In addition to technical elements, Stacks has the dual buffer of US domestic companies and the first ComplianceToken registered and certified by SEC Reg+.
Written by Haotian
Riding on the eye-catching performance of this wave of old coin zone, let me talk about the absolute old coin @Stacks in the BTC ecosystem.
No intention to join the fear of missing out frenzy of BTC layer2, but it has long been a 'pioneer';
POX Consensus Mechanism relies on economic binding to catch the "express train" of BTC rise;
sBTC native BTC Cross-Chain Interaction design, although it lacks Babylon's encryption techniques, it can be considered "native".
Now, let's analyze the above three points from a technical perspective.
1）Back in 2017, when BTC was still in the midst of a debate between the conservatives and the innovators, the conservatives firmly believed that it should simplify its function and focus solely on being a reserve asset, while the innovators believed that BTC should expand its use cases to support Smart Contract functionality in response to the competition from new chains such as Ethereum.
Obviously, Stacks chose the latter, which was somewhat 'alternative' in the then environment. However, years later, the frenzy of BTC on-chain asset issuance and BTC layer2 network expansion triggered by the Ordinals protocol, and various extensions and developments surrounding the BTC ecosystem, have confirmed the strategic vision of Stacks' choice back then.
So, to some extent, Stacks can be considered the pioneer of this BTC ecosystem expansion frenzy. However, under the BTC fear of missing out trend mainly driven by "Chinese", Stacks seems to be "absent" and has not participated much in the hype and discussions. However, its purely technical orientation and stable development have also allowed it to enjoy the market's expected dividends for BTC layer2, and its overall market performance is commendable.
After all, as a 'pioneer', and after 7 years of precipitation and market validation, Stacks has explored a complete set of technology stacks, providing a feasible solution example for BTC to explore smart contract practices.
Speaking of the operating mechanism of Stacks' technical architecture, it gives me a slightly unconventional overall impression. Why do I say that? This has to do with its special Consensus Mechanism.
Stacks did not adopt the more common POW or POS Consensus Mechanism at that time, but instead adopted a special POX Consensus Mechanism, which can be simply understood as: POX is Proof of Transfer.
Miners on the Stacks network need to prove to the BTC Mainnet that they have initiated the transfer of BTC to a specific Address in order to win the 'block rights' on the Stacks network and receive $STX rewards. Meanwhile, users (Holders) on the Stacks network, by holding and Staking STX for a certain period, can proportionally receive the BTC Dividend from the Miners' input.
It is not difficult to see that the POX Consensus Mechanism is a "two-layer design" as a whole, with the BTC network as the basic layer precipitating and locking BTC assets to provide network "consensus layer" security, while the Stacks network is the "execution layer" for landing complex Smart Contract-related applications and network communication collaboration.
This design fully maintains the authority of BTC Mainnet and achieves a "strong correlation" with BTCMainnet through "economic binding". How should we understand it?
To participate in block generation, Miners' main costs, in addition to the basic operation and maintenance fees for running Nodes and 'electricity bills', mainly involve investing a certain amount of 'BTC'. The higher the price of BTC, the higher the cost of Miner Mining, which also determines the preciousness of the STX reward;
Users can stake STX to maintain the security of the network, which is no different from the way most POS networks maintain security. The difference is that the economic gains and losses of most POS networks' stakes cannot withstand the Fluctuation of the Secondary Market itself. However, users of the Stacks network can stake $STX to receive BTC rewards.
This brings about a kind of "benign" economic internal circulation, Miners consume $BTC to compete for the right to mine, and this part of BTC will be distributed to Stakers, making more users willing to stake actively to obtain BTC rewards, thereby causing the reduction of STX Circulating Supply and driving the outstanding performance of BTC Secondary Market prices, further motivating Miners to consume BTC Mining positively.
For Miners, if STX Mining is not profitable, the Mining industry cannot take off. For users, the risk of staking STX assets can be hedged by obtaining real BTC rewards.
This special economic incentive mechanism gives it an advantage in resisting market fluctuations and market ecological stability. Especially when the BTC price continues to rise, the entire network's cost of consumption and Dividend rewards will increase synchronously, meaning that the value precipitated by the network itself will also rise. Moreover, it can adjust the Mining difficulty based on the Secondary Market price of BTC, and the cost of Miner's input and the proportion of STX rewards will be directly proportional to the price of BTC.
In my opinion, the uniqueness or forward-looking aspect of Stacks' trap POX Consensus Mechanism is that it is tied to BTC, the most stable asset in the market, providing network security and gaining network enhancement through BTC. The dilemma of long-term 'loss' of stake assets in the original POS network has been resolved under the super rise Buff of BTC assets.
Recently, @andrerserrano, the product manager of Stacks, shared an overview of the upcoming Mainnet deployment of sBTC, which shows the unique features of sBTC as a native BTC cross-chain interaction asset.
Compared to the commonly used centralized custody assets, sBTC achieves the native technical features of BTC, such as native security, cross-chain free, atomic transactions, and decentralized risk points, through the traditional Wrapped version asset packaging method of locking assets in Chain A and minting assets in Chain B. How does it achieve this?
Stacks uses a multi-signature threshold mechanism to ensure the security of the Stacks network. Therefore, there are many 'signers' on the BTC Mainnet to verify transactions and implement multi-signature operations. When users send BTC assets to a specified BTC multi-signature address, after the transaction is confirmed, the signatory deployment party of the Stacks protocol monitors and verifies the transaction and automatically mints the corresponding sBTC to the user on the Stacks network.
The key point is that Stacks has deployed a large number of independent signing Nodes, such as 100. When a sufficient number of Nodes have signed and confirmed the threshold, the transaction will be truly validated and confirmed, such as (68/100).
To better understand the advantages and disadvantages of this multi-signature mechanism, I tried to make a comparison using @babylonlabs_io: What sets Babylon apart is its use of mathematical Encryption Algorithm techniques to ensure that Nodes do not act maliciously, as their Private Key would be 'exposed' if they do, greatly limiting their potential for malicious behavior;
By contrast, the mechanism of Stacks is relatively simple, relying on the trust of a large number of light nodes and a higher threshold design to reduce the probability of malicious behavior. Once malicious behavior occurs, the Stacks network itself relies on the economic bundling mechanism to complement it well, and the more severe Slash penalty feature will greatly reduce the risk of malicious behavior by the node.
Of course, this kind of multi-signature security mechanism built on the basis of scale will also have a less flexible feature. For example, if the majority of NodeAddress in 100 Nodes are changed, the original multi-signature Address assets will be forced to migrate. Therefore, Stacks is exploring advanced 'dynamic member' management mechanisms such as Multisig2 to expand flexible features such as multi-level verification mechanisms and hierarchical control of permissions. In short, we will continue to explore more sophisticated and secure methods for continuous technical optimization.
Above.
Finally, in addition to the technical elements, it must be said that, apart from the technical elements, it must be said that Stacks has the dual blessing of being the first ComplianceToken certified by a US domestic enterprise and SEC Reg+, which adds a lot of room for imagination in the current macro background of the Trump 'encryption government'.
The content is for reference only, not a solicitation or offer. No investment, tax, or legal advice provided. See Disclaimer for more risks disclosure.
The rise of old coins, why is Stacks worth following?
Written by Haotian
Riding on the eye-catching performance of this wave of old coin zone, let me talk about the absolute old coin @Stacks in the BTC ecosystem.
Now, let's analyze the above three points from a technical perspective.
1）Back in 2017, when BTC was still in the midst of a debate between the conservatives and the innovators, the conservatives firmly believed that it should simplify its function and focus solely on being a reserve asset, while the innovators believed that BTC should expand its use cases to support Smart Contract functionality in response to the competition from new chains such as Ethereum.
Obviously, Stacks chose the latter, which was somewhat 'alternative' in the then environment. However, years later, the frenzy of BTC on-chain asset issuance and BTC layer2 network expansion triggered by the Ordinals protocol, and various extensions and developments surrounding the BTC ecosystem, have confirmed the strategic vision of Stacks' choice back then.
So, to some extent, Stacks can be considered the pioneer of this BTC ecosystem expansion frenzy. However, under the BTC fear of missing out trend mainly driven by "Chinese", Stacks seems to be "absent" and has not participated much in the hype and discussions. However, its purely technical orientation and stable development have also allowed it to enjoy the market's expected dividends for BTC layer2, and its overall market performance is commendable.
After all, as a 'pioneer', and after 7 years of precipitation and market validation, Stacks has explored a complete set of technology stacks, providing a feasible solution example for BTC to explore smart contract practices.
Stacks did not adopt the more common POW or POS Consensus Mechanism at that time, but instead adopted a special POX Consensus Mechanism, which can be simply understood as: POX is Proof of Transfer.
Miners on the Stacks network need to prove to the BTC Mainnet that they have initiated the transfer of BTC to a specific Address in order to win the 'block rights' on the Stacks network and receive $STX rewards. Meanwhile, users (Holders) on the Stacks network, by holding and Staking STX for a certain period, can proportionally receive the BTC Dividend from the Miners' input.
It is not difficult to see that the POX Consensus Mechanism is a "two-layer design" as a whole, with the BTC network as the basic layer precipitating and locking BTC assets to provide network "consensus layer" security, while the Stacks network is the "execution layer" for landing complex Smart Contract-related applications and network communication collaboration.
This design fully maintains the authority of BTC Mainnet and achieves a "strong correlation" with BTCMainnet through "economic binding". How should we understand it?
To participate in block generation, Miners' main costs, in addition to the basic operation and maintenance fees for running Nodes and 'electricity bills', mainly involve investing a certain amount of 'BTC'. The higher the price of BTC, the higher the cost of Miner Mining, which also determines the preciousness of the STX reward;
Users can stake STX to maintain the security of the network, which is no different from the way most POS networks maintain security. The difference is that the economic gains and losses of most POS networks' stakes cannot withstand the Fluctuation of the Secondary Market itself. However, users of the Stacks network can stake $STX to receive BTC rewards.
This brings about a kind of "benign" economic internal circulation, Miners consume $BTC to compete for the right to mine, and this part of BTC will be distributed to Stakers, making more users willing to stake actively to obtain BTC rewards, thereby causing the reduction of STX Circulating Supply and driving the outstanding performance of BTC Secondary Market prices, further motivating Miners to consume BTC Mining positively.
For Miners, if STX Mining is not profitable, the Mining industry cannot take off. For users, the risk of staking STX assets can be hedged by obtaining real BTC rewards.
This special economic incentive mechanism gives it an advantage in resisting market fluctuations and market ecological stability. Especially when the BTC price continues to rise, the entire network's cost of consumption and Dividend rewards will increase synchronously, meaning that the value precipitated by the network itself will also rise. Moreover, it can adjust the Mining difficulty based on the Secondary Market price of BTC, and the cost of Miner's input and the proportion of STX rewards will be directly proportional to the price of BTC.
In my opinion, the uniqueness or forward-looking aspect of Stacks' trap POX Consensus Mechanism is that it is tied to BTC, the most stable asset in the market, providing network security and gaining network enhancement through BTC. The dilemma of long-term 'loss' of stake assets in the original POS network has been resolved under the super rise Buff of BTC assets.
Compared to the commonly used centralized custody assets, sBTC achieves the native technical features of BTC, such as native security, cross-chain free, atomic transactions, and decentralized risk points, through the traditional Wrapped version asset packaging method of locking assets in Chain A and minting assets in Chain B. How does it achieve this?
Stacks uses a multi-signature threshold mechanism to ensure the security of the Stacks network. Therefore, there are many 'signers' on the BTC Mainnet to verify transactions and implement multi-signature operations. When users send BTC assets to a specified BTC multi-signature address, after the transaction is confirmed, the signatory deployment party of the Stacks protocol monitors and verifies the transaction and automatically mints the corresponding sBTC to the user on the Stacks network.
The key point is that Stacks has deployed a large number of independent signing Nodes, such as 100. When a sufficient number of Nodes have signed and confirmed the threshold, the transaction will be truly validated and confirmed, such as (68/100).
To better understand the advantages and disadvantages of this multi-signature mechanism, I tried to make a comparison using @babylonlabs_io: What sets Babylon apart is its use of mathematical Encryption Algorithm techniques to ensure that Nodes do not act maliciously, as their Private Key would be 'exposed' if they do, greatly limiting their potential for malicious behavior;
By contrast, the mechanism of Stacks is relatively simple, relying on the trust of a large number of light nodes and a higher threshold design to reduce the probability of malicious behavior. Once malicious behavior occurs, the Stacks network itself relies on the economic bundling mechanism to complement it well, and the more severe Slash penalty feature will greatly reduce the risk of malicious behavior by the node.
Of course, this kind of multi-signature security mechanism built on the basis of scale will also have a less flexible feature. For example, if the majority of NodeAddress in 100 Nodes are changed, the original multi-signature Address assets will be forced to migrate. Therefore, Stacks is exploring advanced 'dynamic member' management mechanisms such as Multisig2 to expand flexible features such as multi-level verification mechanisms and hierarchical control of permissions. In short, we will continue to explore more sophisticated and secure methods for continuous technical optimization.
Above.
Finally, in addition to the technical elements, it must be said that, apart from the technical elements, it must be said that Stacks has the dual blessing of being the first ComplianceToken certified by a US domestic enterprise and SEC Reg+, which adds a lot of room for imagination in the current macro background of the Trump 'encryption government'.