A Complete Guide To Stacks Cryptocurrency (STX)

Bitcoin is undeniably the most secure blockchain and widely adopted cryptocurrency in the world. Bitcoin's decentralized nature and hashpower contribute to its high level of security, making it a stable and secure platform for decentralized finance (DeFi) applications. 

However, Bitcoin has some limited capabilities impacting global adoption, such as the lack of advanced smart contracts necessary for DeFi applications.

As a solution, Stacks, a Bitcoin layer that brings smart contracts to Bitcoin, is ushering in a new era for Bitcoin functionality. The native token of the Stacks network is STX. As with any cryptocurrency, it’s important to do your research when getting started with Stacks’ cryptocurrency (STX). 

This article offers a comprehensive guide to Stacks, covering how the layer functions on Bitcoin, how to buy STX and passively earn Bitcoin rewards, and the limitless opportunities Stacks unlocks for the Bitcoin economy.

What is Stacks (STX) Crypto?

Stacks is a Bitcoin layer solution powered by the Stacks token (STX), extending Bitcoin’s functionality. Built on top of the Bitcoin blockchain, Stacks brings smart contracts to Bitcoin without having to fork or make any changes to Bitcoin. 

This opens up an entire ecosystem of Bitcoin decentralized applications (dApps) and non-fungible tokens (NFTs) that leverage the security and decentralization of the Bitcoin blockchain.

Thanks to the Nakamoto upgrade, Stacks also leverages Bitcoin finality and immutability and offers protection from Miner Extractable Value (MEV) vulnerabilities while producing its own blocks faster than Bitcoin.

Moreover, the Stacks ecosystem also utilizes the sBTC token, which allows you to use your BTC in this ecosystem's dApps.

Stacks Origin Story

Stacks was originally founded as “Blockstack PBC” by Princeton University alumni Muneeb Ali and Ryan Shea. 

Motivated by the belief that large companies like Google and Facebook have too much power over ordinary users, their goal was to develop a completely decentralized, user-owned internet. When Google adopted an unofficial 'don't be evil' motto, Stacks embraced a 'can't be evil' motto, even displaying the slogan on a billboard near Google's California headquarters.

In 2017, Blockstack PBC raised $50 million in a token offering, and in 2018, launched its testnet in Q2, followed by the mainnet in Q4. 2019 saw Stacks’ public sale become the first ever US Securities and Exchange Commission (SEC) regulated token sale. That same year, STX was listed on several major cryptocurrency exchanges and its price began to rise.

In 2020, STX reached a high of over $2.50, making it one of the top-performing cryptocurrencies of the year. Later that year, Blockstack rebranded to Stacks to separate the ecosystem and open source project from Blockstack PBC, which rebranded to Hiro Systems PBC.

Stacks Today

The mainnet for Stacks 2.0 launched in January 2021, becoming the biggest Bitcoin web3 project with 350 million monthly API requests, 40,000 wallet downloads for Stacks' Hiro (the tool used to create applications for Bitcoin), and 2,500 smart contracts. 

2022 saw a 20% compound annual growth rate (CAGR) in smart contracts and a surge in Bitcoin username registration, with 97,000 usernames registered in Q4 alone.

Between 2023 and 2024, Stacks grew steadily, with the Nakamoto upgrade in late 2024 marking a major milestone. The upgrade introduced faster transactions, 100% Bitcoin finality for better security, and laid the foundation for the sBTC token. This decentralized Bitcoin peg allows trustless transfers within the Stacks network.

Stacks also weathered market challenges. The market cap of its token, STX, increased by 9% between Q1 and Q3 2024 after a dip earlier in the year. 

Also, the total value locked in STX rose by 36% during the same period, reflecting a growing user base.

Moreover, as activity increased on this network in Q3 2024, its revenue jumped by 520% and transactions by 118% in Q3 of 2024.

DeFi projects on Stacks, such as StackingDAO, Velar, and Zest also grew, driving new use cases. Meanwhile, the launch of the Grayscale Stacks Trust brought another instrument for institutions to invest in this network.

What Is the Stacks Nakamoto Upgrade?

The Stacks Nakamoto upgrade is a major update to the Stacks blockchain, which solves the ‘write to Bitcoin problem’ and helps create a trustless 1:1 peg-out for sBTC to BTC. 

Also, this hard fork mitigates Bitcoin Miner Extractable Value opportunities and boosts robustness against chain reorganizations.

Let’s take a closer look.

Faster Block Production 

The upgrade reduces block times from Bitcoin’s 10-minute intervals to just seconds. This change speeds up transactions and makes the network more responsive, especially for applications that rely on quick confirmations.

Bitcoin Finality 

Transactions on Stacks are secured by Bitcoin’s immutable blockchain. Once confirmed, they cannot be altered without also changing Bitcoin’s history, which is nearly impossible. This gives Stacks the same level of trust and security as Bitcoin.

Fairer network with MEV Mitigation

The upgrade combats MEV, preventing miners from manipulating transaction order for personal gain, as Stacks introduced a series of countermeasures to mitigate MEV issues and make mining fairer.

Why Is the Nakamoto Upgrade Significant?

The Nakamoto upgrade is important because it transforms Stacks into a faster, more reliable, and scalable Bitcoin layer while bringing more use cases for BTC holders.

Moreover, developers gain access to an efficient platform for building decentralized applications and use Bitcoin’s security for their projects.

And integrations like sBTC promise new ways to use your bitcoin in decentralized applications.

Therefore, the Nakamoto upgrade helped to cement Stacks’ position as a leading Layer 2 in the Bitcoin ecosystem.

How Does Stacks (STX) Work?

Stacks is built on top of the Bitcoin blockchain, using Bitcoin as a settlement layer. 

Proof-of-Transfer

The Stacks network links to Bitcoin through the Proof-of-Transfer mechanism, which runs parallel to Bitcoin’s Proof-of-Work (PoW) consensus. Proof-of-Transfer (PoX) is an adaptation of Proof-of-Burn (PoB). With PoB, users "burn" or destroy their own Bitcoin to mine new blocks on the Stacks network. The burned Bitcoin recycles work that was already done in Bitcoin's Proof-of-Work consensus.

However, with PoX, instead of burning the Bitcoin, miners must send Bitcoin to specific Bitcoin addresses that participate in consensus. The ability to produce blocks on the Stacks blockchain is determined through a process called sortition, in which miners compete to be chosen to produce the next block by sending Bitcoin to predetermined randomized addresses. This process ensures that block production is decentralized and fair.

Records on Bitcoin

To build new blocks in the Stacks blockchain, miners commit the block hash of each Stacks block to the Bitcoin chain using the OP_RETURN in Bitcoin transactions. This means the state of the Stacks blockchain is settled on the Bitcoin blockchain and benefits from its immutability. 

Stacks nodes can use this data stored on the Bitcoin chain to verify the integrity of the Stacks blockchain state. Metadata from newly mined Stacks blocks are anchored to every Bitcoin block, allowing users to verify the canonical Stacks chain via Bitcoin blocks.

Additionally, because only the block hash of the Stacks block is written to the Bitcoin chain, it allows the blocks to include thousands of transactions without taking up additional Bitcoin block space.

sBTC 

sBTC is a BTC-backed asset on the Stacks blockchain that allows you to use your BTC on the Stacks network. 

To start interacting with dApps on this ecosystem, you’ll need to swap your BTC for sBTC via a trustless smart contract. This is made possible by the Proof-of-Transfer consensus mechanism, which creates a trustless 1:1 peg between BTC and sBTC. 

sBTC provides programmability and allows you to participate in DeFi activities like borrowing, lending, and trading while maintaining ownership of their underlying BTC. 

Unlike wrapped bitcoin (wBTC), sBTC doesn't have a centralized custodian and is secured by smart contracts. 

How is STX Cryptocurrency Mined?

Instead of using electricity, Stacks miners expend already mined BTC to mine newly minted STX tokens. 

Stacks holders can lock their STX in consensus to earn BTC rewards, making STX a unique crypto asset that provides direct Bitcoin earnings. This creates an economic incentive for users to secure the network and contribute to its growth.

Unique Characteristics of Stacks (STX)  

In the crypto industry, it’s not often that you hear about projects where the founders dedicate eight years to the development of the project. And yet, that’s exactly what the Stacks founders did. Thanks to this in-depth research and the subsequent development of a robust foundation, Stacks offers a number of key features that make it unique compared to other networks:

1. Proof-of-Transfer (PoX): Stacks uses a Proof-of-Transfer (PoX) consensus mechanism where "stackers" play a crucial role in maintaining the security of the blockchain by voting on which chain fork they want to support and deciding if stacking rewards are distributed each cycle. With the Stacks network’s sBTC upgrade, stackers will have a novel role of signing the threshold signature wallet that holds the pegged-in Bitcoin.
2. Stacking: Stacking is temporarily locking STX tokens to support the Stacks blockchain. By locking STX, you provide valuable security and consensus through Proof-of-Transfer (PoX), Stack’s unique consensus mechanism. Stackers earn native BTC that Stacks miners transfer to the protocol to mine new STX. A stacking cycle is 2,100 Bitcoin blocks long or approximately two weeks. You can check the status of a current cycle, including an estimated minimum reward, at https://pool.xverse.app/.
3. Post-conditions: Post-conditions are unique to the Stacks chain and can be added to transactions to provide additional safety measures. If the execution of a transaction violates one or more post conditions, the entire transaction will be reversed. Wallets Xverse make it easy to view and understand post conditions on transactions, allowing you to confirm that a transaction is safe before proceeding.
4. SEC Qualified: Stacks was the first cryptocurrency to receive SEC qualification for a sale in the United States, allowing it to launch a $28 million Reg A+ sale cash offering for its STX tokens in July 2019.
5. Bitcoin finality: Stacks is built on top of the Bitcoin blockchain, which means that it uses the same underlying technology and security features as Bitcoin. In addition to having a strong foundation of immutability, it also allows developers to build applications that can leverage the security and decentralization of the Bitcoin blockchain.

Stacks Crypto Smart Contracts

Another key feature of Stacks is its innovative use of smart contracts. Smart contracts are self-executing contracts with the terms of the agreement being directly written into lines of code. They allow developers to build applications that can automatically enforce the terms of a contract, without the need for intermediaries or central authorities.

Clarity, Stack’s self-developed smart contract language, is unique in that it prioritizes predictability and security. It differs from other smart contract languages in two key ways: it is interpreted and deployed on the blockchain as is, rather than being compiled, and it is decidable, rather than being Turing complete. 

Below we’ve listed five factors that make Stacks smart contracts unique: 

1. Human-readable: Many crypto projects rely on smart contracts to autonomously make decisions, but smart contracts aren't infallible. In fact, vulnerabilities in smart contracts can have unanticipated consequences. One way through which Clarity, Stack’s self-developed smart contract language, mitigates these risks is through its human-readable form, allowing anyone with basic programming abilities to take a peek under the hood and ensure everything is as it should be. 
2. No Compiler: Clarity utilizes the transparency of blockchain technology by storing human-readable code on-chain, making it easily accessible for review by anyone at any time. This eliminates the need for compilation prior to deployment, ensuring the code seen on-chain is the same code created, analyzed, and tested by developers.
3. Immutability: Unlike smart contracts from Ethereum or Polygon, Stacks smart contracts cannot be changed once deployed. Deployed Stacks smart contracts are immutable; developers cannot silently change the terms of the contract later.
4. Predictability and Conditions: Another benefit of Clarity is that it is decidable, meaning that the number of possible outcomes is finite and can be formally verified for program correctness. In addition, the Stacks blockchain also allows users to specify conditions for transactions that ensure their tokens can never be transferred unexpectedly. 
5. Transaction Speeds: The Nakamoto release, planned for 2023, aims to improve the processing speed of transactions on Stacks by increasing block speed.

What Determines the Value of STX Cryptocurrency?

The STX token acts as an incentive for people to take part in building and maintaining the Stacks blockchain, which is anchored to the Bitcoin network. It serves as a way of accounting for and assessing the computational resources required to carry out smart contract operations. 

These smart contracts are run using the STX token as fuel, with gas fees being required (in STX) for every transaction on the network. End users can pay for gas using BTC or sBTC to a third party, who will subsequently pay the costs in STX. Demand for STX tokens may rise along with network utilization as more smart contracts and applications are added.

While miners use BTC to mint new STX tokens, STX holders can earn Bitcoin by stacking their tokens. However, the profitability of mining will be determined by a variety of factors, with the platform’s long-term value depending on aspects like the adoption of the Stacks platform and the continued success of Clarity-powered smart contracts.

Adoption of the Stacks platform is key in determining the value of Stacks. As more people use and rely on the Stacks platform, demand for STX crypto tokens or STX NFTs will increase, which can lead to an increase in its value. Additionally, the success of Clarity-powered smart contracts can affect the value of STX, as developers and users need STX to access these contracts. If Clarity-powered smart contracts become widely adopted and successful, demand for STX may increase.

As with any asset, the value of STX can also be influenced by overall market trends and sentiment. If the cryptocurrency market is experiencing positive sentiment, this could have an impact on the value of STX. Lastly, the utility of the Stacks ecosystem, or the number of ways in which it can be used, can also impact the value of the token. If there are more ways to use STX, demand for it may increase.

How to Choose a Stacks Crypto Wallet

There are a number of factors to consider when choosing a Stacks Wallet. The first is whether you want a hot wallet or a cold wallet. 

Hot wallets are online and more convenient to use but they can potentially be vulnerable to hacks. Cold wallets are offline which limits their vulnerability to attacks, however, cold wallets can be less convenient as you would need to manually connect a device to the internet for each transaction. 

In the case of a paper wallet, you would need to input it into a hardware wallet to make transactions. Furthermore, cold wallets are often stored in secure locations like a bank vault, which may not be easily accessible. 

Next consider custodial vs self-custodial wallets. Custodial wallets, despite being easy to use, are highly vulnerable to login attacks, data leaks and social engineering attacks. It’s possible the company can even go insolvent, making it impossible to access your holdings. As a result, many cryptocurrency holders choose to use self-custodial wallets in order to maintain complete control over their assets. 

Self-custodial wallets empower users to act as their own bank, eliminating the need for third-party confirmation for transactions and withdrawals. Private keys are encrypted by default, ensuring that users have full control over their assets at all times. 

Once you have considered these factors, you can start looking at different Stacks Wallets. Xverse is the leading self-custodial hot wallet for Stacks, which offers an in-app browser to connect to Bitcoin dApps, hold NFTs, and earn Bitcoin rewards in a Stacking pool. 

The app is also available as a Chrome browser extension, allowing you to view your Stacks-powered Bitcoin NFTs on your desktop.

How and Where to Buy STX Tokens 

Now that you have a foundational understanding of STX cryptocurrency and its unique features, you can explore where and how to buy STX tokens. Here’s a simple step-by-step guide on how to buy STX tokens using Xverse:

1. To get started, download Xverse wallet, available on iOS and Android, as well as a Chrome browser extension.
2. Click or tap the buy button on your wallet home screen to purchase from Binance, MoonPay or Transak.
3. Enter the amount in STX that you wish to purchase and your Xverse wallet address.
4. Verify your email and basic information.
5. You’re now ready to buy STX with a credit card or your preferred payment method and have the purchased tokens deposited directly into your Xverse wallet.

STX tokens are also available for purchase directly through a number of exchanges, including: 

• Kraken 
• KuCoin 
• Binance 
• OKX
• Gate.io
• Bybit
• Bitcoin.com Exchange

It's important to note that the specific process for buying STX using Xverse may vary depending on your location and other factors. It's always a good idea to carefully review the terms and conditions of any fiat onramp service before attempting to buy or sell any cryptocurrency.

Accessing Bitcoin Web3 on Stacks

Now let’s take a look at some of the exciting Bitcoin web3 decentralized applications you can access in the Stacks ecosystem. You can use your Xverse wallet to browse platforms,  login to desired sites, connect your wallet and sign transactions.

Take a look at Bitcoin NFT marketplaces Gamma, where you can mint Bitcoin NFTs ranging from music, to collectibles, to fine arts & photography. Today, some of the most prominent Bitcoin NFT projects include Crashpunks and  Megaponts. 

If you’re interested in swapping tokens, borrowing, lending or earning a Bitcoin yield, check out decentralized finance protocols like Alex or Zest Protocol. 

You can even secure your “BNS” .btc domain like “satoshi.btc,” which serves as your Bitcoin decentralized identity. Soon you’ll be able to send and receive Bitcoin using your .btc username and purchase them directly in-app with Xverse.

Stacks Shares Bitcoin’s Ethos

Stacks Bitcoin layer was originally founded with the mission to empower people to control their data and wealth by delivering a more accessible, user-owned internet and decentralized economy. With its commitment to bring decentralized finance (DeFi) to Bitcoin, unique features, and its innovative use of the Bitcoin blockchain, the Stacks crypto platform clearly holds promising growth potential. 

However, it’s always advised to keep the volatility of the crypto industry in mind before committing to any investment. To learn more about Stacks, the STX coin, and where to buy STX, visit the official Stacks Foundation website at www.stacks.co. 

What’s Next for the Stacks Ecosystem?

The Stacks ecosystem is moving into an exciting phase with major developments, such as the launch of sBTC, that add to Bitcoin’s programmability and adoption. 

Thanks to the Nakamoto upgrade, you can use your BTC to interact with the Stacks ecosystem’s dApps without intermediaries, while developers can build new, faster and cheaper-to-use applications, expanding this ecosystem even further.

Also, by allowing secure and easy movement of BTC between Bitcoin and Stacks, sBTC unlocks more liquidity and boosts its DeFi applications.

Stacks is also expanding into other blockchains with its latest collaboration with the Aptos Network. This partnership should allow Aptos-based dApps to use bitcoin in its applications. 

Therefore, by linking these two networks, Stacks adds to Bitcoin’s utility and increases BTC’s reach into the larger crypto asset economy beyond the Stacks chain. 

Download Xverse today to manage your sBTC, STX, and Bitcoin assets with one wallet.