What is Stacks (STX)?

Stacks is a Layer 2 blockchain created to expand Bitcoin’s capabilities by supporting smart contracts and decentralized applications (DApps). It operates alongside Bitcoin and relies on Bitcoin’s security and settlement layer as the base for adding programmable functions.

Stacks uses a consensus algorithm called Proof of Transfer (PoX), which links its blocks directly to the Bitcoin blockchain. This setup allows activity on Stacks to be verified through Bitcoin.

The network runs smart contracts using Clarity, its native programming language that can read Bitcoin’s state, and supports sBTC, a Bitcoin-backed asset that allows BTC to move between Bitcoin and Stacks without centralized control.

Together, these components allow Stacks to power financial applications, digital assets, and identity solutions that connect to Bitcoin while maintaining the network’s security and reliability.

Who Founded Stacks?

Stacks was founded in 2013 by Princeton University graduates Muneeb Ali and Ryan Shea. Ali began developing the project right after completing his studies in mechanical engineering and computer science and continues to work on it today as CEO of Hiro PBC. Shea served as co-CEO from the start but stepped away in 2018 to focus on a private startup he says aims to address major global challenges.

The idea behind Stacks came from concerns about how the internet had shifted toward centralized control by large organizations, instead of remaining an open system owned by users. In a 2016 TEDx talk, Muneeb shared his view of a more user-controlled internet, and he later detailed a trust-based internet architecture in his doctoral thesis at Princeton.

How Stacks Works?

Proof of Transfer (PoX) is the mechanism that ties Stacks to Bitcoin. It builds on Bitcoin’s Proof of Work model by using BTC to secure and operate the Stacks network, without requiring additional mining equipment or higher energy use.

Under PoX, miners send BTC to participants called Stackers, who lock STX, the network’s native token, to support consensus. The more BTC a miner commits, the greater their chance of being selected to produce the next block. The chosen miner receives newly issued STX and transaction fees, while Stackers earn BTC rewards for helping keep the network stable.

Once Stackers meet certain requirements, they can also become signers. In this role, they validate new blocks and approve sBTC deposits and withdrawals. Every Stacks block is written to the Bitcoin blockchain, which means reversing a Stacks transaction would require reversing a Bitcoin transaction. This structure allows Stacks to use Bitcoin’s security while adding smart contract functionality on top.

Key Features of Stacks

sBTC

sBTC is a Bitcoin-backed asset on the Stacks network that mirrors BTC at a 1:1 ratio. It allows Bitcoin holders to use their BTC in decentralized finance (DeFi) and other on-chain applications. sBTC operates through an open two-way peg managed collectively by signers and smart contracts.

To create sBTC, BTC is sent to a designated peg wallet on the Bitcoin blockchain. A decentralized group of signers confirms the deposit and issues the same amount of sBTC on Stacks. After that, sBTC can be used for trading, lending, or interacting with smart contracts, while the original BTC remains secured and verifiable on Bitcoin.

To convert back, sBTC is sent to the Stacks protocol, where it is burned and the matching amount of BTC is released from the peg wallet to a Bitcoin address. Each step is verified by multiple signers, reducing counterparty risk, avoiding single points of failure, and keeping all BTC verifiable on the Bitcoin base layer.

Clarity

Clarity is the smart contract language used on Stacks. It was designed to make contracts easier to read and verify, lowering the risk of unexpected behavior after deployment. Clarity contracts run directly on the blockchain instead of being compiled, allowing anyone to review the contract logic before it executes.

Because Stacks blocks are tied to Bitcoin blocks, Clarity contracts can also reference Bitcoin data. For example, a contract can check whether a specific Bitcoin transaction has occurred before allowing an action on Stacks. This makes it possible to build applications and financial tools that respond to Bitcoin’s state while operating on Stacks.

Dual stacking

Dual stacking is a Stacks feature that lets participants earn rewards paid in Bitcoin. Users can lock BTC to mint sBTC and then enroll in dual stacking to receive rewards distributed in sBTC. Locking STX at the same time increases the share of rewards earned.

While assets are enrolled, they can still be used in decentralized applications on Stacks, and rewards are distributed at the end of each cycle based on participation.

Use Cases

• Bitcoin DeFi: Developers can build lending, trading, and yield applications that use Bitcoin as collateral, expanding its use in decentralized finance.
• Non-fungible tokens (NFTs): NFTs can be issued and managed through Clarity smart contracts on Stacks, with transactions anchored and settled on the Bitcoin blockchain.
• Identity: The Blockchain Naming System (BNS) allows users to register decentralized names and namespaces, linking on-chain identities to off-chain data without central control.

What is the STX Token?

STX is the native token of the Stacks ecosystem and serves several functions within the network:

• Network fees: Transactions and application interactions on Stacks are paid in STX. These fees go to miners who process transactions and help maintain network stability.
• Stacking rewards: By locking STX, users take part in the PoX system and earn BTC rewards for contributing to network security and operations.
• Incentives: New STX tokens are issued to miners for producing blocks on the Layer 2 network. Signers who support asset transfers from Stacks back to Bitcoin, known as peg-out operations, also receive STX for maintaining dependable cross-chain transfers.

The STX token is listed on many platforms, including Poloniex, CoinDCX, Coinone and Crypto.com. If you’re looking to list your token on similar platforms, understanding the token listing process and crypto exchange listing fees is essential.

Conclusion

Stacks is a Layer 2 network that brings smart contracts and decentralized applications to Bitcoin without compromising its security or design. By connecting directly to Bitcoin through PoX, Stacks supports use cases such as DeFi, NFTs, and programmable Bitcoin-based assets. With tools like Clarity, sBTC, and dual stacking, it offers more flexible ways to use Bitcoin while keeping everything anchored to its base layer.

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