• About Us
  • Careers
  • Contact
No Result
View All Result
Monday, June 23, 2025
DeFi Planet
  • News
    • People
    • Business
    • Crime
    • Regulation
    • Crypto
    • CBDC
  • Markets
    • Bitcoin
    • Ethereum
    • Stablecoins
    • Altcoins
    • Crypto ETFs
    • Memecoins
  • Policy
  • Articles
    • Press Releases
    • Opinion
    • Explainers
    • Guest Post
    • Sponsored
  • Directory
    • Companies
    • People
    • Products
    • Wallets
  • Multimedia
    • Videos
    • Podcasts
  • Learn
    • DeFi Basics
    • Tutorials
    • Reviews
    • Blockchain Fundamentals
  • Research
    • Case Studies
  • Explore
    • DeFi
    • Crypto Gaming
    • NFT
    • DAO
    • Metaverses
  • Jobs
  • Markets Pro
    • DeFi Planet Pro
    • Spend Crypto
    • Swap Crypto
    • Coin Prices
    • Crypto Exchanges
    • Crypto Analyzer
  • News
    • People
    • Business
    • Crime
    • Regulation
    • Crypto
    • CBDC
  • Markets
    • Bitcoin
    • Ethereum
    • Stablecoins
    • Altcoins
    • Crypto ETFs
    • Memecoins
  • Policy
  • Articles
    • Press Releases
    • Opinion
    • Explainers
    • Guest Post
    • Sponsored
  • Directory
    • Companies
    • People
    • Products
    • Wallets
  • Multimedia
    • Videos
    • Podcasts
  • Learn
    • DeFi Basics
    • Tutorials
    • Reviews
    • Blockchain Fundamentals
  • Research
    • Case Studies
  • Explore
    • DeFi
    • Crypto Gaming
    • NFT
    • DAO
    • Metaverses
  • Jobs
  • Markets Pro
    • DeFi Planet Pro
    • Spend Crypto
    • Swap Crypto
    • Coin Prices
    • Crypto Exchanges
    • Crypto Analyzer
No Result
View All Result
DeFi Planet
No Result
View All Result

Stacks: All You Need to Know About How it Unlocks DeFi and Smart Contracts on Bitcoin

17 February 2025
in Articles, Project Reviews
Reading Time: 6 mins read
115 1
Home Articles

Contents

Toggle
  • How Stacks Works
  • What Stacks Offers
  • Limitations and Challenges
  • Future Outlook

For years, Bitcoin has been celebrated as the world’s most secure and immutable blockchain, but its limited scripting language has confined its functionality to a narrow set of use cases. Unlike Ethereum, which reigns supreme in programmability, Bitcoin has struggled to go beyond being a store of value. Stacks is trying to change that. 

The blockchain project wants to combine Bitcoin’s unmatched security with the versatility of smart contracts and transform it into a robust platform for DeFi, thus enabling developers and users to explore a new frontier of possibilities.

Other endeavours have set out to achieve this goal—bitcoin ordinals, runes, the OP-CAT upgrade, and BRC20 standards are all attempts to extend Bitcoin’s functionality. What sets Stacks apart is its ability to unlock these capabilities without altering Bitcoin’s core protocol—a feat that avoids compromising the stability and trust the Bitcoin network is known for.

How Stacks Works

Stacks, formerly known as Blockstacks and then Bitcoin Stacks, operates with a unique hybrid blockchain architecture that positions it between a Layer 2 and a Layer 1 network. This structure now relies heavily on Bitcoin’s Layer 1 (L1) network for both security and finality, a relationship that has evolved over time. 

Initially, the network had a separate security budget, earning it the “Layer 1.5” label. However, with the introduction of the Nakamoto upgrade, Stacks will now fully rely on Bitcoin’s hash power, making it more aligned with the characteristics of a Layer 2 system. 

The most interesting thing about Stacks is its Proof of Transfer (PoX) consensus mechanism, which helps it build a secure bridge with the Bitcoin network. This consensus mechanism powers an anchoring mechanism that ensures every block on the network is cryptographically anchored to the Bitcoin blockchain. This guarantees that each transaction shares the same robust security as the Bitcoin network itself.

How Stacks’s PoX consensus mechanism works.  | Source: Stacks’ Documentation

This also means the mining process in Stacks is distinct from traditional systems and still links back to Bitcoin. Instead of relying on energy-intensive mining hardware, Stacks miners utilize Bitcoin as a resource to mine new blocks. This process involves sending Bitcoin to specific addresses. Miners are then rewarded with STX tokens, the native cryptocurrency of the network when the process is successful.

Stacks’ tokenomics is a deflationary model similar to Bitcoin itself. The total supply of STX is capped at 1.82 billion, with 1.37 billion tokens currently in circulation. Its mining rate also halves every four years, and the total supply will be fully capped by 2050. 

STX serves multiple functions. They are used to pay for transactions, execute smart contracts, and participate in governance decisions within the network. Holders can lock up their tokens in exchange for passive Bitcoin rewards, just like in staking in networks like Ethereum, through its ‘stacking’ mechanism. 

In this stacking process, Stacks miners conduct Bitcoin transactions to secure the Stacks blockchain, and a portion of these transactions generates BTC rewards for those who lock their STX tokens.

Stacks also introduces Clarity, a smart contract programming language tailored for security and predictability. It operates on a Bitcoin-connected logic, allowing smart contracts to interact directly with Bitcoin and enabling applications that respond to Bitcoin transactions and states. 

Clarity is also “decidable,” meaning developers can predict how a contract will behave before deployment. This reduces vulnerabilities and ensures reliability. However, Clarity smart contracts cannot be altered once deployed; this helps create a tamper-proof environment that guards against hacks.

What Stacks Offers

Stacks’ Ecosystem. Source: X/muneeb

Stacks essentially connect Bitcoin to the DeFi space. For example, decentralized lending platforms can now allow users to borrow Bitcoin by locking assets in Clarity-based smart contracts, while NFT marketplaces tied directly to Bitcoin’s blockchain can offer secure digital collectibles.

Since its inception in 2013 and the launch of Stacks 2.0 in 2020, Stacks has grown into a thriving ecosystem. It now includes a vibrant developer community, an array of tools, and numerous use cases that leverage Bitcoin’s security and wide adoption. The network hosts platforms like

  • Arkadiko — a DeFi lending platform that offers non-custodial liquidity and stable loans via its USDA token
  • Alex – a decentralized launchpad for community funding
  • LNSwap – a protocol for atomic swaps between Bitcoin and Stacks assets. 
  • Gamma – a marketplace for secure, Bitcoin-secured NFTs 
  • StacksBridge – a cross-chain NFT trading platform

The network also supports decentralized autonomous organizations (DAOs) with LydianDAO, a treasury management protocol for decentralized organizations, Web3 innovations like BTC.us, which enables Web3 domain names to be registered via Bitcoin, and Console, a decentralized group chat platform. Additionally, CityCoins allows citizens to generate crypto revenue for themselves and their cities, creating new opportunities for community-driven financial growth.

Limitations and Challenges

The DeFi space is highly competitive. Stacks will face intense competition from Ethereum, Solana, and Polygon, whose mature ecosystems and robust user bases dominate the programmable blockchain space.

Also, there are several platforms striving to integrate programmability and advanced financial services into Bitcoin’s ecosystem. Mintlayer,  Rootstock (RSK), and DeFiChain are notable projects that are trying to do something similar to Stacks. 

Resistance from Bitcoin purists is a challenge for Stacks and its competitors. These stakeholders favour simplicity and oppose changes that introduce complexity to the network. 

The Clarity programming language, while secure, presents a steep learning curve for developers familiar with more widely-used languages like Solidity. 

Also, Stacks’ close integration with the Bitcoin blockchain means it inherits Bitcoin’s limitations, such as slower transaction speeds and higher fees, which may impact scalability as adoption grows. 

Future Outlook

Stacks’ goal to extend Bitcoin’s utility beyond a store of value is quite an interesting undertaking. The recent launch of the Nakamoto upgrade demonstrates a focused effort to address scalability issues while anchoring the network’s security to Bitcoin’s hash power. This enhancement provides a trust-minimized and secure environment that is likely to attract developers and projects seeking reliability and innovation.

Also, its Bitcoin connection is another blueprint for what interoperability in the blockchain ecosystem could look like. The connection bridges the gap between Bitcoin and other blockchain ecosystems, enabling cross-chain applications. This means users who value Bitcoin’s security can now enjoy Ethereum-like programmability without having to leave the Bitcoin ecosystem.

However, Stacks’ success will depend on key factors, including robust developer adoption, the growth of its ecosystem, and strategic collaborations with major blockchain projects to enhance interoperability. Additionally, navigating regulatory scrutiny without compromising its decentralized ethos will be crucial. 

 

Disclaimer: This piece is intended solely for informational purposes and should not be considered trading or investment advice. Nothing herein should be construed as financial, legal, or tax advice. Trading or investing in cryptocurrencies carries a considerable risk of financial loss. Always conduct due diligence.

If you would like to read more articles like this, visit DeFi Planet and follow us on Twitter, LinkedIn, Facebook, Instagram, and CoinMarketCap Community.

Take control of your crypto  portfolio with MARKETS PRO, DeFi Planet’s suite of analytics tools.”

Don't miss out!

Subscribe To Our Newsletter

Receive top education news, lesson ideas, teaching tips and more!
Invalid email address
Give it a try. You can unsubscribe at any time.
Thanks for subscribing!
Tags: Bitcoin Stacks
Share67Tweet42Share12
Previous Post

Over $1.2M Raised in Weeks—Is Web3Bay the Next Millionaire Maker Crypto? More on SUI & Solana’s Market Performance

Next Post

Bubblemaps Links LIBRA Creators to Melania and Other Short-Lived Memecoins

Olajumoke Oyaleke

Olajumoke Oyaleke

Olajumoke Oyaleke is a creative writer with a passion for crafting engaging and informative guides across a variety of topics. Deeply interested in Web3 and blockchain technology, Olajumoke is dedicated to making complex concepts accessible, helping readers stay informed on the latest trends in the space. Through writing, Olajumoke aims to showcase the possibilities of Web3 and simplify its advancements for a broader audience.

Related Posts

Explainers

What Are Teardrop Attacks in Crypto?

17 June 2025
What Does It Cost to Use Bitcoin vs. Ethereum?
Explainers

What Does It Cost to Use Bitcoin vs. Ethereum?

17 June 2025
Crypto in Court: The Weirdest Legal Cases Involving Blockchain
Opinion

Crypto in Court: The Weirdest Legal Cases Involving Blockchain

17 June 2025
Has Web3 Failed to Protect the Core Innovations of Crypto and DeFi?
Featured

Has Web3 Failed to Protect the Core Innovations of Crypto and DeFi?

15 June 2025

Featured Posts

Has Web3 Failed to Protect the Core Innovations of Crypto and DeFi?

Has Web3 Failed to Protect the Core Innovations of Crypto and DeFi?

byOlajumoke Oyaleke
15 June 2025
0

Are Green Cryptocurrencies the Future of Blockchain Sustainability?

Are Green Cryptocurrencies the Future of Blockchain Sustainability?

byOlayinka Sodiq
12 June 2025
0

Web3 Gaming’s Scaling Crisis: Why Innovation Alone Isn’t Enough

Web3 Gaming’s Scaling Crisis: Why Innovation Alone Isn’t Enough

byOlayinka Sodiq
10 June 2025
0

What Is Price Slippage in Crypto & How Can You Avoid It

What Is Price Slippage in Crypto & How Can You Avoid It

byOlayinka Sodiq
4 June 2025
0

The Rise of Decentralized Identity Solutions in DeFi

The Rise of Decentralized Identity Solutions in DeFi

byOlayinka Sodiq
20 October 2024
0

Read More

Chain of Thoughts

Are Stablecoins Bank Deposits?

Are Stablecoins Bank Deposits?

byOlu Omoyele
31 May 2025
0

...

DAOs and the Coordination of Human Endeavour

DAOs and The Coordination of Human Endeavour

byOlu Omoyele
27 April 2025
0

...

Should DeFi Be Regulated?

Should DeFi Be Regulated?

byOlu Omoyele
27 March 2025
0

...

Is Tokenization All That It’s Cracked Up To Be?

Is Tokenization All That It’s Cracked Up To Be?

byOlu Omoyele
26 February 2025
0

...

Markets Update

Your Weekend Crypto Roundup | June 2025 (Week 3)

3 days ago

Your Weekend Crypto Roundup | June 2025 (Week 2)

1 week ago

Your Weekend Crypto Roundup | June 2025 (Week 1)

2 weeks ago

Your Weekend Crypto Roundup | May 2025 (Week 5)

3 weeks ago

Your Weekend Crypto Roundup | May 2025 (Week 4)

1 month ago

Your Weekend Crypto Roundup | May 2025 (Week 3)

1 month ago
Read More

Events

  • No events
  • Spotlight

    All about Ethereum
    All about Algorand
    All about Bitcoin
    All about Gora

    Press Releases

    R0AR Lists on BitMart: $1R0R Makes CEX Debut

    bychainwire
    23 June 2025
    0

    GAP 3 Partners FZCO Becomes Dubai’s First Regulated Virtual Asset Investment Advisor with Operational License from VARA

    bychainwire
    23 June 2025
    0

    Polemos Launches $PLMS Token On MEXC and Uniswap, Advancing Web3 Gaming Infrastructure

    bychainwire
    23 June 2025
    0

    Meta Earth Network 2.0: Pioneering Web3 Innovation with Rewards and Global Events

    bychainwire
    20 June 2025
    0

    BitVault Raises $2M from GSR, Gemini, and Auros to Launch BTC-Backed Money

    bychainwire
    18 June 2025
    0

    Read More

    ADVERTISING

    ABOUT

    TEAM

    CAREERS

    CONTACT

    TERMS & CONDITIONS

    PRIVACY POLICY

    © Copyright 2025 DeFi Planet

    Welcome Back!

    Login to your account below

    Forgotten Password?

    Retrieve your password

    Please enter your username or email address to reset your password.

    Log In
    Please enter and activate your license key for Cryptocurrency Widgets PRO plugin for unrestricted and full access of all premium features.

    Add New Playlist

    No Result
    View All Result
    • News
      • People
      • Business
      • Crime
      • Regulation
      • Crypto
      • CBDC
    • Markets
      • Bitcoin
      • Ethereum
      • Stablecoins
      • Altcoins
      • Crypto ETFs
      • Memecoins
    • Policy
    • Articles
      • Press Releases
      • Opinion
      • Explainers
      • Guest Post
      • Sponsored
    • Directory
      • Companies
      • People
      • Products
      • Wallets
    • Multimedia
      • Videos
      • Podcasts
    • Learn
      • DeFi Basics
      • Tutorials
      • Reviews
      • Blockchain Fundamentals
    • Research
      • Case Studies
    • Explore
      • DeFi
      • Crypto Gaming
      • NFT
      • DAO
      • Metaverses
    • Jobs
    • Markets Pro
      • DeFi Planet Pro
      • Spend Crypto
      • Swap Crypto
      • Coin Prices
      • Crypto Exchanges
      • Crypto Analyzer

    © Copyright 2024 DeFi Planet   |   Terms & Conditions   |   Privacy Policy

    -
    00:00
    00:00

    Queue

    Update Required Flash plugin
    -
    00:00
    00:00