Are Bitcoin NFTs and L2s The Next Big Thing? Breaking Down The Stacks Revolution
Are Bitcoin NFTs and L2s The Next Big Thing? Breaking Down The Stacks Revolution
Bitcoin NFTs are having a moment… again!
Hey ya’ll! This article was originally published on May 4th in conjunction with Web3 Academy here. I encourage you to check out Web3 Academy and subscribe to their newsletter. They’re absolutely worth reading on a daily basis.
Introducing… Stacks
As the world of blockchain and cryptocurrency continues to evolve, innovative solutions such as the Stacks ecosystem emerge to address the limitations of existing networks.
Stacks brings a new level of utility and functionality to Bitcoin.
In this intro, we will delve into the intricacies of the Stacks ecosystem, its unique tokenomics, the innovative concept of Bitcoin Ordinals, and notable NFT projects building on the platform.
Stacks Ecosystem Overview
Stacks is a L2 (Layer-2) solution built on top of Bitcoin, designed to bring smart contracts and decentralized applications to the Bitcoin ecosystem.
Stack’s approach is inspired by Satoshi's early vision of generalizing Bitcoin, sharing CPU power across networks, and increasing the total strength. By creating a separate network with its own token, Stacks aims to maintain decentralization without relying on a federation.
Stacks emphasizes a layered approach to solving the blockchain trilemma of decentralization, scalability, and security. Bitcoin serves as the foundational settlement layer, offering the highest levels of decentralization, security, and immutability.
The Stacks layer sits on top of Bitcoin, enabling smart contract functionality and programmability. Additional layers, such as Hiro's Subnets, provide scalability and speed.
This approach allows for a separation of concerns, keeping Bitcoin's core functionality intact while extending its capabilities.
(Recent graph highlighting Stacks' current market cap, hovering at around $1.06B as of April 23rd)
Stacks differs from other Layer-2 solutions like Lightning, which only scales existing Bitcoin functionality without adding new features. Stacks also contrasts with Ethereum Layer-2 solutions like Polygon or Arbitrum, as it maintains a strong connection to the underlying Bitcoin layer.
Its entire transaction history is recorded on the Bitcoin blockchain, making it as difficult to re-org as Bitcoin itself.
The introduction of the Stacks token, $STX, provides economic incentives for miners to produce blocks honestly and offers a way to grow the chain. Unlike many tokens with no use case, Stacks has real utility, as it allows users to make Bitcoin productive in a decentralized manner.
The Stacks ecosystem aims to build a network of financial systems and decentralized software products that use Bitcoin as their foundation.
However, it's important to note that Stacks is still in its early stages. The current priority is to tightly integrate Stacks with Bitcoin, enabling seamless interaction with decentralized applications.
With this context in mind, a deeper understanding of the Stacks ecosystem can be gained by exploring its technical details, starting with the Proof of Transfer (PoX) consensus mechanism.
This mechanism allows Stacks to build upon Bitcoin's security and decentralization while adding new functionality, making it a promising solution for the future of the Bitcoin ecosystem.
PoX is an exciting, novel consensus mechanism, and I encourage you to read and learn more about it here.
Last month, Stacks announced the launch of Stacks 2.1. As Rick Sebastiaan (responsible for community growth for Stacks) mentioned recently on their Discord server, this means:
Stacking improvements (continuous stacking)
New smart contract functions for Clarity, making it easier to write Clarity contracts that react to Bitcoin transactions
Fixes for Clarity to unlock better bridges
Decentralized mining pools
Bitcoin-native Assets and Smart Contract Control
Stacks and Bitcoin
The upcoming sBTC peg for Stacks offers economic security through a 1:1 Bitcoin backing and incentive engineering.
This decentralized peg system features open membership for signers and relies on PoX (Proof of Transfer) consensus, Bitcoin finality, and Bitcoin rewards for safety, incentive compatibility, and liveliness.
I’ve written about PoX before, so I encourage you to check out this article here if you’d like to learn more.
Upon the Nakamoto release (slated for the 4th quarter of 2023), Stacks will offer several advantages over other blockchains, including being secured by the entire hash power of Bitcoin, a trust-minimized Bitcoin peg mechanism, atomic BTC swaps, assets owned by BTC addresses, a secure programming language (Clarity) for smart contracts, knowledge of the full Bitcoin state, and fast, scalable transactions that settle on Bitcoin.
Clarity is similar to Solidity (Ethereum’s native programming language) but differs in a number of technical regards. To dig deeper, I recommend this article that outlines more of the key differences on a technical level.
The native token of the Stacks network, $STX, is used to pay transaction fees and can be locked directly on the network for earning $BTC rewards through a process called stacking (not staking), which helps secure the network by signaling consensus.
The total supply of $STX is 1.82 billion tokens, with 1.37 billion unlocked. $STX has a fixed, predictable future supply that halves every four years (similar to Bitcoin) and will reach a total supply of 1.82 billion by 2050.
Ordinals
Bitcoin Ordinals are known as digital artifacts (like NFTs) that gained traction in February 2023.
While Bitcoin doesn't natively support NFTs, Ordinals inscribe satoshis with unique information, creating an NFT-like token on the Bitcoin blockchain.
Ordinals are distinct from Stacks NFTs, which are by contrast not stored directly on Bitcoin. Stacks, with its native functionality to mint NFTs, is expected to grow in popularity if Bitcoin Ordinals continue to gain traction.
(Since their inception in mid-December of 2022, inscriptions (ordinals) have grown steadily (source: dgtl_assets on Dune))
In the upcoming Nakamoto release, further speed and scalability upgrades will be introduced to enhance Stacks' transaction capabilities. Many in the crypto community, such as crypto VC fund North Rock LP, are betting on Stacks to increase the utility of Bitcoin as a settlement layer and solve the Bitcoin scalability dilemma.
Several DeFi and NFT projects are being built in the Stacks ecosystem, which, along with Bitcoin Ordinals, offer new possibilities for innovation and creativity on top of Bitcoin.
However, they also face challenges such as low adoption rates and skepticism within the crypto community. The long-term success of Stacks and Bitcoin NFTs will depend on whether they can maintain the positive momentum and continue to deliver value to the broader ecosystem.
For the analytically minded, I highly suggest @dgtl_assets’ Bitcoin Ordinals dashboard here.
There you’ll find a handful of insightful metrics that also break down what types of files people are inscribing into blocks. I have no doubt we will see increasingly clever methods of compression to utilize inscriptions in the future.
Stacks Marketplaces
The Stacks ecosystem is home to several NFT marketplaces, each offering unique features and catering to different audiences within the space.
At the moment, the most prominent and active by far is Gamma, but Superfandom is also worth looking into. Ordswap has also become popular in the last couple of months, as the first trustless Ordinals marketplace and wallet built on Bitcoin.
Gamma, the premier no-code NFT marketplace on Stacks, sometimes experiences slow browsing during high-traffic periods, and the developers are striving to enhance the platform's capacity.
To purchase NFTs (Stacks-native, not Ordinals) on Gamma, one must acquire a wallet (Hiro) and transfer $STX into it.
Gamma live auctions feature various categories, including collectibles, fine art, photography, communities, utility, and music.
Though still in the early stages, Gamma has attracted numerous users who are actively participating in trading and developing projects with potential utility (or the prospect of it).
You’ll quickly notice that Gamma is chiefly divided into Ordinals and Stacks on the site, and the process for actually purchasing inscriptions is notably different than a typical NFT listing on OpenSea. Dutch auctions are becoming increasingly popular, as is Sparrow Wallet.
NFT Projects on Stacks
For the sake of brevity, I will briefly touch on a few NFT projects within the Stacks ecosystem that I think are worth checking out and learning more about.
Exploring the top collections on Gamma is also a great way to see what’s trending in the space.
Purchasing Ordinals and browsing collections have gotten notably easier in the last couple of months, and many of the initial pain points from a usability standpoint have been ironed out.
The following collections are a mixture of Ordinals collections and Stacks-native NFTs. The two are different, as is the buying process.
Bitcoin Magazine Historic Covers
Bitcoin Magazine stands as the most well-established and time-honored provider of news, insights, and expert opinions on Bitcoin.
This Ordinals collection is a unique series that commemorates Bitcoin's history by featuring 1/1 inscriptions of the initial 23 covers of the publication. Successful bidders can obtain a free physical copy of their corresponding cover.
At the moment, this collection and historical inscriptions are trending, so it’s safe to say that inscriptions and nostalgia go hand-in-hand. This is proving to be a theme within the Ordinals space.
Megapont
Megapont, an NFT project on Stacks, features a fictional universe where rapid mutations accelerated Earth species' evolution.
The Stacks NFT venture, Megapont Ape Club, focuses on chimpanzees and was created by Russian pixel artists Dmitry and Yuriy, influenced by early computer art and 2D games.
$MEGACOIN is the token for Megapont's web3 community, while $MEGA is its governance token.
MegaKongs, launched on Ethereum in 2022, extends the Megapont ecosystem with an identical utility to Megapont Apes, offering full membership and a total supply of 6,000.
Megapont is one of the most active Stacks-native communities, with an active social media presence and Discord server. For Megapont Ape Club, the current floor price is sitting at ~588 $STX (or 434$).
Bitcoin Birds
Abraham Finlay, a 12-year-old with a passion for birds and Bitcoin, created Bitcoin Birds after volunteering for a wildlife rescue group.
His digital collection of 400 distinct pixel art birds, sold on Stacks, supports real-life birds by donating part of the proceeds to wildlife aid. The popular series led to a pre-mint for his next collection, Turtles, starting on April 12th.
Definitely one of the cheekier projects, but the total volume and floor price for this collection is nothing to snuff at. The current floor price as of writing is 995 $STX (or ~734.56 $).
Satoshibles
5000 algorithmically generated crypto collectibles, which are unique and are supported by a cross-chain NFT bridge allowing assets to be moved between Ethereum and Stacks. The project claims that this is the first NFT project of its kind to have such a bridge.
The collection is viewable on both Opensea and Gamma, with the total volume for the collection exceeding 2064 $ETH ($3,805,799.28 USD).
Moving Forward
The Stacks ecosystem has the potential to unlock a new era of innovation and creativity within the cryptocurrency space.
By leveraging the security and reliability of the Bitcoin blockchain, Stacks brings smart contract functionality and a wide range of decentralized applications, including NFTs and DeFi projects, to the forefront.
With the upcoming Nakamoto release, Stacks aims to solidify its position as a major player in the industry by further improving its speed, scalability, and overall user experience. As more developers and entrepreneurs embrace the platform, the future of the Stacks ecosystem appears promising.
The growth of NFT marketplaces on the Stacks platform, such as Gamma, Ordswap, and Superfandom, signifies the increasing interest in Stacks-based NFT projects.
These marketplaces not only offer unique features and cater to diverse audiences but also contribute to the broader adoption of NFTs on the Stacks blockchain.
As the Stacks ecosystem continues to evolve and mature, we hope to see even more innovative and engaging NFT projects emerge, further driving the utility and adoption of both Stacks and the broader cryptocurrency space.
Thanks for reading, let me know what you think about Stacks in the comments!
References:
https://finbold.com/review/stacks-co/
https://medium.com/@halp1120/stacks-thesis-62ce0599c77f
https://www.stacks.co/explore/discover-apps
https://www.stacksboard.art/
https://www.megapont.com/
https://www.bitcoinbirds.com/
https://stacksparrots.com/
https://satoshibles.com/
https://stacksonchain.com/dashboards/nftalpha
https://twitter.com/louiseivanvp/status/1628766147771244545
https://www.jumpnews.xyz/news/stacks-stx-bitcoin