What is cryptocurrency Stacks (STX) and how does it work?

What is Stacks (STX)?

Stacks is a cryptocurrency project that seeks to unlock the full potential of the Bitcoin blockchain by bringing smart contracts and decentralized applications to Bitcoin. Originally known as Blockstack but rebranded to Stacks in 2020, the project was designed as a layer-1 solution that uses Bitcoin as its base layer. The platform is powered by the Stacks (STX) token, which fuels the execution of smart contracts, the processing of transactions, and the registration of new digital assets.

The philosophy behind Stacks comes from a feeling held by some that the internet is not the decentralized means of exchange it could be and that big players like Google and Facebook have too much power over ordinary users. It is this power that led Google to adopt the unofficial motto, “don’t be evil”, which it later dropped in 2018. The idea behind Stacks is to design online architecture in such a way that companies “can’t be evil” – a motto the developers adopted and even pasted onto a billboard across the road from Google’s California headquarters.

Because Stacks is a layer-1 ecosystem anchored to Bitcoin, the smart contracts it brings to Bitcoin do not change any of Bitcoin’s features – including the very things that make it so popular, its security and stability.

Stacks dApps are open and modular so that developers can build on top of each other’s apps and generate features that wouldn’t be possible otherwise. Additionally, because Stacks uses Bitcoin as its base layer, everything that happens in the Stacks ecosystem is backed by the most secure blockchain out there.

How Does Stacks Work?

The way Stacks works centers on the interaction of two parties: miners and stackers (not stakers!). Their interaction is regulated by a unique consensus mechanism called Proof of Transfer, or PoX, for short.

It might come as a bit of a surprise but in the Stacks blockchain, miners don’t actually mine anything. Instead, they exchange BTC that has already been mined from the Bitcoin blockchain and commit it for a chance to earn STX coins. The way this kind of mining works is governed by its own rules, so check out the Stacks Mining section further down in this article.

The thing to know here is that each block mined on the Stacks blockchain stores user identity and transactional metadata, and uses this to interact with all of the applications in the Stacks ecosystem. Because it is connected to Bitcoin, any changes made to Stacks IDs or wallet balances can be verified using the Bitcoin blockchain. This also applies to Stacks smart contracts, which are written in a special coding language developed and tested for Stacks by Algorand.

All of the remaining data that isn’t stored on the Stacks blockchain is stored using a bespoke storage system called Gaia. This novel storage solution relies on cloud storage providers like Azure and Dropbox but also gives users the option to sidestep cloud storage in favor of their own cold storage solution – provided they have the requisite computing power.

The Stacks coin, STX, is the native cryptocurrency token of the Stacks ecosystem and underpins all of this by being used to register digital assets to the Stacks blockchain – including user IDs and smart contracts.

Who Are the Founders of Stacks?

Stacks was co-founded by Princeton University alumni, Muneeb Ali and Ryan Shea, back in 2013. Ali began work on Stacks immediately after he graduated in mechanical engineering and computer science and still works with the platform today as CEO of Hiro PBC. The platform’s other co-founder, Ryan Shea, served as co-CEO from 2013 but left in 2018 to pursue his own stealth startup that he claims will tackle the greatest problems facing humanity in the 21st century.

Stacks was conceived as a response to the fact that the internet has become increasingly centralized in the hands of big players, rather than being an open, end-to-end system owned by its users. Muneeb laid out his vision for the next generation of the internet in a 2016 TEDx talk and outlined the architecture for a new trust-to-trust design for the internet in his doctoral thesis at Princeton.

What Makes Stacks Unique?

Putting it simply, there is little about Stacks that is not innovative. Starting from the way it was developed. Unlike most crypto projects, Stacks was in development for as long as eight years before it saw the light of day. Much of this time involved the Stacks team taking their concept through a robust peer-review process in which academics at Princeton and Stanford picked it apart to pluck out any potential weaknesses.

Stacks takes a look at the functions that make Bitcoin work and seeks to extend its functionality beyond what was thought possible but without the need to hard fork or change the original blockchain.

To achieve this, it uses its novel consensus mechanism (Proof of Transfer, or PoX) to connect directly with the Bitcoin blockchain. As part of the process of achieving this, it introduces a new smart contract coding language, called Clarity, which is designed around an easy-to-use syntax that makes it accessible but with an eye on maintaining top-level security.

Because of the lightweight architecture of Stacks, it needs to use a separate data storage solution, which it achieves by outsourcing this service to commercial cloud storage providers via its own storage system, Gaia. The thing about Gaia that sets it apart from similar approaches is that it allows those who are distrustful of cloud storage to store their data themselves.

Stacks was also designed with an integrated naming service, called the Blockstack Naming Service. This gives users the ability to designate names to assets that are readable by humans. The assets are, in turn, secured with a combination of public and private keys.

Finally, as though all of this were not enough innovation for one blockchain, Stacks has received the backing of the US government. This came in the form of millions of dollars of funding for its development and, more importantly perhaps, SEC backing for its initial coin offering, making Stacks the first-ever blockchain token to achieve this.

What Gives Stacks Value?

While miners commit BTC to generate new Stacks (STX) tokens, STX coin holders can stack their tokens to earn Bitcoin as a reward. How profitable the mining system will prove for miners in the future remains to be seen and will depend on a lot of factors – primary among which is the relative price of STX vs BTC.

Although the price of STX has been nothing short of stellar in 2021, its value in the long term will depend on the take-up of the Stacks platform and the continued growth of Clarity-powered smart contracts. Should this growth stagnate, the price of STX could suffer to the point that no miners are willing to commit their BTC in exchange for Stacks tokens. This is important because smart contract developers need STX tokens to add their contracts to the blockchain and users need STX to pay gas fees when executing the contracts.

How Many Stacks (STX) Coins Are There in Circulation?

The total supply of STX is not capped but about 1.8 billion are expected to be in circulation by 2050.

Currently, there are STX tokens in circulation.

Other Technical Data

The exact allocation of STX’s initial supply remains a little unclear but estimates suggest that about 15% of the genesis supply (1.32 billion STX) was allocated to the founders and the original Stacks team. These tokens are subject to an unlock schedule that ranges from three to seven years, with the next scheduled unlock expected in November 2021.

Stacks STX

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Bitcoin BTC

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Ethereum ETH

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XRP XRP

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How is The Stacks Network Secured?

Stacks leverages Bitcoin’s Proof of Work consensus for security, which uses the combined efforts of thousands of miners and nodes to protect the network against attack – primarily by making it unfeasible to undermine the network, both in terms of computing power and in terms of financial incentive.

To bulwark this further, Stacks introduces its own consensus model, the aforementioned Proof of Transfer, which sees miners committing BTC to mint STX – to all intents and purposes linking the security of the Stacks platform to BTC because all transactions can be verified via Bitcoin.

In the latest iteration of Stacks, the blockchain’s transactions are capable of scaling independently of Bitcoin, on which it relies. The Bitcoin blockchain is used only to provide a final verification and to ensure security. The end result of this is that thousands of transactions on the Stacks blockchain produce just a single hash on Bitcoin’s blockchain.

How to Use Stacks

The primary use case for the STX token is to fuel the connection between Stacks and Bitcoin via the Proof of Transfer consensus. In addition to powering the consensus mechanism, STX also supports the creation of smart contracts, dApps, and the creation of indelible and transferable virtual assets. STX can be used to publish new contracts to the blockchain and to pay the transaction fees that underpin the execution of these contracts. STX tokens used in this way are burned in the process.

Other functions of the STX token include voting on upgrades to the Stacks protocol and participating in the selection of app reviewers.

Finally, users can stack their STX in a form of staking – yes the two terms are easily mixed up but the way it works is relatively simple. Users need to hold a certain minimum amount of STX, which they can then ‘lock up’ on the network in return for rewards. The rewards are paid out in BTC and are made available at the end of each reward cycle, which is approximately two weeks. The rewards are sourced from the BTC that miners commit in order to earn the right to mine new blocks of STX.

How to Choose a Stacks Wallet

Stacks has its own dedicated wallet for storing STX but the tokens are compatible with a broad range of third-party wallets. Those wishing to invest in or mine STX are therefore advised to do their own due diligence when selecting a wallet.

Hardware wallets or cold wallets like Ledger or Trezor provide the most secure option for storing cryptocurrencies with offline storage and backup. However, they can require more technical knowledge and are a more expensive option. As such, they may be better suited to storing larger amounts of STX for more experienced users.

Software wallets provide another option and are free and easy to use. They are available to download as smartphone or desktop apps and can be custodial or non-custodial. With custodial wallets, the private keys are managed and backed up on your behalf by the service provider. Non-custodial wallets make use of secure elements on your device to store the private keys. While convenient, they are seen as less secure than hardware wallets and may be better suited to smaller amounts of STX or more novice users.

Online wallets or web wallets are also free and easy to use and accessible from multiple devices using a web browser. They are, however, considered hot wallets and can be less secure than hardware or software alternatives. As you are likely trusting the platform to manage your STX, you should select a reputable service with a track record in security and custody. As such, they are most suited for holding smaller amounts of cryptocurrencies or for those making more frequent trades.

Kriptomat offers a secure storage solution, allowing you to both store and trade your STX tokens without hassle. Storing your STX with Kriptomat provides you with enterprise-grade security and user-friendly functionality.

Buying and selling STX, or trading it for any other cryptocurrency, is done in mere moments when you choose our secure platform as your storage solution.

Stacks Mining

Because Stacks relies on BTC to fuel the minting of STX, it needs miners. In this case, the miners don’t mine STX directly, instead they commit already mined BTC to generate new STX tokens. Miners need to commit BTC just to have the chance to mine STX and this chance is partly random and partly based on how much BTC an individual miner has committed.

How lucrative this operation is depends on two critical factors. One is whether the miner is awarded the right to mine a block of STX in the first place and, as has been stated, this right will likely go to those miners able to commit greater quantities of BTC. The second factor is the relative price of STX vs BTC. If the Bitcoin price goes up while STX stagnates, this could lead to mining becoming unprofitable until such a time when the relative price sees some recovery. Another possible outcome is that a miner who commits BTC to the mining process could see the value of STX drop in the time it takes to mine it (approximately sixteen hours) – cutting into their profits.

The issuance of STX tokens follows a halving schedule that mirrors that of BTC and means that a miner’s reward per block will drop from its current 1,000 STX down to 500 STX, then 250 STX, and finally, 125 STX. Once it reaches 125 STX, this will remain the reward for mining indefinitely.

Revolutionary Ambition

Whether you’ve just given it a cursory glance or looked at it in detail, there is no aspect of Stacks that will leave you feeling that the developers have lacked ambition. Their initial vision for the project is to revolutionize the use case for the biggest and most powerful blockchain in the world, Bitcoin itself.

The way they have gone about achieving this vision has also been incredibly bold and ambitious. Little wonder then that theirs was the first SEC-backed ICO in US history. How their ambition will pan out – whether they will manage to reach for the stars or whether theirs is the fate of Icarus – is still something that remains to be seen.

As cryptocurrencies see another bullish swing in the markets, there is much skepticism about whether anyone will still be willing to exchange BTC in return for a chance to mine STX. Either way, the fate of Stacks is something we will all be watching closely going forward.

Stacks FAQ

How to Buy Stacks

Buying STX is as easy as visiting the Kriptomat how to buy Stacks page and choosing your preferred payment method.

How to Sell Stacks

If you already own STX and hold it in a Kriptomat exchange wallet, you can easily sell it by navigating the interface and choosing your desired payment option.

Stacks Price

A variety of factors influence the price action of STX, from such things as project news and developments to the flow of assets on exchanges, public sentiment, and emerging trends in the wider cryptocurrency sphere and global economy.

A decisive factor affecting STX price is demand for the outputs of the Stacks network, in particular the smart contracts driven by the Clarity coding language. These smart contracts rely on STX for payment of gas fees but dApps built on Stacks also require STX for every user interaction.

If Stacks can attract a growing number of users paying fees and burning tokens to create smart contracts, the demand for STX will go up and this will have a commensurate impact on the price of the token.

The current Stacks price is EUR.

The 24-hour trading volume of STX is EUR. STX is currently ranked of all cryptocurrencies by total market cap, with a market cap of EUR. It has a circulating supply of .

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