In this guide, we are looking at Stacks, a layer-1 smart contract-enabled blockchain that depends on Bitcoin for its security. Specifically, we will consider its features which include hosting DeFi Apps and Bitcoin NFTs, plus providing you with a brief tutorial on how to buy your first Bitcoin NFT through the Gamma.io marketplace.
Stacks is a smart contract-enabled blockchain attached to the Bitcoin network enabling the introduction of decentralized apps (dApps) and non-fungible tokens (NFTs) to the premier decentralized network.
Stacks was initially launched in 2019 under the name Blockstacks by the company Blockstack PBC and was co-founded by Muneeb Ali and Ryan Shea.
In October 2020, the Blockstacks project rebranded to the Stacks ecosystem and launched the second iteration of its blockchain (Version 2.0) on January 14th, 2021. As part of the rebrand, Blockstacks PBC also changed its name to Hiro Systems PBC to develop supporting infrastructure for the Stacks and Bitcoin networks.
The Stacks blockchain has a native cryptocurrency dubbed the Stacks Token (STX) which is instrumental in facilitating value transfer across the Stacks ecosystem.
The Stacks blockchain is often considered a side-chain to Bitcoin. This is not the case, and neither is it a second layer (layer-2) scalability solution.
Instead, it is an independent blockchain that can exist outside Bitcoin. It maintains its transaction records, has its independent miners, and employs a unique consensus mechanism called Proof-of-Transfer (PoX).
However, Stacks is connected to the Bitcoin network enabling the former to take advantage of the latter’s security, stability, and economic power. Essentially, transactions carried out on Stacks get settled onto the Bitcoin blockchain.
Stacks blockchain use cases
As a smart contract platform, Stacks help introduce profound features not previously possible on the Bitcoin network.
The primary purpose of the Stacks network is to expand the Bitcoin functionality without using the help of scalability solutions (i.e., layer-2 and side-chains), which have been the go-to solutions for competing networks.
Like its smart contact rivals, Stacks supports the development and running of decentralized apps designed for various use cases such as decentralized finance (DeFi), web3 gaming, decentralized naming services (DNS), and NFTs.
Below are some of the use cases that have already been implemented, while others are under active development by the community:
- Bitcoin NFTs;
- Bitcoin DeFi;
- Blockchain Naming System (BNS);
- Stacks token (STX).
Let’s delve into each item in further detail:
1. Bitcoin NFTs
Non-fungible tokens (NFTs) are pieces of data existing on a blockchain that represent other assets. Think of NFTs as titles representing other items, such as a car title or a property title. Non-fungible tokens can be used to hold, among other properties, ownership information, descriptive features, and provenance.
NFTs are created on blockchains that support smart contracts and, for the longest time, have been associated with Ethereum, the leading such platform. However, over the last few years, other formidable rivals have cropped up, including Stacks.
With the Stacks blockchain, NFTs created on the platform are linked to the Bitcoin blockchain, which is designed not to run decentralized apps. However, now with the help of Stacks, NFTs have been realized on the premier decentralized protocol.
Hence the term ‘Bitcoin NFTs’ is appropriate because the non-fungible tokens, even though being created on the Stacks network, these NFT transactions are settled on and secured by the Bitcoin blockchain.
Note: We will delve into how to purchase a Bitcoin NFT in a later section below.
2. Bitcoin DeFi
DeFi, short for decentralized finance, is an umbrella term that represents all financial services offered on the decentralized web minus the involvement of centralized financial institutions. The most common DeFi applications offer savings, loans, and liquidity mining.
Similar to how NFTs are not natively supported on Bitcoin, neither are DeFi apps. Stacks enables the introduction of DeFi to Bitcoin, leveraging its security and settlement assurances.
3. Blockchain Naming System (BNS)
The Blockchain Naming System (BNS) is an alternative system to assigning domain names to the conventional domain naming system (DNS). Unlike DNS, which relies on centralized registries to assign and allocate the domains, BNS is controlled and managed within a decentralized ecosystem, ensuring an open and uncensorable platform.
The biggest advantage BNS has over its counterpart is that its domain names are single purchase names meaning that they are only paid for once at the time of claiming. Once the domain has been claimed, there are no annual renewal fees, as with the DNS.
Stacks’ BNS names have three distinctive properties, which are:
- They are unique in that each name can only be claimed once;
- Names are human-readable and are customized at the point of claiming;
- These names are fully owned by the owners, who get exclusive rights to change any of their properties. BNS names are resistant to seizure or censorship.
4. Stacks Token (STX)
STX is the native cryptocurrency asset on the Stacks ecosystem tasked with performing three functions:
- Facilitating transactions within the Stacks network. As the native asset, STX is used to pay for fees whenever a smart contract is deployed and whenever users execute a value transfer transaction;
- Stacking – comparable to staking, stacking involves holding the STX token for a determined period within which you can earn a reward in the form of Bitcoins (BTC). STX stakeholders can participate in the governance of the network;
- Powering the Stacks ecosystem of DeFi apps, NFT marketplaces, and Liquidity pools. STX token can be used with DeFi to save, lend or borrow and is the medium of exchange on the NFT platforms such as Gamma.io.
Step-by-Step: How to Buy a Stacks-powered Bitcoin NFTs?
There are three things you need to be able to purchase a Bitcoin NFT. These are:
- A Stacks blockchain wallet;
- Stacks tokens (STX);
- A Bitcoin NFT Marketplace.
Note: For this tutorial, we will use the Hiro Wallet, an official Stacks blockchain wallet. Additionally, we will use Gamma.io marketplace, currently the leading platform for Bitcoin NFTs by daily trading volume.
1. Set up a Stacks Wallet (Hiro)
Step 1 – Download Hiro Wallet.
Visit the Hiro wallet download page at https://www.hiro.so/wallet and click the [Download Hiro Wallet] button.
There are two versions of the Hiro Wallet to choose from:
- Web app available as an extension for Chrome, Firefox, and Brave browsers;
- Desktop app version for Windows, macOS, and Linux.
For this demonstration, choose the web version, which will enable us to connect to the marketplace later in this tutorial.
Click on the [Install extension] button, then choose your preferred browser onto which you want to install the extension.
In our case, that is the Chrome extension and clicking on the [Install from Chrome Web Store] redirects us to the web store.
Click on the [Add to Chrome] button to download and install it.
You have successfully downloaded the Hiro Wallet web app extension to your device.
Step 2 – Setup Hiro Wallet
Once you install the Hiro web extension, the app will automatically open a setup window.
If you already have a Stacks wallet, you can recover it using the secret phrase (Key). Otherwise, press on the [Create Stacks Account] to create a new crypto wallet to hold your STX tokens and Bitcoin NFTs.
Back up your Secret Key phrase in a secure place, preferably on a piece of paper (offline). Next, click on the [I’ve backed it up] button to confirm that you have stored your recovery phrase securely.
Finally, create a strong password that will be used to access the wallet on the device that you have it installed. If you forget the password, you will be required to reset it using the recovery phrase/Secret Key.
Note: If you lose your Secret Key, you will not be able to access your wallet and any asset you may have stored in it, including your Bitcoin NFTs.
2. Add funds to the Wallet
Once you have created your Stacks wallet, you will need to fund it by either sending STX tokens from an external wallet or buying STX directly using the available payment channels. For simplicity, we will use the second method for this tutorial.
Login to your Hiro wallet interface by clicking on the Hiro extension icon on the top right of your browser window next to the address bar. Use the password to unlock it.
Once you log in, click on either of the two buttons shown above to add funds to your wallet.
On the next screen, you will be provided with a choice of payment processors that will enable you to pay for your STX token purchase. Make a choice to proceed to the next step. In our case, we chose ‘Transak.’
Next, specify the amount of fiat currency you want to spend to purchase STX, then specify your preferred payment method, which could be a debit card (Visa/Mastercard), Apple, or Google Pay.
Click [Buy Now] to proceed to the next screen, where you will input your receiving wallet address. This form field will be automatically filled if you have been following up with the previous steps. However, if you wish to use a different STX wallet, you can change the wallet address at this stage.
Click [Buy STX] to process your order. The following steps will require you to open an account with the service you chose to process your order, where you will provide your email address, and debit card details, and verify your new account. Once done, the service will instantly process the order and deposit your STX tokens into your wallet.
3. Buy a Bitcoin NFT
Now that you have funded your STX wallet, it is time to purchase a Bitcoin NFTs. Visit a Bitcoin NFT marketplace of choice. So far, Gamma.io is the largest, but there are other options which include:
Visit Gamma.io and connect your STX Hiro wallet, which is already funded with some STX tokens. The amount of STX you will need will depend on the price of the NFT you will opt to purchase.
Note: Visit the marketplace using the browser on which you have installed the Hirow wallet extension.
On the Gamma home page, click on the [Connect Stacks Wallet] button on the top right of the navigation bar. The website will detect you have a wallet extension and request permission to link to it. Choose the account you wish to link to the marketplace.
This wallet account will hold your NFT once you have purchased it.
Next, browse through the marketplace or search for the specific Bitcoin NFT you are looking to purchase. There are various categories to help you locate interesting items, including the ‘Featured’, ‘Collectibles’, ‘Fine Art’, ‘Music’, and ‘Photography’ categories.
In the event that you find what you are looking for, click on it to open the details page. You can read through the description to learn more about the item. Then you can either buy it at the listed price or make an offer to the seller.
For instance, the NFT shown above is currently selling for 1,100 STX. We can choose to accept this price and buy it outright (if we have enough funds in our wallet). Otherwise, we can make an offer requesting to buy it at a lower price, say 500 STX.
To make an offer, click on the [Make an offer] button to display the offer screen.
Before you make the offer, ensure you have the funds in your wallet since these will be locked in escrow, waiting for the seller to respond. Once the seller accepts the offer, the funds are automatically transferred to the seller’s wallet while the NFT is transferred to your wallet.
Note: Pay attention to the floor price, which is the price of the cheapest item within a series of similar NFTs minted using the same contract. Ensure that you make an offer that is above this lowest price because otherwise, the system will reject your offer.
As a Bitcoin companion, Stacks blockchain is helping introduce much-needed features such as decentralized applications, NFTs, and a vibrant DeFi ecosystem.
The flagship blockchain network may be highly secure and the most popular, but it is still quite limited in terms of features. Even its scalability solutions, such as the layer-2 Lightning app, may not help make it more accessible to a wider audience.
For that, Bitcoin needs innovative solutions such as Stacks, which, despite being an independent chain, settles its transactions on the Bitcoin network leveraging its security, capital, and infrastructure.
In this guide, we have discussed some of the features that Stacks introduces to Bitcoin which include DeFi, Bitcoin NFTs, and BNS.
However, with an active and growing community of developers and users, the smart contract-enabled blockchain could expand Bitcon’s capabilities even further as more use cases emerge.
Frequently Asked Questions on the Stacks Blockchain
What is the Stacks blockchain?
Stacks is a layer-1 smart contract-enabled decentralized network launched in 2019 that supports the deployment and running of dApps, DeFi apps, and non-fungible tokens.
What are Bitcoin NFTs?
Bitcoin NFTs are non-fungible tokens created on the Stacks blockchain whose settlement is done on the Bitcoin network. Given that Bitcoin does not support NFTs, these unique items are created on Stacks but recorded onto Bitcoin for enhanced security.
How is Stacks related to Bitcoin?
Stacks is an independent blockchain with its own record of transactions verified with its miners and maintains a unique consensus mechanism called Proof of Transfer (PoX). Stacks, however, relies on the flagship network for security features, with all transactions settling on the Bitcoin blockchain.
What are some of the use cases of Stacks blockchain?
Stacks is a smart contract blockchain that can be used in the development and deployment of:
- Decentralized autonomous organizations (DAOs);
- Decentralized finance (DeFi) apps;
- Non-fungible tokens (NFTs);
- Blockchain-based domain names; and several more.