Introduction
The Nakamoto release of Stacks, expected to come out in 2023, will be a major upgrade that will help Stacks become a powerful Bitcoin layer, allowing Bitcoin to be used more productively than ever before. This update will include a trustless two-way Bitcoin peg to move BTC in and out of the layer and write to Bitcoin, as well as transactions secured by Bitcoin finality for fast transactions between Bitcoin blocks. This will make Bitcoin a fully programmable asset in a trustless manner, and unlock hundreds of billions of dollars of passive Bitcoin capital into decentralized applications. The Stacks layer, with its Bitcoin-secured transactions, will make Bitcoin the backbone of a more secure web3, and will revolutionize the way people interact with and use Bitcoin.
Highlights of Nakamoto Release
Secured by Bitcoin, Stacks transactions can be finalized using Bitcoin’s hash power. As soon as 100 Bitcoin blocks confirm these transactions, they become secured and irreversible on the Stacks layer. This means that an attacker would have to reorg Bitcoin in order to reverse these transactions, making them extremely secure. Furthermore, the Stacks layer will automatically follow all Bitcoin forks, giving users even more protection. As a result, users can trust that any transaction made on the Stacks layer will be permanently settled on Bitcoin with Bitcoin finality. This gives users peace of mind that their transactions are safe and secure.
The trustless Bitcoin peg from Stacks introduces a pioneering, non-custodial, Bitcoin-affiliated asset, sBTC, that permits smart contracts to run faster and more cost-effectively without sacrificing security. This brings about the potential of contracts on the Stacks layer to dependably inscribe to the Bitcoin blockchain through peg-out transactions. Bitcoin users can now similarly possess and pass on Stacks layer properties like STX, stablecoins, and NFTs by means of Bitcoin transactions if they elect, by utilization of atomic BTC swaps and Magic and Catamaran swaps. These trustless swaps provide a secure course to exchange between BTC on Bitcoin L1 and commodities on the Stacks layer and are already in operation. This allows for a trustless and competent way for digital asset holders to collaborate with the Bitcoin blockchain, constructing a bridge between two of the most important blockchain networks.
Clarity language is designed to make smart contract development more reliable and secure. By providing mathematical certainty as to what a contract can and cannot do beforehand, developers can ensure that their contracts are safe and can be trusted. This is especially important for the trustless peg contract, as it will require a high level of trust and security. As of December 2022, there has already been an impressive 5,000+ Clarity contracts deployed on the Stacks layer, showing just how popular and useful this software is becoming. This trend is likely to continue, as the security and certainty that Clarity offers is a major benefit for developers of smart contracts.
The knowledge of Bitcoin state is essential for successful execution of a trustless Bitcoin peg. With this knowledge, one is able to trustlessly read Bitcoin transactions, state changes, and execute smart contracts triggered by Bitcoin transactions. This helps to keep the trustless peg state consistent with the Bitcoin locked on Bitcoin L1. Furthermore, this knowledge also enables the trustless peg to be able to read the correct Bitcoin data and determine when a transaction has been successfully completed so that the peg can issue the correct amount of a cryptocurrency. In addition, it also allows for the peg to verify the balances of users' addresses and includes the ability to check for double spending. All of these features make the knowledge of Bitcoin state an invaluable part of a trustless peg and are essential for its successful functioning.
The Stacks framework furnishes scalability and speed for exchanges, enabling robust performance and scalability for a large variety of users. To accomplish this, a couple of strategies are implemented, like speedier Stacks layer squares between Bitcoin blocks, and scalability layers such as Subnets 3.1 that allow for various tradeoffs between performance and decentralization. Subnets additionally empower the utilization of programming languages and execution conditions. All in all, Stacks offers an effective, scalable platform for an assortment of users and exchanges.
The Nakamoto release of Stacks is a major step towards growing the Bitcoin economy by unlocking the potential of latent Bitcoin capital.
The launch of Stacks, with its trustless Bitcoin peg and ability to read and write Bitcoin state, is a major step forward in growing the Bitcoin economy. By allowing users to easily move BTC in and out of the Bitcoin layer, hundreds of billions of dollars of latent Bitcoin capital can be deployed into applications such as decentralized Bitcoin-backed lending and Bitcoin-backed stablecoins. This increased application activity will ultimately drive demand for Bitcoin, making it more valuable and increasing its utility to the world. Additionally, the higher transaction fees for Bitcoin miners that result from this activity will aid Bitcoin's security in the long-run, as the Bitcoin coinbase incentives must eventually be replaced by transaction fees in the years to come.
The Stacks layer’s consensus protocol, Proof of Transfer (PoX), was inspired by Bitcoin's Proof of Work (PoW) and is notably energy-efficient, having the capability to recycle PoW energy. This design of the trustless peg is integrated with, and made possible by, PoX consensus. The native token of the Stacks layer, STX, is key to PoX consensus operation: without STX miners would be unable to maintain the Stacks layer global ledger outside the Bitcoin L1, and threshold signers have no incentive to participate in the peg mechanism. Traditional Bitcoin pegs lack a native token, and therefore fallback to using custodians or trusting known federation members, meaning these approaches are not truly permissionless and open. STX is fundamental to achieving an open and trustless peg, allowing the Stacks layer to be accessible to all.
Is Stacks competing with Bitcoin?
The Stacks Bitcoin layer relies on Bitcoin in a fundamental way, but its own token (STX) may be seen as pulling away value from Bitcoin. However, this is not the case as the Stacks layer in fact helps to grow the Bitcoin ecosystem. The STX token is not merely a governance token or something to be speculated on, but it is necessary for the PoX consensus mechanism and key functional purposes. These include incentivizing mining Stacks blocks and providing a liveness incentive and basis for an economically secured trustless Bitcoin peg. In other words, STX plays a vital role in the sustainability of the Stacks Bitcoin layer and helps to improve the efficiency of Bitcoin itself.
The token is thus essential to the goal of developing and expanding decentralized applications that make Bitcoin more accessible and useful. By increasing demand for Bitcoin block space, these applications can make Bitcoin more valuable, and result in higher transaction fees for Bitcoin miners. This is due to both the additional Bitcoin transactions caused by the applications, as well as the Stacks mining and settlement activities, which also result in higher fee BTC transactions. As Bitcoin halvings occur every four years, the coinbase rewards or 'new block subsidies' become reduced, meaning Bitcoin miners will rely more heavily on transaction fees for income. By enabling decentralized applications with Bitcoin, this gives users fewer reasons to use other competing chains and monetary assets, further strengthening the value of Bitcoin.
The STX token is essential to the goal of developing and expanding decentralized applications that make Bitcoin more accessible and useful. It incentivizes mining Stacks blocks and provides an economically secured trustless Bitcoin peg. This increases demand for Bitcoin block space and transaction fees, making Bitcoin more valuable, and resulting in less incentive to use other competing chains and monetary assets.
Power of sBTC
sBTC is a trustless, permissionless Bitcoin asset on the Stacks layer, pegged 1:1 to the original BTC, that does not require any central management or predetermined entities. Instead, the asset is maintained in a decentralized fashion by a group of changing entities that can join or leave the peg maintenance as they wish. This group, known as the Stackers of the PoX consensus protocol, must lock up STX tokens in order to be rewarded in BTC proportionally to the STX they stack. This trustless peg is implemented in the Stacks consensus protocol and uses PoX and STX tokens for its incentive engineering. This new technology has been an unsolved challenge in the crypto world, allowing BTC owners to utilize the asset in smart contracts without any centralized risk. It can be used for Bitcoin-based services such as decentralized lending and stablecoins, with the same trustless, secure properties that Bitcoin holders demand. Anyone can become (or unbecome) a Stacker, just like miners for PoW. The STX stacking acts as collateral and the BTC rewards incentivize Stackers to sign genuine pegs and not fake ones. The protocol ensures that it is financially feasible for miners to always mine on the main fork and Stackers to always maintain the peg.
The peg-out system of sBTC utilizes a threshold signature mechanism to guarantee the security and liveness of the system. This ensures that BTC cannot be stolen and the peg-out system can only be compromised if a majority of Stackers maliciously collude and act economically irrationally. The peg-out process is quite efficient, taking no more than 24 hours to complete a peg-out of arbitrary size, and users can even complete faster exchanges of BTC/sBTC through trustless atomic swaps. sBTC does not require users to pay a wrapping fee, unlike other pegged assets such as wBTC, making it a more affordable option. The STX token is essential to providing economic guarantees for the trustless Bitcoin peg in a permissionless setting. The peg also provides all the other properties and benefits of the Stacks Bitcoin layer, giving users the chance to leverage the advantages of both blockchains.
Summary
The recent release of Nakamoto has enabled the Stacks Bitcoin layer to unlock a new world of decentralized applications and smart contracts which use Bitcoin as their asset and settle transactions on the Bitcoin blockchain, allowing users to take advantage of the security and durability of Bitcoin while still being able to use it as money. This layer enables features such as Bitcoin-backed stablecoins, decentralized Bitcoin lending and a trustless Bitcoin peg system known as sBTC. The sBTC peg has been long sought after and is enabled by the unique properties of the Stacks layer, such as the PoX consensus and Bitcoin finality, as well as BTC rewards to incentivize positive contributions to the protocol. Additionally, the Stacks layer allows for fast blocks and subnets to enable smart contracts written in languages such as Solidity to be executed in the Ethereum Virtual Machine, further allowing for familiar integration and development by leveraging existing Solidity smart contracts. All of these features come together to make the Stacks Bitcoin layer a powerful tool for using Bitcoin more productively without compromising its security.
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