What are Stacks and are they DeFi for Bitcoin?

What are Stacks and are they DeFi for Bitcoin?

Stacks is marketed as enabling “DeFi, NFTs, applications, and smart contracts for bitcoin.” It is the blockchain that attempts to participate in some of the security of Bitcoin by writing blockheaders into the Bitcoin blockchain. The Stacks series uses the STX token as the original token.

However, the chain has been struggling lately as users try to register names using the Blockchain naming service – which made us wonder, how well does this work?

Are Stacks as safe as they say?

Essentially, Stacks are tied to Bitcoin because ‘miners’ who are involved in the process of securing the Stacks blockchain write their block headers to the Bitcoin blockchain using OP_RETURN when they ‘commit’ their Bitcoin configuration for mining. Therefore, Stacks uses bitcoin as a file Layer provides additional datawhich makes it possible for anyone with access to the Bitcoin blockchain to determine which Stacks have been streamed and build on them.

What this enables in practice is the ability to better identify bad actors. It is still possible for the Stacks client to change and declare the previous state invalid.

Stacks marketing repeatedly stresses the idea that it is secured by Bitcoin, but it really means.”As a way to store history.

Is it “Bitcoin?”

In order to use Bitcoin in most Stacks apps, you first need to get xBTC – a rolled-up form of Bitcoin that was listed on OkCoin less than a year ago and is now available zero 24 hour volume.

Currently, if you have dollars or bitcoins and want xBTC, the easiest way to do it is to buy STX on an exchange, transfer STX to your wallet, and then use a protocol like Alex Then swap your STX for xBTC. You can also get your STX by doing a submarine swap using a service like LN SWAP from bitcoin.

In the future hope to be able to Use of atomic swaps To make it easier to enter bitcoin into xBTC using something like “CharmA protocol to facilitate switching between bitcoin and xBTC.

These UX hurdles likely contributed to the anemic use of xBTC at less than 250 Total bitcoins currently in use. This compared to more 244000 Bitcoins currently used for wBTC on Ethereum and 16000 Bitcoins are currently wrapped in Solana for Solana. Even other chains that explicitly attempt to enable DeFi for Bitcoin, such as Liquid and RSK, have 3500 And the 3100 Straight.

Do NFTs work?

One of the most popular use cases for NFTs on Stacks has been for the Blockchain naming service. It is broadly similar to the Ethereum naming service, but currently Some annoying restrictions.

these included:

  • Only one name is allowed per address.
  • They are difficult to trade and require special guarantee contracts.
  • Stacks users complain that the working group assembled to boost the BNS ecosystem is “missing in action”.

There are of course other NFTs on Stacks, including Gamma Market, which they hope will one day merge soon. Sweetened Bitcoin payment. The largest collection ever found is the “Megapont Ape Club”, a reminder of how all great artists were created.

A total of 4.3 million STX have been traded, or at the current price of STX around $1.4 million. The best NFT collection on Ethereum is CryptoPunks that did it A million ether worth of volumeor about $1.3 billion at the time of writing.

Read more: Millionaire under investigation for burning Frida Kahlo art in NFT stunt

Previous Attempts at Bitcoin Tradable Visible Assets Like Rare Pepes Sold Individual Assets for $3.6 Million Beforesingle-handedly surpassing the entire “Megapont Ape Club” trading volume.

The NFT ecosystem on Stacks has limited adoption, and Bitcoin cannot be traded directly for most of the current NFTs.

Does DeFi work?

Sometimes, some of them work, if you’re willing to accept a few trade-offs. When the chain gets crowded – which happens frequently – the largest and most important protocols had to use their administrative privileges to shutdown protocols.

Even in the best of times, there is still a strong question as to whether or not this enables “DeFi for Bitcoin” with the above difficulties of actually using Bitcoin.

Devilama Approx. $12.3 million of the total insured value (TVL) on Stacks. This compares to nearly $31 billion in TVL on Ethereum.

Alex, the largest DeFi protocol on Stacks has a $10 million TVL. This compares to approximately $2.2 billion for Compound on Ethereum. DeFi on Stacks has seen very little use.

How did Stacks raise donations?

The STX token sale was one of the few crypto token lifts that opted for it registration With the SEC under Regulation A+. They managed to raise 50 million dollars.

This did not grant voting rights to the STX token in Blockstack PBC (now Hiro System PBC). Previous stock rounds were converted to STX tokens at a rate of $0.019 per STX, or just under 7% of the $0.30 price of the A+ token sale.

The STX token is “mined” by running the node’s software and sending Bitcoin to a set of predefined addresses, at which point random number generator It allows a miner to add its block to the chain, receive new STX tokens and transaction fees for that block.

This can be seen as somewhat analogous to allowing “miners” to participate in the ongoing sale of Bitcoin’s STX token that they send to the STX “stack.” Stacking is the process by which STX holders can receive bitcoins sent from miners as a reward for closing their STX tokens.

Currently, you need about 100,000 STX tokens to “stack” independently, or about $32,000. You can stack smaller quantities if you want to stack them.

Is it decentralized?

Currently there five Miners who participated in the last 100 blocks. Unlike bitcoin mining, these generally do not represent groups of smaller individual miners.

This issue is partly related to the fact that Stacks miners say mining is not profitable quest. This, unless you are willing to participate in Compatibility protocol attack And “stack” a large amount of STX to receive as much Bitcoin as you send back in the mining process. This is called an “enemy mining” attack and is a behavior that rational miners need to engage in Stacks.

The solutions to this proposal in the white paper were either to have a group of “trusted miners” you can be sure they would never secretly pile on the side, or to eventually stop giving Coinbase (newly minted STX) rewards to miners and hope That “they are still being incentivized by STX transaction fees to participate. Neither of these two solutions seems appropriate.”

Even the founder Munib Ali pointing to Without making major changes to the protocol, it is effective Capped to less than 100 minerssince “with 100 unique miners… you will take about 10% of the total Bitcoin transaction bandwidth per block. Personally, I wouldn’t want the Stacks layer to take up more than 10% of the Bitcoin bandwidth for mining.”

Decentralization is, of course, a spectrum, but five individual miners certainly seem closer to one end.

What Happened Under Pregnancy Recently?

Recently, Stacks protocol has been experiencing membal congestion. This has caused some protocols like Alex to shut down some of their functions, as it becomes impossible to pass the transactions you need.

It appears that the source of this congestion was related to a new release on the Blockchain Naming Service causing an increase in the number of transactions. It was enough for effectiveness helpless Series.

Read More: 0xbadc0de Blockchain Predator Becomes Prey, Losing 1100 ETH

Remarkably, the number of mempool transactions sufficient to block the network seemed just in thousandspeaking at around 6,500 transactions over a 15-minute period.

There were earlier periods when relatively small amounts of upload were enough to confuse the Stacks network. In August of 2021 I had similar problems, although the problem was partly related to the fact that they had no operating fee Marketbecause the mining program Did not look at the fees.

The most famous wallet, Hiro – developed by Munib Ali Company – also did not support Replace By Fee allowing users to later increase their transaction fees, which means that if you set fees too low, they may be stranded until the network is cleared.

At least that’s good for CityCoins!

One of the most popular use cases for piles so far has been the issuance of CityCoins. These include Miami Queen, endorsed by Mayor Francis Suarez, and New York Queen, backed by Mayor Eric Adams.

Are there other options for DeFi with Bitcoin?

Omni, formerly known as Mastercoin, was the first protocol to enable the issuance of tokens on Bitcoin. They eventually developed a decentralized primary exchange. Its use has always been dominated by Tether, and as Tether has moved to other layers, it has been used less. There are many limitations to what can be accomplished in Omni.

RSK is an embedded blockchain compatible with the Ethereum Virtual Machine that uses Bitcoin as its native currency. Users can effectively Lock Bitcoin in a multi-signature wallet Get the corresponding rBTC token and use it in the RSK chain.

Liquid is a Bitcoin side chain created by Blockstream that allows users to deposit their bitcoins into multisig and then use the L-BTC token to transact on the liquid network. Liquid places more emphasis on token issuance rather than enabling fully configurable DeFi.

The most common way to use Bitcoin in DeFi is to wrap it and use it on other smart contract chains. Using Bitcoin in this way often allows access to the largest DeFi and liquidity protocols, and while using assets on different chains poses some indisputable issues, this applies to xBTC, rBTC, L-BTC and many other solutions as well.

Bitcoin could enable zero-knowledge sets to enable many of the things these sidechains are currently used for, although it’s still active research region.

What does it all mean?

Stacks is advertised as enabling a whole host of additional features, and is focused on connecting all of these purported benefits to the Bitcoin brand. However, the reality is that many of the links are more fragile than they appear, with very little Bitcoin used in applications, and security reliant little on Bitcoin security.

It’s a strange string representing a A symbolic vision of Bitcoin DeFi Instead of a really useful and usable version. Partly because Bitcoin itself has been reticent to make changes that would enable more of it, preferring to take very incremental steps for improvements.

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