Stacks
Stacks is a blockchain layer built on top of Bitcoin that enables smart contracts and decentralized applications without modifying Bitcoin itself. It leverages Bitcoin’s security while enabling faster transactions, programmability, and novel features such as the sBTC two-way peg. The protocol was co-founded by Muneeb Ali and Ryan Shea in 2013. [1]
Overview
Stacks is a layer-2 blockchain that extends Bitcoin’s capabilities by enabling smart contracts, fast transactions, and digital assets without altering the Bitcoin base layer. It leverages Bitcoin’s security through its block production mechanism, Proof of Transfer (PoX), in which miners spend BTC to mine Stacks blocks, anchoring the chain to Bitcoin and ensuring the irreversibility of Stacks transactions. The platform uses Clarity, a purpose-built smart contract language, which allows developers to safely create contracts that can reference Bitcoin’s state, enabling operations such as atomic swaps and conditional asset transfers. A key component is sBTC, a decentralized two-way peg that represents Bitcoin on Stacks, allowing BTC to be used within smart contracts and converted back to Bitcoin without relying on centralized custodians. Together, these features provide a scalable, secure, and trust-minimized environment for building Bitcoin-integrated applications and programmable digital assets. [6]
Architecture
Proof of Transfer (PoX)
Proof of Transfer (PoX) is the block production mechanism used by Stacks, designed to anchor a new blockchain to the security of an existing proof-of-work chain—in this case, Bitcoin—without modifying Bitcoin itself. PoX is an evolution of proof-of-burn: instead of destroying cryptocurrency, miners transfer BTC to network participants (Stackers) as part of the mining process, securing the Stacks network while earning BTC rewards. By recording a hash of each Stacks block in Bitcoin transactions, the history of Stacks is cryptographically anchored to Bitcoin, inheriting its security and finality. This integration allows Stacks blocks to reference Bitcoin state directly, enabling Clarity smart contracts to react to or verify Bitcoin transactions. The mechanism also ensures that miners must build on the latest Stacks blocks, preventing independent forks and leveraging Bitcoin’s hashrate to secure consensus. Through PoX, Stacks can unlock Bitcoin’s capital for decentralized applications, enabling a programmable economy while using Bitcoin as a base layer for value and settlement. [13]
Stacking
Stacking is a mechanism on the Stacks blockchain that allows STX token holders to lock their tokens and participate in network consensus as signers, earning Bitcoin as rewards. Unlike traditional staking in PoS networks, stacking generates yield in BTC rather than the locked token, requires no slashing, and uses the PoX (Proof of Transfer) consensus mechanism. STX tokens remain in the holder’s wallet while locked, becoming temporarily unspendable until the end of the lockup period. Stacking operates in roughly two-week reward cycles with a preparation phase for selecting stackers and a reward phase for distributing BTC payouts.
Participants can stack solo—run their own signer and meet the minimum STX requirements—or delegate stacking to a pool operator, who handles the signer responsibilities. All stackers must register block-signing keys to ensure signatures can be validated and stacking integrates with the PoX protocol. [14]
Dual Stacking
Dual Stacking is a mechanism on the Stacks network that allows Bitcoin holders to earn Bitcoin-denominated rewards in sBTC by pairing their BTC with STX tokens and optionally deploying sBTC into DeFi. Unlike other blockchains that pay rewards in their native token, Stacks uses Proof of Transfer (PoX) to enable real Bitcoin rewards. Participants receive a baseline BTC reward for the sBTC enrolled in Dual Stacking. They can earn additional rewards based on their STX-to-sBTC ratio, which follows a square-root curve to provide diminishing returns, and through deploying sBTC in DeFi, which offers a 10× reward multiplier. The reward system is designed to prevent manipulation by setting the maximum STX/BTC ratio at the 95th percentile of user ratios, ensuring broad participation and fairness while continuing to provide standard STX stacking rewards. [15] [16]
Clarity
Clarity is a decidable, interpreted smart contract language designed for the Stacks blockchain, prioritizing predictability, security, and transparency. Unlike compiled languages, Clarity code is executed exactly as written, making it human-readable and verifiable, and its decidable nature ensures all programs halt in a finite number of steps. The language prevents common vulnerabilities such as reentrancy, overflows, and underflows, and enforces explicit handling of return values to avoid silent failures. Clarity supports built-in creation and management of fungible and non-fungible tokens, with post conditions to enforce transactional outcomes. It favors composition over trait inheritance, simplifying contract structure and interoperability. Additionally, Clarity contracts can access Bitcoin’s base chain, enabling smart contracts to react to Bitcoin transactions and verify cryptographic signatures, integrating Bitcoin as a foundational layer for secure, programmable applications. [7] [17]
sBTC
sBTC is a SIP-010 fungible token on the Stacks blockchain that represents Bitcoin at a fixed 1:1 ratio and can be converted back to BTC on the Bitcoin blockchain. It functions as a two-way peg that allows Bitcoin to be used within Stacks smart contracts while remaining backed by BTC held in a single Bitcoin UTXO secured by a multi-signature Taproot address. This UTXO is managed by a decentralized set of sBTC signers, who are responsible for signing peg operations, maintaining custody of the locked BTC, and interacting with sBTC smart contracts, with signer membership and key rotation governed collectively. Deposits and withdrawals between BTC and sBTC occur within a defined number of Bitcoin blocks. An external service, the Emily API, coordinates communication between users, signers, and contracts to facilitate bridge operations. Through this structure, sBTC enables Bitcoin to interact with smart contract applications on Stacks without requiring BTC to be sold or custodied by a centralized intermediary. [18]
STX
STX is the native token of the Stacks network, serving as an infrastructure token that facilitates transaction fees, network security, and governance. It is used to pay for transaction fees on the network, reward miners for verifying transactions, participate in governance through voting, and support the Proof of Transfer (PoX) consensus by locking (or “stacking”) STX to earn Bitcoin rewards. Within the Stacks ecosystem, STX can also be utilized in decentralized applications, including DeFi platforms, NFT marketplaces, and name registrars, providing both utility and incentives for network participation. [19] [20]