The Rise of the BTC Ecosystem and the Evolution of Stacks

In the current cryptocurrency bear market cycle, we are witnessing the rise of the Bitcoin ecosystem. Although some staunch supporters of BTC as a store of value are cautious about this, exploration of the BTC ecosystem has been ongoing. The driving force behind this exploration mainly comes from two aspects: first, the opportunity to unlock the value of BTC assets; second, addressing the future mining subsidy issues of BTC, which relate to the sustainability of the entire network's security. Without the development of the BTC ecosystem, addressing these issues in the future will pose significant challenges.

In the exploration of the BTC layer two network, Stacks, as one of the earliest projects to enter this field, attempts to provide opportunities for ecosystems like DeFi to develop on the BTC network through its layer two solution. From a technical perspective, we can understand the evolution of Stacks as being divided into the sidechain era and the layer two network era.

Sidechain Era

The concept of Bitcoin sidechains was initially proposed by a blockchain technology company, which subsequently developed related networks. During the same period, other networks were also launched. In 2018, Stacks launched its mainnet and introduced Clarity contract development for oracles in 2019, while applying to regulatory authorities for compliant token issuance, which was a rare practice at the time. This approach allowed Stacks to gain more exploration time under compliant regulatory policies.

The initial technical mechanism of Stacks is similar to that of BTC sidechains, but it has its unique features. It integrates with the Bitcoin network through an anchoring transaction mechanism, which includes block header information from the Stacks chain that needs to be broadcasted to the BTC network.

Stacks uses a PoX (Proof of Transfer) mechanism, similar to the staking system of PoS. Participants are divided into miners and signature validators. Miners need to participate in transactions on the Bitcoin chain to qualify for mining, by sending transactions on the BTC chain to participate in each round of leader elections. Signature validators are responsible for verifying the validity of new blocks.

The interaction between Stacks and the Bitcoin mainnet uses a "chain anchoring" mechanism to bind information on the Stacks chain to the BTC mainnet. Each Stacks block contains hash values pointing to the previous Stacks block and a Bitcoin block, attempting to make all state changes that occur in its network verifiable on the BTC mainnet.

Era of Layer 2 Networks

Stacks 2.0 marks its entry into the Bitcoin second layer network era, primarily including the Nakamoto upgrade and the launch of sBTC. The Nakamoto upgrade technically transitions Stacks into the BTC second layer era, attempting to address issues such as security and performance; while the launch of sBTC prepares for the practical implementation of its second layer ecosystem.

The Nakamoto upgrade is an important milestone for Stacks in its evolution towards a true Layer 2 network. The most critical feature of Layer 2 networks is the sharing of the underlying network's security, and the Nakamoto upgrade is precisely moving in that direction. After the upgrade, Stacks aims to position itself as a layer of the Bitcoin network, integrating more closely with the Bitcoin network and becoming an inseparable part of the Bitcoin ecosystem.

This evolution not only showcases the technical advancements of Stacks but also reflects the ongoing exploration within the entire cryptocurrency space for expanding the functionalities and use cases of BTC. As technology continues to develop, we may see more innovative solutions that further enrich the BTC ecosystem, providing users with greater value and possibilities.