OG Bitcoin L2 Stacks Is Getting a Major Overhaul

In the midst of renewed interest in Bitcoin development, Stacks, a notable layer-2 network, aims to undergo a transformation. Starting April 16, this key player in the Bitcoin L2 market will initiate the rollout of its long-awaited Nakamoto upgrade. This significant update, which has been in development for years, is intended to significantly boost Stacks’ speed.

This article is included in CoinDesk’s special series, “The Future of Bitcoin,” released in conjunction with the anticipated fourth Bitcoin “halving” event in April 2024.

OG Bitcoin L2 Stacks Is Getting a Major Overhaul Unmute

Stacks aims to enhance the capabilities of Bitcoin by introducing a separate chain for more affordable and swift transactions, along with Ethereum-like smart contract functionality. However, it preserves Bitcoin’s robust security and finality ensured by its dedicated miner network.

Muneeb Ali, the creator of Stacks, mentioned in an interview with CoinDesk that in a sense, Nakamoto’s vision for a network of interconnected blockchains sharing computational power with Bitcoin is coming to life through Stacks. This idea was previously encoded into Stacks’ Genesis block as a nod to Satoshi Nakamoto’s original concept.

At a point of surging curiosity about Bitcoin L2s, the update emerges. This surge is mainly fueled by the “Ordinals revolution,” initiated last year, enabling the creation of various new tokens – ranging from meme coins to NFT-inspired “inscriptions” – on a blockchain previously believed to be stuck in development limbo.

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Since the debut of bitcoin ETFs in the US last January, BTC has experienced a significant surge of approximately 50%, leading to an even more remarkable increase for Stack’s native token, STX, which has risen by over 70%. This token has seen a massive gain of around 250% since the introduction of the Ordinals Protocol. As a result, STX now ranks among the top 30 largest cryptocurrencies in terms of market capitalization.

So what is the Nakamoto upgrade?

The Nakamoto update allows Stacks and Bitcoin to operate independently in certain aspects, yet strengthens their connection between the two blockchain systems.

Stacks, similar to other L2 (Layer 2) platforms, processes transactions conducted on its network ultimately by confirming them on the Bitcoin blockchain. Consequently, although Stacks transactions may appear quicker and less costly than those on Bitcoin, they are considered definitively settled only when Bitcoin miners validate new blocks every ten minutes.

Starting from Bitcoin block height 840,360, Nakamoto introduces a solution for the issue of sluggish transaction confirmations. This is achieved through a method of concurrent processing, enabling Stacks miners to generate several blocks within the gaps between Bitcoin blocks.

The functionality of Stack operates through an alteration in its consensus mechanism, a fusion of proof-of-stake and mining referred to as “proof-of-transfer.” Essentially, Stacks imposes an economic expense on maintaining the blockchain by requiring miners to purchase bitcoin and transmit it to a designated address. Subsequently, the Bitcoin is redistributed among Stacks validators. In return for this process, miners receive STX tokens.

After Nakamoto, the network’s validators, referred to as “stackers,” will continue to earn BTC for confirming blocks, while Stacks miners will still receive STX as rewards. However, the process becomes more efficient with the addition of “tenures.” This means that individual miners are given a specific timeframe to generate multiple blocks. Ultimately, these blocks are consolidated into a single Bitcoin block.

Under development

Since Stacks launched its mainnet, Nakamoto has been continually improved upon. The network quickly reached its limit in terms of usage, leading to concerns among users. “They expressed frustration that they couldn’t utilize this technology effectively due to excessively long block times,” explained Ali, a computer science doctorate from Princeton University. This issue became particularly evident.

By December 2022, Stacks developers had released two white papers proposing network changes: one for Nakamoto and one for a separate upgrade planned for later this year, the “trust minimized” bridge called sBTC to make it easier to port over BTC into the Stacks economy.

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In keeping with the decentralized approach, Ali mentioned that no individual authors’ names were included in the documents. Over thirty engineers from various Stack-associated organizations collaborated on this project.

According to the current plans, the introduction of sBTC will happen approximately 2-3 months after Nakamoto’s rollout. Although it’s not as significant in terms of technical upgrades for the Stacks network itself, the capability to transfer BTC onto Stacks could have a substantial impact on the network’s economy.

Despite having a smaller DeFi economy than networks like Ethereum and Solana in terms of value and number of applications, Stack’s decentralized finance system is considered the most advanced when it comes to Bitcoin. However, Ali expressed his excitement about the potential launch of a Stripe-like payments system on Stack. Such a system would enable commercial Bitcoin applications to become more practical, allowing users to complete transactions promptly without experiencing long wait times for confirmation.

“Ali expressed great pride in this potential significant enhancement to Bitcoin’s user experience for the average population. The public has been clamoring for an easier method to utilize their Bitcoins.”

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2024-04-16 16:55

OG Bitcoin L2 Stacks Is Getting a Major Overhaul

So what is the Nakamoto upgrade?

Under development

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