At time of writing, Stack’s native cryptocurrency, STX, is leading market resurgence, following Grayscale’s yesterday success in its lawsuit over the SEC, regarding its rejected application to convert its Bitcoin trust into an ETF.

But what is Stacks, and does it stand to revolutionize what the Bitcoin network is capable of?

Stacks (STX): Background

Originally ‘Blockstack’, Stacks was founded all the way back in 2013, and is the brainchild of Princeton computer scientists, Ryan Shea and Muneeb Ali, with the project flowing through Y Combinator’s cohort in 2014. 

According to data from Crunchbase, Stacks has raised an impressive $93.8 million, including ICOs, sourcing capital from top-tier investors such as Hashkey, Fenbushi Capital, IOSG Ventures, and many more.

How Does Stacks (STX) Work?

Rather than being a layer-2 on Bitcoin, Stacks is its own blockchain that leverages the underlying security and decentralization of the Bitcoin network by recording all Stacks activity on the world’s largest blockchain.

Stacks relies upon a consensus mechanism dubbed Proof of Transfer, which leverages the Proof of Work mechanism used by Bitcoin, in order to ensure the safety and security of the Stacks ecosystem. 

Rather than using a widespread programming language, such as Solidity, for smart contract construction, Stacks possesses its own language, designed especially for Bitcoin smart contracts, called Clarity, which Stacks describes as predictable, decidable, and secure.

The Stacks (STX) Ecosystem

ALEX

According to data from DefiLlama, the ALEX application is the primary driver of total value locked in the Stacks ecosystem.

ALEX itself is a multi-purpose platform, and is responsible for providing much of the existing functionality within the Stacks ecosystem. ALEX offers users a variety of applications including:

• Decentralized exchange/swapping feature
• Lending and borrowing platform
• Yield farming
• Launchpad platform

ALEX is supported directly by the Stacks Foundation, which features on its list of investors alongside Whitestar Capital, GBV, and Trust Machines.

Arkadiko Finance

Second on the list of Stacks TVL drivers, after ALEX, is Arkadiko - a platform offering loans that ‘repay themselves’ and a collateralized stablecoin, USDA, in tandem. 

Arkadiko is especially interesting as it leverages Stacks’ unique consensus mechanism to facilitate its products. Users can both take out a loan, and mint USDA, using STX as collateral. The STX is then staked on Stacks, with Bitcoin rewards gradually paying off the loan in its entirety. 

Hiro Wallet

Perhaps the most popular self-custody wallet for interacting with the Stacks ecosystem, Hiro Wallet provides the key to using Stacks' native applications.

According to its website, Hiro Wallet has seen around 280,000 downloads and its browser extension allows for easy application connection, the direct purchase of STX, and even hardware wallet integrations.

Hiro’s full desktop version, meanwhile, further allows users to participate in the ‘Stacking’ element of Stacks’ consensus mechanism. 

Following the speculative fervor and excitement around Bitcoin ordinals, exhibited by the crypto-community earlier this year, Hiro Wallet now supports the storage and management of these novel NFT-type assets. 

Stacks (STX) and the Future of Bitcoin

With a current market capitalization of more than $530 billion, Bitcoin (BTC) remains by far the largest cryptocurrency ecosystem in the industry today. However, its purpose-built nature as a store of value have so far inhibited any meaningful growth of Bitcoin’s functionality ecosystem.

The Bitcoin parent chain is not smart contract compatible, and exhibits both transaction times and transaction costs that are unpalatable to the everyday user.

However, perhaps triggered by the meteoric rise of Bitcoin ordinals and BRC-20 fervor, interest in Bitcoin’s capabilities beyond pure value storage is on the rise.

Whilst Bitcoin ordinals have been pivotal in drawing attention to the network’s potential capabilities, it may well be long-running functionality-oriented projects like Stacks that drive the creation and adoption of a BTC ecosystem that has more to offer than just the traits of a ‘digital gold’...