The Rise of the BTC Ecosystem and the Evolution of Stacks

In the current cryptocurrency bear market cycle, we have witnessed the rise of the Bitcoin ecosystem. Although some staunch supporters of BTC as a store of value remain cautious about this, exploration of the BTC ecosystem has been ongoing. Beyond speculative factors, this exploration primarily stems from two needs: first, to unlock the earning potential of BTC assets, and second, to address the network security sustainability issues arising from the future reduction in mining rewards. Without the development of the BTC ecosystem, these challenges would be more difficult to tackle.

In the exploration of the BTC Layer 2 network, Stacks, as one of the earliest projects to enter this field, attempts to provide opportunities for applications like DeFi to develop within the BTC ecosystem through its Layer 2 solution. The development of Stacks can be roughly divided into two stages: the sidechain era and the Layer 2 network era.

Sidechain Era

The concept of Bitcoin sidechains was initially proposed by a blockchain company, which also developed the related network. Around the same time, other projects like the Rootstock network were also launched. In 2018, Stacks launched its mainnet and introduced Clarity contract development for oracles the following year. It is noteworthy that Stacks also applied for compliant token issuance from regulators, which was a rare practice at the time, granting the project more development time.

The initial technical mechanism of Stacks is similar to that of BTC sidechains, but it has its unique features. It integrates with the Bitcoin network through an anchoring transaction mechanism, broadcasting data such as the block header information of the Stacks chain to the BTC network.

Stacks adopts the PoX (Proof of Transfer) mechanism, which is a staking system similar to PoS. Participants are divided into two categories: miners and signature validators. Miners need to conduct transactions on the Bitcoin chain to qualify for writing new blocks on the Stacks chain. Miners participate in each round of leader election by sending transactions on the BTC chain, and then the winner is selected through a verifiable random function (VRF).

The interaction between Stacks and the Bitcoin mainnet uses a "chain anchoring" mechanism to bind information on the Stacks chain to the BTC mainnet. Each Stacks block contains hash values pointing to the previous Stacks block and the Bitcoin block, attempting to ensure that all state changes in the Stacks network can be verified on the BTC mainnet.

In addition to miners, STX (Stacks token) holders can also participate as signers in the PoX consensus to validate the validity of Stacks blocks. By staking STX, holders can earn a portion of the BTC and STX bid by miners as rewards.

Era of Layer 2 Networks

Stacks 2.0 marks the project's entry into the Bitcoin Layer 2 network era, mainly including the Nakamoto upgrade and the launch of sBTC. The Nakamoto upgrade brings Stacks into the Layer 2 network era from a technical foundation, aiming to address issues such as security and performance; while the launch of sBTC prepares for the practical applications of its Layer 2 ecosystem.

The Nakamoto upgrade is a key step for Stacks towards evolving into a true layer two network. It aims to integrate Stacks more closely with the Bitcoin network, becoming a more deeply integrated part of the Bitcoin ecosystem. The core goal of this upgrade is to achieve shared security with the Bitcoin mainnet, which is one of the most critical features of a layer two network.

Through these developments, Stacks is striving to become an important layer of the Bitcoin network, contributing to the expansion and functionality enhancement of the BTC ecosystem.