BTC Ecological Accelerator Talking about the Investment Value of STX Upgrade from Stacks Nakamoto

Unleashing the Potential BTC Ecological Accelerator Explores the Investment Value of STX Upgrade from Stacks Nakamoto

The long-term value of Stacks depends on the growth of the Stacks ecosystem and the demand for Clarity smart contracts. Currently, the development of the Stacks ecosystem is relatively slow, with a slow increase in the number of developers and actual users. The Nakamoto Upgrade is the next major upgrade for Stacks, expected to be launched in the first quarter of 2024. It will be a potential catalyst for driving STX price changes.

Original article title: BTC Ecosystem Accelerator: Uncovering $STX Investment Prospects in Stacks’ Nakamoto Upgrade
Original authors: @JellyZhouishere, @GryphsisAcademy
Original source: medium

TL;DR
– The long-term value of Stacks depends on the growth of the Stacks ecosystem and the demand for Clarity smart contracts.
– Price drivers for Stacks include halving narratives, being the only circulating token project in BTC layer 2, regulatory narratives, upgrades, and emotional premium brought by the thriving Ordinals ecosystem.
– The Nakamoto Upgrade is the next major upgrade for Stacks, expected to be launched in the first quarter of 2024. It will serve as a potential catalyst for STX price changes. For Stacks, the Nakamoto Upgrade means achieving shared network security with BTC, launching sBTC, supporting BTC atomic swaps, fast block generation, and supporting multiple programming languages.
– The Nakamoto Upgrade roadmap consists of three phases, currently in the second phase with the Nakamoto consensus going live on the testnet. sBTC v0.1 is launched as a smart contract for further early testing in a real-time environment. Full release is expected in the first quarter of next year. If progress goes smoothly, speculation about the upgrade event is expected to start earlier.
– In summary, Stacks is currently a target with technology but no commercialization ability, no market heat, a roadmap without an ecosystem, and no TVL (Total Value Locked). However, it possesses many potential speculative elements (upgrade, halving, compliance, one of the most famous and influential layer 2 solutions in BTC), and it is suggested to be treated as a BTC-related meme/high-leveraged beta.

Stacks Features
– Stacks is a Bitcoin smart contract layer aiming to allow smart contracts to be used on the Bitcoin blockchain without the need for trust, using Bitcoin as the asset and settlement currency. Stacks has the following features:
– Stacks has its own chain, compiler, and programming language called Clarity. It runs in sync with Bitcoin. Essentially, it builds a new chain outside of the Bitcoin chain, with its own governance structure and transaction patterns.
– It integrates with the Bitcoin main chain by submitting anchoring transactions on the Bitcoin main chain, which include a digest of Stacks chain block headers and additional information, to ensure their immutability.
– It allows applications and smart contracts to use BTC as their asset or currency and settle their transactions on the Bitcoin main chain.
– Stacks uses the PoX (Proof of Transfer) consensus algorithm: miners and transaction validators in Stacks are two separate roles. Transaction validators need to stake STX tokens (mine BTC), while miners need to stake BTC on the Bitcoin main chain (mine STX).

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STX: Project Value Analysis

The long-term value of Stacks depends on the growth of the Stacks ecosystem and the demand for Clarity smart contracts, because:

• Miners can see an increase in mining value due to high transaction fees, providing them with an incentive to obtain STX for consensus participation.

• STX is designed to pay for transaction fees and smart contract execution, and STX Stackers will be able to benefit from the growth of the Stacks ecosystem.

• However, at present, the development of the Stacks ecosystem is relatively slow, with few projects that can make an impact, and both the number of developers and actual users are growing slowly.

• TVL: 19.13M

• Main reasons: high technical development difficulty and low market enthusiasm.

Source: Defillama (https://defillama.com/)

Source: https://defillama.com/chain/Stacks

Stacks Development History and Price Driving Factors

Sorting out the development history of Stacks, the key milestones are as follows:

• The evolution of Stacks began in 2013. The project was created by founders Muneeb Ali and Ryan Shea. Stacks is a result of Muneeb Ali’s doctoral thesis, which detailed an internet framework that can be built around the Bitcoin blockchain. This framework is called Blockstack.

• In 2014, participation in the Y Combinator batch made preliminary research and development possible. Muneeb Ali and Ryan Shea raised funds in the early stages from Union Square Ventures, Naval Ravikant, SV Angel, Winklevoss Capital, and others.

• In 2017, $47 million was raised through token issuance, and in 2019, $23 million was raised through SEC-certified US Reg A+ and Reg S issuances. Over 4,500 Stacks holders participated in these issuances, including USV, Lux, DCG, Winklevoss Capital, Blockchain Capital, Foundation Capital, Hashkey, Fenbushi, and more.

• 2018 Q4: Mainnet launch

• 2018 Q4: Official wallet Hiro Wallet released

• 2019 Q2: Submitted $50 million to SEC for compliance token issuance

• 2019 Q2: Stacks 2.0 whitepaper released

• 2019 Q2: Introduced Clarity contract development oracle

• 2019 Q3: Became the first SEC-compliant public offering project

• 2020: Blockstacks renamed to Stacks

• 2020 Q1: Implemented Proof of Transfer (POX) consensus mechanism

• 2020 Q2: Stacks 2.0 testnet launched

• 2020 Q2: Submitted development report to SEC

• 2020 Q4: After the launch of Stacks 2.0, STX is no longer considered a security under US legal regulation (SEC has not publicly agreed with this view)

• January 2021: Stacks 2.0 mainnet launch, compatible with Clarity smart contracts

• 2021 Q2: Released Stacks Accelerator ecosystem development projects

• 2021 Q2: Released Stacks scalability solution Hyperchain

• 2021 Q4: Audit of Clarity contracts

• 2022 Q2: Released version 2.05.0.2.0

• 2023 Q1: Stacks 2.1 version release

• 2023 Q1: Hiro developer platform launch

• 2023 Q4: Major update, Nakamoto network release

• 2023 Q4: Major update, sBTC release

Combining the development history of Stacks, it is not difficult to discover that the main driving factors for Stacks’ price are as follows:

• Halving: The halving of BTC will occur in approximately one year, and its reduced security will bring more attention to BTC Layer 2, while the market is also looking for trading opportunities related to halving and higher volatility.

• Only circulated token project in BTC Layer 2: STX is currently the most comprehensive BTC Layer 2 and the only circulating token project in BTC Layer 2, and its market value is relatively small compared to Ethereum‘s L2.

• As the efficiency of network usage improves and the value of block space increases, the BTC costs that miners need to pay will also increase correspondingly, thereby increasing the return rate of STX stakers.

• Compliance narrative: SEC’s first compliant token issuance

• Upgrades

• The popularity of the Ordinals ecosystem brings funds and emotional premium to BTC Layer 2

Nakamoto Upgrade

The Nakamoto upgrade is the next major upgrade for Stacks, expected to be released in Q4 2023, which will be a potential important catalyst for the price movement of $STX. For Stacks, the main significance of the Nakamoto upgrade is as follows:

(1) Sharing network security with BTC: Transactions settle on the Bitcoin network. This feature makes Stacks transactions more secure and reliable, making it a true Layer 2 rather than a sidechain with its own independent state.

(2) Introduction of sBTC: Introduction of a Bitcoin-pegged asset sBTC, enabling smart contracts to run faster and cheaper, and facilitating the easy transfer of BTC into or out of Stacks L2. Beneficial for the development of the Bitcoin DeFi market.

When converting BTC to sBTC: Send BTC to a multisig address and initiate a transaction on the Stacks network, triggering a smart contract that sends BTC to the multisig address and creates the corresponding amount of sBTC assets on the Stacks network.

When converting sBTC back to BTC: Send a message to the smart contract and initiate another transaction on the Stacks network, triggering another smart contract that destroys the corresponding amount of sBTC assets and sends the corresponding amount of BTC to the user.

Comparison of sBTC and WBTC:

(3) Support for BTC atomic swaps, allowing Bitcoin addresses to hold and move assets defined on the Stacks layer, such as STX, stablecoins, and NFTs, and transfer them through Bitcoin L1 transactions.

(4) Clarity language: Significantly improves the security of on-chain smart contracts.

(5) Bitcoin State Reading: It can read the data of the Bitcoin chain in its entirety, supporting the reading of Bitcoin transactions and state changes, and executing smart contracts triggered by Bitcoin transactions. The Bitcoin reading function can keep the Bitcoin L1 network data and L2 network data synchronized.

(6) Fast Block Generation: Currently, the block generation time is 10 minutes. After the upgrade, it can achieve a block generation speed of 4-5 seconds, breaking the limitation of BTC’s 10-minute block generation. The transaction hash will be written to the Bitcoin secure network during each block generation, ensuring network security.

(7) Customizable Subnets Support Multiple Programming Languages: Scalability layers such as subnets can make different trade-offs in performance and decentralization compared to the Stacks main network. Subnets can support other programming languages and execution environments (such as Ethereum’s Solidity and EVM), allowing all Ethereum smart contracts to use Bitcoin-anchored assets and settle on the Bitcoin chain.

The roadmap for the Nakamoto upgrade is as follows:

This upgrade will launch the sBTC in three phases, and the second phase is currently in progress.

Source: https://www.stacks.co/explore/events

Test page:

Source: https://www.stacks.co/explore/events

The first phase is to lay the foundation for the upgrade, launching the MVP product of sBTC on the testnet, and deploying the developer version to the mainnet and testnet for 6 months. The second phase involves the activation of sBTC on the mainnet and the release of the Nakamoto network, which is expected to take 6 months. The third phase will focus on scalability and building the flywheel of the application ecosystem, further expanding the Bitcoin economy, and is a relatively medium to long-term task.

sBTC has already been launched and is undergoing early testing in a real-time environment. The full launch is expected in early next year. If everything goes smoothly, speculation about the Stacks upgrade event is expected to start earlier.

Conclusion:

First, let’s discuss the project itself:

• Stacks, as an old project that can be traced back to 2013, has a high level of recognition and influence in the BTC core community and the Western crypto community;

• Technology: It has a unique set of technology, with its own chain, compiler, and programming language that runs in sync with Bitcoin. Essentially, it has built a new chain outside of Bitcoin, with an independent governance structure and transaction mode. The disadvantage is that the technological development difficulty is relatively high;

• Ecosystem Construction: Relatively lagging behind, the total value locked (TVL) of the entire chain is 19 million, and for most of its establishment time, it has not exceeded 10 million;

• Lack of representative projects, the number of developers and actual users is relatively low, and the growth rate is slow;

• Low commercial sensitivity, the popularity of Ordinals and Brc20 tokens did not bring actual benefits to the Stacks ecosystem, even though Stacks expressed interest in Ordinals later;

• Slow development progress, the pace of ecosystem construction is very slow;

• Future construction focus: Bitcoin DeFi, BTC NFT, and other applications; currently, the focus is on slowly building infrastructure;

Secondly, about $STX:

• It usually moves in sync with BTC, acting as the beta to the overall market. Earlier this year, there was a brief period of alpha due to the speculation around the Nakamoto upgrade expected at the end of the year.

• Key factors driving speculation:

• Bitcoin Halving: BTC halving is expected to occur in about a year. After the halving, BTC’s security will receive more attention, and the market will be looking for trading opportunities with increased volatility related to the halving.

• Nakamoto network upgrade.

• One of the few coin issuance projects on the Bitcoin layer 2. It is currently the most complete layer 2 solution for BTC.

• As network usage efficiency increases and block space becomes more valuable, the cost of BTC for miners will also increase. This will simultaneously increase the returns for STX stakers.

• Compliance narrative: First SEC-qualified token issuance. In 2019 Q3, it became the first public offering project to receive SEC approval. After the launch of Stacks 2.0 in 2020 Q4, STX is no longer considered a security under US law (SEC has not publicly confirmed this, but it is implied). Currently, there is less emphasis on the compliance narrative.

Lastly, regarding the Nakamoto upgrade:

• What will it upgrade:

• Improve Stacks performance and security.

• Launch sBTC, a Bitcoin-pegged asset.

• Support multiple programming languages: Subnets can support other programming languages and execution environments (e.g., Ethereum’s Solidity and EVM), allowing all Ethereum smart contracts to use Bitcoin-anchored assets and settle on the Bitcoin chain.

• Roadmap:

• Currently, Nakamoto is being tested on the testnet, and the full release is expected early next year. If progress continues smoothly, speculation is likely to start before the network upgrade is launched (continuous monitoring is required to confirm progress).

In summary, $STX is a target that currently lacks technological commercialization ability, market heat, and TVL (total value locked), but it has many potential speculative elements (upgrade, halving, compliance, one of the most qualified, famous, and influential layer 2 solutions within BTC). It is recommended to view it as a BTC-related meme/high-leveraged beta.

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