{"id":190182,"date":"2024-02-23T13:24:47","date_gmt":"2024-02-23T13:24:47","guid":{"rendered":"https:\/\/www.techopedia.com\/?p=190182"},"modified":"2024-02-23T13:39:27","modified_gmt":"2024-02-23T13:39:27","slug":"stacks-explained-will-stacks-l2-unlock-bitcoins-multi-billion-dollar-defi-economy","status":"publish","type":"post","link":"https:\/\/www.techopedia.com\/stacks-l2-unlock-bitcoins-defi-economy","title":{"rendered":"Stacks Explained: Will Stacks L2 Unlock Bitcoin\u2019s Multi-billion Dollar DeFi Economy?"},"content":{"rendered":"<p><span>Stacks (STX), a leading <\/span><a href=\"https:\/\/www.techopedia.com\/definition\/layer-two-l2\"><span>Layer 2<\/span><\/a><span> network on <\/span><a href=\"https:\/\/www.techopedia.com\/definition\/27193\/bitcoin-btc\"><span>Bitcoin<\/span><\/a><span> (BTC), is garnering investor interest ahead of a key network upgrade dubbed \u201cNakamoto\u201d that could become a catalyst event in unlocking the multi-billion dollar DeFi potential of Bitcoin.<\/span><\/p>\n<p><span>April 2024 will be a defining month for Stacks, with the network slated to implement the Nakamoto upgrade in the same month as the highly-anticipated <\/span><a href=\"https:\/\/www.techopedia.com\/definition\/halving\"><span>Bitcoin halving<\/span><\/a><span> event.<\/span><\/p>\n<p><span>Why is the upcoming <\/span><span>Stacks upgrade<\/span><span> important? Will the <\/span><span>STX crypto<\/span><span> add to its 70% year-to-date gain?\u00a0<\/span><\/p>\n<figure id=\"attachment_190202\" aria-describedby=\"caption-attachment-190202\" style=\"width: 1283px\" class=\"wp-caption aligncenter\"><img decoding=\"async\" src=\"https:\/\/www.techopedia.com\/wp-content\/uploads\/2024\/02\/Stacks.png\" alt=\"Stacks: STX One Year Price Chart\" width=\"1283\" height=\"665\" class=\"wp-image-190202 size-full\" srcset=\"https:\/\/www.techopedia.com\/wp-content\/uploads\/2024\/02\/Stacks.png 1283w, https:\/\/www.techopedia.com\/wp-content\/uploads\/2024\/02\/Stacks-300x155.png 300w, https:\/\/www.techopedia.com\/wp-content\/uploads\/2024\/02\/Stacks-1024x531.png 1024w, https:\/\/www.techopedia.com\/wp-content\/uploads\/2024\/02\/Stacks-768x398.png 768w, https:\/\/www.techopedia.com\/wp-content\/uploads\/2024\/02\/Stacks-1200x622.png 1200w\" sizes=\"(max-width: 1283px) 100vw, 1283px\" \/><figcaption id=\"caption-attachment-190202\" class=\"wp-caption-text\">Stacks: STX One Year Price Chart (<a href=\"https:\/\/coinmarketcap.com\/currencies\/stacks\/\" target=\"_blank\">CoinMarketCap<\/a>)<\/figcaption><\/figure>\n<p><span>In this article, we take an in-depth look at the project to answer these questions.<\/span><\/p>\n<p><span><div class=\"su-note\"  style=\"border-color:#dddddd;border-radius:3px;-moz-border-radius:3px;-webkit-border-radius:3px;\"><div class=\"su-note-inner su-u-clearfix su-u-trim\" style=\"background-color:#f7f7f7;border-color:#ffffff;color:#333333;border-radius:3px;-moz-border-radius:3px;-webkit-border-radius:3px;\"><\/span><\/p>\n<h2><span id=\"key_takeaways\">Key Takeaways<\/span><\/h2>\n<ul>\n<li aria-level=\"1\"><span>A key Stacks network upgrade called Nakamoto is scheduled for April 2024.<\/span><\/li>\n<li aria-level=\"1\"><span>The Nakamoto upgrade will coincide with Bitcoin\u2019s 4th halving event.<\/span><\/li>\n<li aria-level=\"1\"><span>Nakamoto will increase network security, reduce Maximal Extractable Value (MEV), and enable faster transactions.<\/span><\/li>\n<li aria-level=\"1\"><span>The upgrade could spur DeFi activity on Bitcoin.<\/span><\/li>\n<\/ul>\n<p><span><\/div><\/div><\/span><\/p>\n<p><span><div>\n    <section class=\"toc-sticky w-100 bg-white \">\n        <div class=\"toc-sticky__container container\">\n            <div class=\"toc-sticky__open d-flex align-items-end\" data-bs-toggle=\"collapse\"\n                 aria-controls=\"multiCollapse1\"\n                 data-bs-target=\"#multiCollapse1\">\n                <button\n                        class=\"btn btn-primary collapse-action-btn p-1 rounded-circle\"\n                        type=\"button\"\n                >\n                    <i class=\"icon-chevron-up\"><\/i>\n                <\/button>\n                <span id=\"toc-current-title\" class=\"d-flex align-items-center\">\n                    Table of Contents\n                <\/span>\n                <span class=\"toc-main-title-permanent\">Table of Contents<\/span>\n            <\/div>\n            <div\n                    class=\"collapse my-3\"\n                    id=\"multiCollapse1\"\n            >\n                <ol class=\"StepProgress\">\n                                                                        <li class=\"StepProgress-item current\">\n                                                <div class=\"StepProgress-item__group\">\n                            <a data-id=\"key_takeaways\"\n                               onclick=handleScrollToTitle(\"key_takeaways\")\n                               class=\"StepProgress-item__link\" data-level=\"2\">Key Takeaways<\/a>\n                                                    <\/div>\n                                                <\/li>\n                                                                        <li class=\"StepProgress-item\">\n                                                <div class=\"StepProgress-item__group\">\n                            <a data-id=\"what_is_stacks_stx\"\n                               onclick=handleScrollToTitle(\"what_is_stacks_stx\")\n                               class=\"StepProgress-item__link\" data-level=\"2\">What is Stacks (STX)?<\/a>\n                                                    <\/div>\n                                                <\/li>\n                                                                        <li class=\"StepProgress-item\">\n                                                <div class=\"StepProgress-item__group\">\n                            <a data-id=\"why_is_the_stacks_nakamoto_upgrade_significant\"\n                               onclick=handleScrollToTitle(\"why_is_the_stacks_nakamoto_upgrade_significant\")\n                               class=\"StepProgress-item__link\" data-level=\"2\">Why is the Stacks Nakamoto Upgrade Significant?<\/a>\n                                                    <\/div>\n                                                <\/li>\n                                                                        <li class=\"StepProgress-item\">\n                                                <div class=\"StepProgress-item__group\">\n                            <a data-id=\"stx_tokenomics\"\n                               onclick=handleScrollToTitle(\"stx_tokenomics\")\n                               class=\"StepProgress-item__link\" data-level=\"2\">STX Tokenomics<\/a>\n                                                    <\/div>\n                                                <\/li>\n                                                                        <li class=\"StepProgress-item\">\n                                                <div class=\"StepProgress-item__group\">\n                            <a data-id=\"the_bottom_line\"\n                               onclick=handleScrollToTitle(\"the_bottom_line\")\n                               class=\"StepProgress-item__link\" data-level=\"2\">The Bottom Line<\/a>\n                                                    <\/div>\n                                                <\/li>\n                                                                        <li class=\"StepProgress-item\">\n                                                <div class=\"StepProgress-item__group\">\n                            <a data-id=\"faqs\"\n                               onclick=handleScrollToTitle(\"faqs\")\n                               class=\"StepProgress-item__link\" data-level=\"2\">FAQs<\/a>\n                                                    <\/div>\n                                                <\/li>\n                                    <\/ol>\n                <div class=\"toc-sticky__container__disperse\"><\/div>\n                <div class=\"toc-sticky__btn-top justify-content-center\">\n                    <button class=\"btn btn-link d-flex align-items-center\" onclick={btnTop()}><p>Show Full Guide<\/p><img decoding=\"async\"\n                                src=\"\/wp-content\/plugins\/table-of-contents\/assets\/images\/arrow-up-circle.svg\"\n                                alt=\"arrow-up-circle\">\n                    <\/button>\n                <\/div>\n            <\/div>\n        <\/div>\n    <\/section>\n    <div class=\"toc-sticky-list\">\n        <div class=\"toc-sticky__container container\">\n            <div class=\"toc-sticky__open d-flex align-items-end\" data-bs-toggle=\"collapse\" aria-controls=\"multiCollapse2\" data-bs-target=\"#multiCollapse2\">\n                <button class=\"btn btn-primary collapse-action-btn p-1 rounded-circle\"\n                        type=\"button\">\n                    <i class=\"icon-chevron-up up\"><\/i>\n                <\/button>\n                <span id=\"toc-current-title\" class=\"d-flex align-items-center\">\n                    Table of Contents\n                <\/span>\n            <\/div>\n            <div  class=\"collapse my-3\" id=\"multiCollapse2\">\n                <ol class=\"StepProgress\">\n                    \t\t\t\t\t \t\t\t\t\t                                                     <li class=\"StepProgress-item current \">\n                                                    <div class=\"StepProgress-item__group\">\n                                <a data-id=\"key_takeaways\"\n                                   onclick=handleScrollToTitle(\"key_takeaways\")\n                                   class=\"StepProgress-item__link\"\n                                   data-level=\"2\">Key Takeaways<\/a>\n                                                            <\/div>\n                                                    <\/li>\n                    \t\t\t\t\t \t\t\t\t\t                                                     <li class=\"StepProgress-item \">\n                                                    <div class=\"StepProgress-item__group\">\n                                <a data-id=\"what_is_stacks_stx\"\n                                   onclick=handleScrollToTitle(\"what_is_stacks_stx\")\n                                   class=\"StepProgress-item__link\"\n                                   data-level=\"2\">What is Stacks (STX)?<\/a>\n                                                            <\/div>\n                                                    <\/li>\n                    \t\t\t\t\t \t\t\t\t\t                                                     <li class=\"StepProgress-item \">\n                                                    <div class=\"StepProgress-item__group\">\n                                <a data-id=\"why_is_the_stacks_nakamoto_upgrade_significant\"\n                                   onclick=handleScrollToTitle(\"why_is_the_stacks_nakamoto_upgrade_significant\")\n                                   class=\"StepProgress-item__link\"\n                                   data-level=\"2\">Why is the Stacks Nakamoto Upgrade Significant?<\/a>\n                                                            <\/div>\n                                                    <\/li>\n                    \t\t\t\t\t \t\t\t\t\t\n\t\t\t\t\t\t <span class=\"show_moretoc\">Show Full Guide<\/span>\n\t\t\t\t\t\t \t\t\t\t\t \t\t\t\t\t\t  \t\t\t\t\t                                                      <li class=\"StepProgress-item ms_hidetoc\">\n                                                    <div class=\"StepProgress-item__group\">\n                                <a data-id=\"stx_tokenomics\"\n                                   onclick=handleScrollToTitle(\"stx_tokenomics\")\n                                   class=\"StepProgress-item__link\"\n                                   data-level=\"2\">STX Tokenomics<\/a>\n                                                            <\/div>\n                                                    <\/li>\n                    \t\t\t\t\t \t\t\t\t\t \t\t\t\t\t\t  \t\t\t\t\t                                                      <li class=\"StepProgress-item ms_hidetoc\">\n                                                    <div class=\"StepProgress-item__group\">\n                                <a data-id=\"the_bottom_line\"\n                                   onclick=handleScrollToTitle(\"the_bottom_line\")\n                                   class=\"StepProgress-item__link\"\n                                   data-level=\"2\">The Bottom Line<\/a>\n                                                            <\/div>\n                                                    <\/li>\n                    \t\t\t\t\t \t\t\t\t\t \t\t\t\t\t\t  \t\t\t\t\t                                                      <li class=\"StepProgress-item ms_hidetoc\">\n                                                    <div class=\"StepProgress-item__group\">\n                                <a data-id=\"faqs\"\n                                   onclick=handleScrollToTitle(\"faqs\")\n                                   class=\"StepProgress-item__link\"\n                                   data-level=\"2\">FAQs<\/a>\n                                                            <\/div>\n                                                    <\/li>\n                                    <\/ol>\n            <\/div>\n            <div class=\"toc-sticky__container__disperse\"><\/div>\n        <\/div>\n    <\/div>\n<\/div>\n\n<script id=\"toc-js\">\n    window.addEventListener(\"DOMContentLoaded\", () => {\n        const header = document.querySelector(\".header_wrapper\");\n\n        const pageLegend = document.querySelector('#multiCollapse1');\n        const pageLegendList = document.querySelector('#multiCollapse2');\n        const pageLegendCollapse = new bootstrap.Collapse(pageLegend, {toggle: document.querySelector(\".toc-sticky\").classList.contains('sticky')});\n\n        \/**\n         * Changing current title\n         *\/\n        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targetListStatic.getBoundingClientRect().height;\n\n            \/\/ -headerHeight so it won't be jumpy\n            const stop = targetListStatic.offsetTop + headerHeight + targetHeight;\n            const docBody =\n                document.documentElement || document.body.parentNode || document.body;\n            const hasOffset = window.pageYOffset !== undefined;\n\n            const applySticky = function () {\n                \/\/ cross-browser compatible scrollTop.\n                const scrollTop = hasOffset ? window.pageYOffset : docBody.scrollTop;\n\n                \/\/ if user scrolls to headerHeight from the top of the target div\n                if (scrollTop >= stop) {\n                    pageLegendCollapse.hide();\n                    \/\/ stick the div\n                    target.classList.add(\"sticky\");\n                    \/\/target.style.marginTop = `${headerHeight}px`;\n                } else {\n                    pageLegendCollapse.show();\n                   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const headerHeightDifference = window.innerWidth < 992 ? -30 : -15;\n        window.scrollTo({\n            top: el.offsetTop - 60 - headerHeightDifference - 10,\n        });\n    }\n<\/script>\n<\/span><\/p>\n<h2><span id=\"what_is_stacks_stx\">What is Stacks (STX)?<\/span><\/h2>\n<p><span>To fully grasp the importance of the upcoming <\/span><span>Nakamoto upgrade<\/span><span>, we first need to learn how it functions.\u00a0<\/span><\/p>\n<p><span>Stacks is a blockchain layer that brings <\/span><a href=\"https:\/\/www.techopedia.com\/definition\/32499\/smart-contract\"><span>smart contract<\/span><\/a><span> functionalities and <\/span><a href=\"https:\/\/www.techopedia.com\/definition\/33409\/decentralized-application-dapp\"><span>decentralized applications<\/span><\/a><span> (dApps) to Bitcoin. It uses the Bitcoin blockchain as a settlement layer and enables the use of BTC beyond <\/span><a href=\"https:\/\/www.techopedia.com\/definition\/25777\/peer-to-peer-network-p2p-network\"><span>peer-to-peer<\/span><\/a><span> payments and <\/span><a href=\"https:\/\/www.techopedia.com\/definition\/store-of-value-sov\"><span>store-of-value<\/span><\/a><span>.<\/span><\/p>\n<p><span>All Stacks blocks are recorded on Bitcoin, enabling transactions to be publicly visible on the Bitcoin <\/span><a href=\"https:\/\/www.techopedia.com\/definition\/30246\/blockchain\"><span>blockchain<\/span><\/a><span>. Concurrently, smart contracts on Stacks can read the Bitcoin state and can be triggered by Bitcoin transactions.\u00a0<\/span><\/p>\n<p><span>Stacks uses a <\/span><a href=\"https:\/\/www.techopedia.com\/definition\/consensus-algorithm-consensus-mechanism\"><span>consensus mechanism<\/span><\/a><span> called proof-of-transfer where <\/span><a href=\"https:\/\/www.techopedia.com\/definition\/32530\/mining-blockchain\"><span>miners<\/span><\/a><span> submit bids in BTC on the Bitcoin blockchain to win the chance to create the next block. The block creator earns <\/span><a href=\"https:\/\/www.techopedia.com\/definition\/33145\/block-reward\"><span>block rewards<\/span><\/a><span> in STX.\u00a0<\/span><\/p>\n<p><span>The BTC committed by miners for block building is distributed to a network of STX <\/span><a href=\"https:\/\/www.techopedia.com\/definition\/staking-blockchain-staking\"><span>stakers<\/span><\/a><span> (called Stackers) for participating in consensus. Stackers are responsible for keeping a check on miners.<\/span><\/p>\n<p><span>They are responsible for approving and validating newly proposed blocks. The responsibility and BTC rewards of Stackers are expected to increase following the introduction of a token called sBTC (More on that later).<\/span><\/p>\n<p><span>Stacks features customizable execution layers called subsets that support smart contracts and <\/span><a href=\"https:\/\/www.techopedia.com\/definition\/4805\/virtual-machine-vm\"><span>virtual machines<\/span><\/a><span>. Decentralized applications can customize their subnets to their needs and can make tradeoffs between <\/span><a href=\"https:\/\/www.techopedia.com\/definition\/decentralization\"><span>decentralization<\/span><\/a><span> and performance.<\/span><\/p>\n<h2><span id=\"why_is_the_stacks_nakamoto_upgrade_significant\">Why is the Stacks Nakamoto Upgrade Significant?<\/span><\/h2>\n<p><span>The Nakamoto upgrade is seen as a key upgrade not only for the <\/span><span>L2<\/span><span> network but also for the growth of DeFi activity on Bitcoin. Here is why the upcoming Nakamoto upgrade is a key moment for Stacks and the Bitcoin ecosystem:<\/span><\/p>\n<h3>1. Growth of Bitcoin DeFi<\/h3>\n<p><span>Bitcoin\u2019s lack of programmability has restricted BTC from being used as a store-of-value cryptocurrency. To unlock the value of the world\u2019s most valuable blockchain, L2 networks can bring smart contract programmability to the rigid Bitcoin network, enabling decentralized exchanges, crypto lending, and other DeFi activity.<\/span><\/p>\n<p><span>Although Stacks is the leading L2 on Bitcoin, the network is still nascent and faces issues such as slow transactions, security vulnerabilities, and <\/span><a href=\"https:\/\/www.techopedia.com\/definition\/maximal-extractable-value-mev#:~:text=What%20is%20Maximal%20Extractable%20Value,of%20transactions%20in%20a%20block.\"><span>maximal extractable value<\/span><\/a><span> (MEV) issues. The Nakamoto upgrade will address these problems creating better end-user and developer experience, which will ultimately accelerate the growth of DeFi on Bitcoin.<\/span><\/p>\n<p><strong>American Hedgefund Pantera Capital<\/strong><span> said in a <\/span><a href=\"https:\/\/panteracapital.com\/blockchain-letter\/the-absence-of-bad-things\/\" target=\"_blank\"><span>research note<\/span><\/a><span>:<\/span><span><br \/>\n<\/span><\/p>\n<blockquote><p><span>\u201cBitcoin is the most valuable, widely adopted, secure and decentralized cryptocurrency, and thus arguably the best candidate to act as a global settlement layer, and yet there is only a relatively small crypto economy built on it today.\u00a0 There is enormous value creation potential if even just a fraction of the $850bn+ capital base is deployed as liquidity in decentralized finance applications.\u201d\u00a0<\/span><\/p><\/blockquote>\n<h3>2. Precursor to sBTC<\/h3>\n<p><span>Nakamoto upgrade will prepare Stacks for a highly-anticipated feature called sBTC, which the project said will solve a &#8220;<\/span><a href=\"https:\/\/stx.is\/nakamoto\" target=\"_blank\"><span>holy grail<\/span><\/a><span>&#8221; problem for a decentralized BTC pegged token that does not exist in the market today.<\/span><\/p>\n<p><span>sBTC is a decentralized pegged BTC token on the chain that is operated by a fully permissionless, decentralized, dynamic set of crypto-incentivized Stackers.\u00a0<\/span><\/p>\n<p><span>An equivalent amount of sBTC tokens will be minted when users send BTC to a peg wallet on the Bitcoin chain. The sBTC token is similar to <\/span><a href=\"https:\/\/www.techopedia.com\/definition\/wrapped-bitcoin-wbtc\"><span>wrapped Bitcoin<\/span><\/a><span> (wBTC) on <\/span><a href=\"https:\/\/www.techopedia.com\/definition\/32571\/ethereum-cryptocurrency\"><span>Ethereum<\/span><\/a><span>, but without centralized actors enabling and managing the peg between the base and mirror tokens.<\/span><\/p>\n<p><span>Applications and end-users will be able to use sBTC for decentralized Bitcoin lending, Bitcoin-backed stablecoins, and other DeFi activity without compromising the security and decentralization promises of Bitcoin.<\/span><\/p>\n<p><strong>Hal Press, founder of crypto hedge fund North Rock Digital<\/strong><span>, said in a <\/span><a href=\"https:\/\/medium.com\/@halp1120\/stx-thesis-update-cd09b7f2cce8\" target=\"_blank\"><span>research note<\/span><\/a><span>:<\/span><\/p>\n<blockquote><p><span>\u201cThe sBTC peg can be extended to lock ordinals on L1 and use them on Stacks L2 instead, which would provide a faster, cheaper, and more programmable way to trade ordinals. Additionally, there is room to explore more traditional DeFi applications with sBTC such as lending.\u201d<\/span><\/p><\/blockquote>\n<h3>3. Faster Transactions on Stacks<\/h3>\n<p><span>At the time of writing, the block times of Stacks are as slow as the block times on Bitcoin. A single block is created every ten minutes due to the protocol only allowing one block proposer per Bitcoin block.\u00a0<\/span><\/p>\n<p><span>Following the Nakamoto upgrade, a miner will be able to produce many Stacks blocks per Bitcoin block instead of one. According to the<\/span><a href=\"https:\/\/github.com\/stacksgov\/sips\/blob\/6d27e7cf706df5a367d8714e6037226d741630de\/sips\/sip-021\/sip-021-nakamoto.md\" target=\"_blank\"> <span>Nakamoto upgrade draft<\/span><\/a><span>, the time taken for a Stacks transaction to be mined within a block will reduce from ten minutes to seconds.\u00a0<\/span><\/p>\n<h3>4. Increased Security by Anchoring to Bitcoin<\/h3>\n<p><span>Nakamoto upgrade will bring the Stacks L2 and Bitcoin L1 ever closer. The upgrade will require miners to add the indexed <\/span><a href=\"https:\/\/www.techopedia.com\/definition\/hash#:~:text=Each%20block%20contains%20a%20unique,the%20integrity%20of%20the%20blockchain.\"><span>block hash<\/span><\/a><span> of the latest block to their bidding transactions submitted on the Bitcoin blockchain (as explained earlier, Stacks miners bid in BTC to win a chance to create the next block).<\/span><\/p>\n<p><span>This process will anchor Stacks&#8217;s chain history to Bitcoin, ensuring that Stacks blocks and transactions are protected by 100% of Bitcoin\u2019s mining power. According to the <\/span><a href=\"https:\/\/github.com\/stacksgov\/sips\/blob\/6d27e7cf706df5a367d8714e6037226d741630de\/sips\/sip-021\/sip-021-nakamoto.md\" target=\"_blank\"><span>Nakamoto upgrade draft<\/span><\/a><span>, altering a transaction will be as hard as reversing a Bitcoin transaction following the upgrade.<\/span><\/p>\n<h3>5. Bitcoin Miner MEV Resistance<\/h3>\n<p><span>Bitcoin miners mine Stacks to increase their mining profits. The Stacks mining process is rather seamless for Bitcoin miners as bids to win the chance to mine blocks are submitted on the Bitcoin blockchain in BTC.\u00a0<\/span><\/p>\n<p><span>It was discovered that whenever <\/span><a href=\"https:\/\/www.f2pool.com\/\" target=\"_blank\"><span>F2Pool<\/span><\/a> \u2013\u00a0<span>one of the biggest Bitcoin mining pools in the world \u2013 created Bitcoin blocks, F2Pool would censor rival Stacks block-building bids and only include their bid in their Bitcoin block.\u00a0<\/span><\/p>\n<p><strong>Stacks research scientist jude.btc<\/strong><span> said on the <\/span><a href=\"https:\/\/forum.stacks.org\/t\/rfc-minimum-bid-pox-to-thwart-bitcoin-mev\/14675\" target=\"_blank\"><span>Stacks forums<\/span><\/a><span>:<\/span><\/p>\n<blockquote><p><span>\u201cF2Pool simply ignores other Stacks miners\u2019 block-commit transactions when creating a Bitcoin block, thereby ensuring that their Stacks miners\u2019 block-commit is the only block-commit in that Bitcoin block. Moreover, F2Pool\u2019s Stacks miner <\/span><i><span>only<\/span><\/i><span> mines in F2Pool-produced blocks.\u201d<\/span><\/p><\/blockquote>\n<p><span>F2Pool would extract maximum value from their Bitcoin block by creating Stacks blocks and earning the STX block rewards off it. Nakamoto upgrade will add conditions to the Stacks protocol that will prevent such censorship.<\/span><\/p>\n<h2><span id=\"stx_tokenomics\">STX Tokenomics<\/span><\/h2>\n<p><span>STX is the native token of Stacks. It is used to pay gas fees, for paying block rewards, and for providing added crypto-economic security to the network via stacking. In this section, we talk about the STX tokenomics and relevant market information:<\/span><\/p>\n<ul>\n<li aria-level=\"1\"><span>STX was the <\/span><a href=\"https:\/\/coinmarketcap.com\/currencies\/stacks\/\" target=\"_blank\"><span>29th largest cryptocurrency<\/span><\/a><span> with a market cap of $3.78 billion, as of 23 February 2024<\/span><\/li>\n<li aria-level=\"1\"><span>The token\u2019s total circulating supply <\/span><span>stood at 1.443 trillion, which was about 80% of its max supply of 1.818 trillion<\/span><\/li>\n<li aria-level=\"1\"><span>STX\u2019s all-time high stood at $3.61, hit on 16 November 2021.<\/span><\/li>\n<li aria-level=\"1\"><span>STX has gained 73% year-to-date, as of 23 February 2024<\/span><\/li>\n<li aria-level=\"1\"><a href=\"https:\/\/www.techopedia.com\/definition\/total-value-locked-tvl#:~:text=Total%20Value%20Locked%20(TVL)%20is,dApp%20is%20perceived%20to%20be.\"><span>Total value locked<\/span><\/a><span> (TVL) in Stacks hit an all-time high of $71.2 million in mid-February 2024.<\/span><\/li>\n<li aria-level=\"1\"><span>The reason for STX price rise and Stacks TVL record-high was the launch of STX20 protocol, the growth of decentralized exchanges, and the introduction of <\/span><a href=\"https:\/\/www.techopedia.com\/definition\/liquid-staking\"><span>liquid stacking protocols<\/span><\/a><span>.<\/span><\/li>\n<\/ul>\n<h2><span id=\"the_bottom_line\">The Bottom Line<\/span><\/h2>\n<p><span>Stacks and other Bitcoin L2s are key to the evolution of Bitcoin into a vibrant and secure DeFi ecosystem. But first, the network has to successfully implement the upcoming Nakamoto upgrade which will enable higher network throughput, lower fees, and improved security.\u00a0<\/span><\/p>\n<h2><span id=\"faqs\">FAQs<\/span><\/h2>\n<div class=\"man_faq_sec\" itemscope itemtype=\"https:\/\/schema.org\/FAQPage\"><\/time><section class=\"ms_faq ms_card \" ><div itemscope itemprop=\"mainEntity\" itemtype=\"https:\/\/schema.org\/Question\"><div class=\"accordionButton\"><h3 itemprop=\"name\">What is Stacks crypto?<\/h3> <\/div>\n<div class=\"accordionContent\" itemscope itemprop=\"acceptedAnswer\" itemtype=\"https:\/\/schema.org\/Answer\" style=\"display:none;\"><p itemprop=\"text\">Stacks is a blockchain layer that brings smart contract functionalities and decentralized applications to Bitcoin. It uses the Bitcoin blockchain as a settlement layer and enables the use of BTC beyond payments and store-of-value.<\/p>\r\n                <\/div><\/div><\/section>\n<section class=\"ms_faq ms_card \" ><div itemscope itemprop=\"mainEntity\" itemtype=\"https:\/\/schema.org\/Question\"><div class=\"accordionButton\"><h3 itemprop=\"name\">Does Stacks have a token?<\/h3> <\/div>\n<div class=\"accordionContent\" itemscope itemprop=\"acceptedAnswer\" itemtype=\"https:\/\/schema.org\/Answer\" style=\"display:none;\"><p itemprop=\"text\">STX is the native token of Stacks. It is used to pay gas fees and block rewards and provide crypto-economic security to the network via stacking.<\/p>\r\n                <\/div><\/div><\/section>\n<section class=\"ms_faq ms_card \" ><div itemscope itemprop=\"mainEntity\" itemtype=\"https:\/\/schema.org\/Question\"><div class=\"accordionButton\"><h3 itemprop=\"name\">What will the STX token be used for?<\/h3> <\/div>\n<div class=\"accordionContent\" itemscope itemprop=\"acceptedAnswer\" itemtype=\"https:\/\/schema.org\/Answer\" style=\"display:none;\"><p itemprop=\"text\">The STX token is used to pay gas fees, as block rewards, and provides crypto-economic security to the network via stacking.<\/p>\r\n                <\/div><\/div><\/section>\n<\/div>","protected":false},"excerpt":{"rendered":"<p>Stacks (STX), a leading Layer 2 network on Bitcoin (BTC), is garnering investor interest ahead of a key network upgrade dubbed \u201cNakamoto\u201d that could become a catalyst event in unlocking the multi-billion dollar DeFi potential of Bitcoin. April 2024 will be a defining month for Stacks, with the network slated to implement the Nakamoto upgrade [&hellip;]<\/p>\n","protected":false},"author":286557,"featured_media":122965,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_lmt_disableupdate":"no","_lmt_disable":"","om_disable_all_campaigns":false,"footnotes":""},"categories":[601,602],"tags":[],"category_partsoff":[],"class_list":["post-190182","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blockchain","category-cryptocurrency"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v24.2 (Yoast SEO v24.5) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Will Stacks L2 Unlock Bitcoin\u2019s Multi-billion Dollar DeFi Economy?<\/title>\n<meta name=\"description\" content=\"Stacks is gearing for the highly-anticipated Nakamoto upgrade that will bring it closer to the Bitcoin blockchain. 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