Bittime - Stacks, Bitcoin's largest Layer 2 by market cap, is gearing up for its biggest hard fork (protocol change): the Nakamoto Upgrade.
“Stacks is transforming into a true Layer 2,” said Rena Shah, VP of Bitcoin products at Trust Machines, a company that has supported and built on Stacks for years.
The Nakamoto Upgrade presents a solution that is expected to reduce Stacks block times to five to 10 seconds, from the current 10-minute confirmations inherited from Bitcoin.
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Stacks has been growing rapidly in recent months. The STX token, with a market cap of $3.9 billion, is up 250% in the past year, now trading at $2.71.
The Rise of Bitcoin
Stacks is looking to capitalize on Bitcoin's recent rise. "Bitcoin's second season will see users finally separate BTC as an asset from Bitcoin as infrastructure," said Muneeb Ali, co-creator of Stacks.
Also read: Stacks: Bitcoin DeFi Has the Potential to Surpass Ethereum
"Bitcoin scaling layers of all kinds will benefit (from Ordinals) as developer awareness of the protocol grows and user demand for faster, cheaper, and more secure experiences that are native to or close to Bitcoin increases."
Driven by Ordinals, which has sparked a wave of new users and development, Bitcoin's Layer 2 ecosystem is starting to expand, as the industry's oldest blockchain finally makes its move after years of stagnation.
What is Nakamoto Upgrade?
Launched in October 2018, Stacks stores hashed copies of transactions on the Bitcoin blockchain, rewarding users who lock their STX on the network, known as “stackers.”
Stacks pays stackers with direct payouts in BTC while rewarding “miners” who stake their BTC with newly minted STX.
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According to Shah, a "true" Layer 2 essentially depends on how assets are locked from Layer 1 to Layer 2. The benchmark mechanism, he said, is critical.
Stacks will separate its blocks from Bitcoin blocks so that Stacks miners can generate multiple blocks in a certain time period.
The upgrade will also protect the blockchain from “reorgs” (this occurs when node operators replace blocks because a longer chain has been created) by connecting the Stacks forking framework directly to Bitcoin.
Also read: Nakamoto Upgrade on Blockchain Stacks (STX): This is what you need to know!
Why is all this important? According to Shah, it's all about finality. Stacks is “recycling” the finality of Bitcoin, he said, which is ultimately the most important part of the network.
Bitcoin as a medium of exchange
Much has been said about Bitcoin's store of value properties, but with the Lightning Network's slow adoption, high transaction fees, and slow block times, payments are lagging behind.
Shah explains that the Bitcoin exchange phase is still in its infancy, but now Stacks may finally be able to help it grow.
Transforming Bitcoin from an investment hedge or “freedom money” to a more DeFi- friendly use case is “a natural progression for an asset class that has been here for a while,” Shah said.
He cited Bitcoin's $1.3 trillion market cap locked in as an example, and how it could be better leveraged.
“Imagine what would happen if those trillions were used in Ondo or Ethena,” he asked. The Stacks upgrade is a monumental step towards making DeFi a Bitcoin reality, Shah added.
Not Compatible with EVM
Stacks takes a slightly different approach than most of the rest of the crypto industry. It will not be compatible with the Ethereum Virtual Machine (EVM), as is the case with Rootstock.
Instead, Stacks will seek to integrate alternative networks in the crypto ecosystem. According to Shah, these include Near Protocol, Solana, and Aptos, at least to start with.
Stacks is the third-largest Layer 2 Bitcoin by total value locked, holding $152 million in assets, compared with $996 million for Merlin and $199 million for Rootstock, according to DeFiLlama.
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"The Nakamoto Upgrade, and the work that has been done by the Stacks ecosystem as a whole, is a huge contributor to the resurgent need for Layer 2 Bitcoin," said Ali.
Shah added that this update is very optimistic, along with the development surge generated by Ordinals and the Layer 2 landscape in general, Shah told The Defiant.
With Bitcoin puritanism waning, he explains, building with Stacks makes more and more sense.
As initial preparations, the Nakamoto Upgrade implementation window takes place on April 22, while the hard fork is expected to occur during the first week of June.
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Monitor price chart movements of Bitcoin (BTC), Ethereum (ETH), Solana (SOL) and other cryptos to find out today's crypto market trends in real-time on Bittime.
Also read:
Stacks Approaching Record High Crypto Prices, What Are Its Advantages Over Bitcoin?
Polkadot Rises, Stacks Hits All Time High and AI Altcoins Start to Seem
Bitcoin NFT, A Multifaceted Symbiosis
Smart Contract Total Surge Implemented with Nakamoto Upgrade Plan in $STX Stacks
DISCLAIMER: This article is informational in nature and is not an offer or invitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.
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