTC exchange? Our detailed guide explains how Stacks works. Make sure to read it first to discover if this is a smart move!

Introducing Stacks

Stacks is a blockchain platform with the goal of using smart contracts to add new use cases for Bitcoin. These include:

  • NFTs on Bitcoin. The platform uses Clarity smart contracts to make non-fungible tokens secured by Bitcoin. NFTs are becoming more popular, and this could be an important option for BTC holders.
  • Decentralized finance. Bitcoin isn’t famous for dApps or DeFi services. The unique structure offered by Stacks enables settling all transactions on Bitcoin, which unlocks a huge untapped market for BTC.
  • Blockchain Naming System. The network system is unique, and there are no name collisions. You pick the name, which the system binds to off-chain states while ensuring decentralization. BNS names remain fully owned by the person who created them forever.

Stacks Functioning Principles

Stacks uses a proof-of-transfer or PoX consensus mechanism. The method uses PoW crypto on an existing blockchain to initiate new blockchain security. Miners move the mentioned crypto to other network participants, which is a modification of the proof-of-burn mechanism that includes burning the currency. Stacks’ consensus mechanism secures the crypto network and rewards participants with BTC since that’s the platform’s anchor chain.

The Stacks mining process requires having suitable computer hardware. You don’t need an expensive rig since a common PC will do the job.

As Stacks relies on Bitcoin, you’ll need BTC to enter the mining process. The first step includes sending the desired coin amount to two addresses on the Bitcoin chain. These addresses are accumulators, and a random algorithm chooses them. The trick is that the person sending the most money to the destination address will mine the next Stacks block. Some estimations are you need at least 5,000 satoshis to hope for success.

Stacking is a chance for users to receive BTC for supporting the network’s consensus and security. Here’s how it works:

  1. You acquire STX and decide to hold it in your possession.
  2. Lock the currency temporarily, with the minimum amount depending on the method chosen.
  3. The locking deal secures a prize once that period expires. You earn BTC at the rates specified in the deal.

Stacking is simple, and you can choose between different methods. Using a Hiro Wallet is an individual way of stacking, but you need to meet the demanding minimum. More affordable ways include joining a pool or using an exchange.

STX Market Performance

Stacks ranks among the top 100 cryptocurrencies in the market. Its current value is around $0.23, with the market cap being approximately $300 million.

STX entered the market in 2020 with an opening price of $0.21. The first few months have been turbulent, and the token’s value remained under the starting cost. A huge rise followed in 2021 when STX’s worth exceeded $2. It suffered a few small crashes, but the positive crypto market environment then led to an all-time high. The token’s value was $3.61 in November 2021.

Terrible times for the crypto market affected STX. It entered 2022 with a value of $2.17. Several huge crashes followed, and the coin kept losing its value. Today, it’s close than ever to its starting price in 2020.

Is STX a Secure Investment?

Most experts believe that STX can be profitable, especially in the long run. Not many experts believe that 2023 will be a successful crypto year, so Stacks should maintain its value during that time. But some platforms mention that STX value can grow six to seven times by 2025. 

If you decide to trade STX, always pick a reliable platform. Reputable exchanges like godex.io don’t limit transaction volumes and guarantee anonymity and fixed exchange rates. That makes them the best choice to trade Stacks and other cryptocurrencies.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.