A Deep Dive into the Stacks Ecosystem

By  James Huang March 12, 2024

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Background

For the last few years, if you said that Bitcoin makes for a perfect store of value tokens because it's big, boring, slow, and secure, nobody would argue against you. As a team of Belugas who adopted Ethereum early, jumped into Decentralized Finance, and minted NFTs, we've held that view of Bitcoin for as long as we can remember. The Ethereum ecosystem is just way more fun as a participant.

Why Stacks Might be the Future of Bitcoin

But, if a company as large as Facebook can rebrand itself to Meta and refocus their priorities, why couldn't Bitcoin? We entertained that idea and spent some of our free time exploring Stacks , widely considered to be the leader in the Bitcoin Layer 2 ecosystem. It's still early days of course, as there are new competitors popping up everyday, but Stacks has been at it the longest, when most people left Bitcoin for Ethereum.

Source: https://www.stackingdao.com/s

The folks at Pantera and Portal Ventures have thrown out some massive valuation estimates in the range of $50-100b FDV. We had a sticker shock response to the numbers, but after we spent some time looking through this well written investment memo , it doesn't seem so crazy after all. Bitcoin has become such a large asset class that it can support some massive layer 2 solutions the same way Ethereum does today.

So, we dove into the ecosystem to see what the experience was like. Here's what I did to play around in the ecosystem:

  • I bought some Stacks tokens, which are conveniently listed on Coinbase.
  • I transferred them to my Xverse Wallet , which is a Bitcoin wallet. It was a clean experience.
  • The reason I did this is because I wanted to stake my $STX tokens. Similar to Ethereum, you stake your tokens to participate in security and consensus on the network. As with all staking, it generates yield. The cool part is that your yield is paid out in Bitcoin. Roughly 6% APR right now, just above some T-Bills.
  • The staking options are well documented by Stacks. I went with the pooled version through Xverse since it was conveniently located in my Xverse wallet, but there are other options depending on the type of user you are.
  • I didn't come to Stacks just to stake, I'm here for some DeFi and NFTs!
  • Starting in DeFi, there's a Lido equivalent in Stacks. It's called StackingDAO . Same concept, you can wrap your STX to get stSTX (staked STX) and take stSTX into other parts of the ecosystem to earn yield.
  • So, I staked my STX through the StackingDAO app and got some stSTX back.
  • Conveniently, StackingDAO has a points system, so all your interactions will earn points!
  • StackingDAO does a great job of showing you where else you can take your stSTX, so I followed it over to Bitflow , which is an AMM/DEX and contributed to their LP Pools for STX-stSTX.
  • Of course, Bitflow also has a point system built out!
  • You can also head over to Arkadiko , which is a bit like the Stacks version of MakerDAO and Zest Protocol for lending.
  • My itch to trade hit me, so I went to Stacks's largest DEX, Alex . I bought some $WELSH tokens, which is the memecoin on Stacks, because what kind of exploration is complete without surveying the local memetoken?
  • Alex has BRC20 token trading available but I didn't do any trading.
  • I used the bridge to bring some USDT over, as I wasn't allowed to bridge USDC.
  • I wanted to explore the NFT Art on Stacks, so I went over to Gamma , which is the NFT marketplace for Stacks.
  • StackingDAO has a genesis NFT which multiplies points for holders of the NFT.
  • I went and sent a few offers out and eventually bought a floor NFT for 19 STX.
  • I explored Bitcoin Birds and surveyed Stacks Punks v3 , which is a direct copy of the Crypto Punks projects.

Source: https://arkadiko.finance/

Conclusion

Overall, the experience was surprisingly smooth. The infrastructure was well built out throughout Stacks–it really surprised me.

However, the long block times meant I was waiting 10-30 minutes for transactions to complete. It felt like I was going back to dial-up internet in the early days of the internet. This made it unusable in certain cases, like buying NFTs, bridging, and trading tokens, but didn't affect me when it came to one time type of actions like staking or contributing to an LP pool. But, because of the delay, sometimes you're left wondering what happened to a particular transaction. It's just not a great user experience.

That being said, the experience is almost there. It feels EVM-like in many ways and it's clear Stacks has invested in their ecosystem.

For this reason, I'm excited about the upcoming Nakamoto upgrade in Q2 of this year, which is about to conclude voting. The upgrade will bring not only Bitcoin L1 security, but a much needed 200x improvement to transaction times. This should bring the user experience in line with other chains. Much more palatable for the Eth maxi in me.

Subsequent to the Nakamoto upgrade, Stacks will support sBTC , a native and secure wrapped Bitcoin integrated with Stacks consensus.

After spending some time in the Stacks ecosystem, I'm excited to see what unique applications and use cases might arrive in Layer 2 when the Layer 1 is Bitcoin itself, the mother of all cryptocurrencies. Exciting times!