| Daily issue Meet the Crypto That's Making Bitcoin More Functional Perhaps Layer-1s are the new meme coins. New ones are popping up everywhere, most of them look and feel the same, and many likely won't make the cut when the going gets tough. That being said, there are certainly new Layer-1s springing up that innovate in unique ways and stand out from the crowd. Some of these cryptos have specific use cases that make them visibly more original. Some have interesting takes on consensus that make them more scalable and secure, at least in theory. But there's one relatively new Layer-1 -- its mainnet launched in January of 2021 -- that "cheats" in a way. Instead of starting from scratch, it leverages the most popular blockchain that exists in order to bootstrap its own ecosystem with unmatched decentralization and security. Crypto Overview The crypto we're talking about is Stacks (STX/USD). Stacks stands out from the rest of the crypto crowd for a few reasons. For one, it is closely intertwined with Bitcoin. While most cryptos are building Ethereum-compatible or entirely unique networks, Stacks takes a novel hybrid approach. It's sort of like a Layer-1.5 in a way, rather than what we commonly think of as a Layer-1 or Layer-2. It depends on Bitcoin, but it's also its own programming layer that applications get built on top of. 
Let's explain that a bit more. Stacks has smart contracts, like Ethereum or another Layer-1. However, instead of handling network security on its own, it essentially outsources consensus to the Bitcoin network -- the largest and most secure network out there. All transactions are settled on Bitcoin, and blocks created on Stacks are synchronized with Bitcoin's blocks. The same can be said of Bitcoin and Stacks' halvings. And because of this close integration of Stacks with Bitcoin's network, it's easy to use Bitcoin as a currency within apps. Through a consensus mechanism known as Proof-of-Transaction (PoX). This is similar to Proof-of-Stake and Proof-of-Burn, but isn't quite the same. Stacks miners mine by sending BTC to a random, predefined address as a bid to produce the next block on the Stacks blockchain -- this is where the Transaction aspect of Proof-of-Transaction comes into play. Sending larger amounts of BTC gives a node a better chance of being selected and being rewarded with STX. Where does the BTC from miners go? This BTC goes to individuals that have "stacked" their STX, or locked it up for a certain amount of time. In this way, individuals get rewarded with BTC and run no risk of losing any of their stacked STX, since it remains in their wallets. Stacks aims to triumph over the Blockchain Trilemma, the concept that no blockchain can be more than two of the following -- decentralized, scalable, secure. The Bitcoin network takes care of the security, and Stacks focuses its effort on being decentralized and scalable. Stacks isn't without its issues, but its close ties with Bitcoin certainly could give it a unique advantage. The market cap for Stacks is currently about $1.5 billion, which is down from it's all-time high market cap of about $3 billion in early December 2021. The Opportunities - Everybody knows about Bitcoin. Basically everyone that has an interest in cryptocurrencies likely has some Bitcoin, or at the very least has held Bitcoin in the past. Since Stacks is built on top of Bitcoin, the barrier to entry to STX is extremely low, which is great for adoption.
- Being built on top of Bitcoin, Stacks benefits greatly from the most massive, secure blockchain network out there. So, despite being relatively new in its current iteration -- its mainnet launched in early 2021 -- Stacks
- Stacks opens the floodgates to entirely new markets to exist on Bitcoin, where loads of value is currently just sitting in wallets and not being used. The NFT market, for example, is worth over $40 billion of dollars and is expected to grow rapidly as mainstream adoption of cryptos occurs. And that's without the NFTs on Bitcoin, which Stacks makes possible.
- The Stacks blockchain was created by two computer scientists who first got involved with Bitcoin in 2013. Though one of the co-founders has since left to work on other projects, the remaining co-founder, Dr. Muneeb Ali, seems quite legit. He's raised $75 million in the past from Y Combinator, Winklevoss Capital, and others, and he currently serves as the CEO of Hiro, which actively develops tools for the Stacks ecosystem. He's been in the game for a long time and is familiar with the landscape, particularly when it comes to Bitcoin.
- Total Value Locked (TVL) on Stacks looks solid. Despite being outside the top 50, it boasts a TVL that's way up there next to the TVL on Cardano, Tezos, and Algorand.
- Stacks' uniqueness sets it apart from other Layer-1 blockchains. This can be good, because Stacks has less competition within its own realm. But it can also be a negative -- as stated above, developers might not be all that interested in developing on top of Bitcoin.
The Challenges - Stacks doesn't use Solidity, which is the most common blockchain language (it's what Ethereum uses), and it also doesn't use a language native to any other major blockchains. Instead, it has its own Non-Turing Complete language called Clarity. This poses a significant hurdle to those who move to develop on Stacks from any other chain. But, the caveat here is that Turing Completeness is less exploitable, and thus more secure. Turing-Complete languages, like Ethereum's Solidity, basically have far more capabilities than Non-Turing Complete languages. This sounds nice, but it also means more security exploits. Stacks' smart contract language Clarity is Non-Turing Complete, making it easier to audit and far more difficult to exploit.
- When most developers think of developing a blockchain app, developing on Bitcoin (via Stacks) probably isn't their first instinct. Most likely still aren't aware that Stacks exists, and will instead instinctually wade towards a more common chain or language.
- Similar to the above point, some people refuse to see Bitcoin as anything other than digital gold. They don't really care about extra functionality, because they're buying and holding Bitcoin for reasons unrelated to Web3 utility.
- We created a STX wallet, transacted on the network, and we found it to not be as fast as it needs to be. Many have attributed recent slowdowns to its newness and a recent upgrade, but some transactions have been reported as taking several hours to a day to be confirmed. That clearly isn't acceptable in the long-term for Stacks to be more widely utilized.
How It Could 10X in Value - STX only needs to grow to be 5% of Ethereum's market cap ($370 billion) and land itself in the top 20 or so cryptos.
- If the Stacks ecosystem can continue to be fleshed out with high-quality dapps, this is certainly possible -- especially given Bitcoin's popularity, which serves as the "anchor" for Stacks. Its close integration with Bitcoin could facilitate rapid adoption from Bitcoin enthusiasts and crypto newbies alike who are more familiar using a Bitcoin smart contract layer than Ethereum, for example.
- There's also lots of money in NFTs at the moment, which Stacks has the potential to tap into...
- Current valuation sits around $1.9 billion.
Final Word Stacks sounds like a great idea in theory. It takes Bitcoin, which everybody is familiar with, and tacks on a bunch of new functionality. But this familiarity bridge it builds to facilitate easy adoption isn't without its fair share of obstacles. Both developers and users are currently overlooking STX to a large degree not only because it's newer than other Layer-1s, but also because Bitcoin and smart contracts don't sound like an obvious combination. Bitcoin isn't expected to do much except store value. But, if Stacks can successfully pique Bitcoin holders' interest and get them on board with using Bitcoin to do things, it has a great shot at increasing in value. |
Comments
Post a Comment