Stacks (STX) Dark Page

A platform for smart contracts. Secured by the Bitcoin network. 

DWR Score:
10/10

Analysis by Dani B. | #001 | January 23, 2022

Table of Contents

Research Summary

Development

Stacks (formerly Blockstack) is an open source blockchain network that leverages the security and capital of Bitcoin for decentralized apps and smart contracts through its consensus mechanism, Proof of Transfer (PoX). Muneeb Ali and Ryan Shea founded Blockstack in 2013 at the Princeton Computer Science department to solve the underlying problems of current web and mobile apps. After launching a blockchain-based decentralized identity (DID) system in 2014, the team released the initial design for the then-Blockstack (now Hiro) platform in 2015. The development of the Stacks network is now a global endeavor, as the network’s development is decentralized.

Stack’s roadmap includes the first public alpha version of the Blockstack Browser (now Stacks Browser) released in October 2017. As well as, in January 2021, Stacks 2.0 received a major upgrade introducing Clarity, a new smart contract language, and a new mining mechanism that leverages the Bitcoin blockchain and allows users to earn BTC rewards.

Tokenomics

The project raised $47M in a token offering for the Stacks cryptocurrency in 2017, and an additional $23M through an offering in 2019. More than 4,500 Stacks holders participated in these offering, including USV, Lux, DCG, and Winklevoss Capital among others.

Hiro PBC filed a form 1-U report with the SEC that summarizes the successful adoption of the Stacks blockchain by independent miners and the board approval of management’s determination to no longer treat the Stacks cryptocurrency as a security under U.S. federal securities laws.

As of February 3, 2022, Stacks (STX) has a circulating supply of approximately 1.3b STX. Currently, this represents 71% of the total supply.

Community

As of January 23, 2022, Stack’s community is active on Discord, Telegram, Twitter, and Reddit. The Stack Community also hosts a variety of events and discussion forums. The Stack’s ecosystem has over 100k followers across its social media platforms.

Based on the research conducted, Stacks (STX) appears to be a fundamentally strong project.

Development

Documentation

What is the URL of the official cryptocurrency project website?

https://www.stacks.co/

Are there any obvious errors on the website (broken links, misspelling, grammar, etc.)? 

No obvious spelling, grammar, etc. mistakes were found on the official website pages.

Is comprehensive documentation available for the project?

The official cryptocurrency project website has direct links to resources, including guides with FAQs, relevant blog posts and news articles. Additionally, the project has its own whitepaper.

Project Use-Case and MVP

What problem is the project trying to solve?

The project got its start at the Princeton Computer Science Department in 2013 as an effort to build a better internet.

The Stacks network allows users to directly own digital assets like usernames, domain names, computer programs, etc. Its focus is to replace the reliance on centralized cloud service providers and apps that harvest and monetize user information.

What is the project’s solution to the problem the project aims to solve (aka use-case)? 

Stacks 2.0 brings apps and smart contracts to Bitcoin. Bitcoin can be the foundation for a better user-owned internet much like TCP/IP for the traditional internet. Stacks 2.0 enables a new way for users to earn Bitcoin by actively participating in consensus.

Their work can make Bitcoin more valuable by turning passive Bitcoin capital into actively deployed capital and bringing more apps and smart contracts to the Bitcoin ecosystem.

Is there a working product (MVP)?

Stacking:

By Staking, the user provides security benefits to the network. In return, the user gets rewarded in Bitcoin using Proof of Transfer (the Stacks protocol consensus mechanism).  

STX can be stacked alone, on an exchange or in a pool. To participate in Stacking directly via the Hiro Wallet, you’ll need at least the minimum number of STX in your Hiro Wallet balance. Stacking directly requires an ever-rising dynamic threshold of STX.  Stacking is also irreversible. 

Clarity Smart Contracts:

Clarity is a programming language for writing smart contracts on the Stacks 2.0 blockchain. It supports programmatic control over digital assets.

Note: Comprehensive coverage of Clarity smart contracts will be available in an updated version of the dark paper for this project. Additional information can be found here.

The Team

Is there a known development team for the project?

Dr. Muneeb Ali is the founder of Stacks and CEO of Hiro, the development tooling company in the Stacks ecosystem.

Where is the development team headquartered?

Hiro (formerly Blockstack PBC) is based the USA. However, the Stacks Ecosystem is a decentralized group of independent entities working on research, development, growth, and education of the Stacks Network.

Are there known sustainable incentives to grow/retain developers?

  • The team behind the project is actively hiring for full-time job roles.
  • There are bug bounties currently in place for identifying bugs and submitting issues.
  • The Grants Program funds builders and developers who are creating developer tools, community resources, applications, and research that serve the project’s mission of a user-owned internet.
  • Stacks Entities and providers (exchanges) will often host contests, hackathons, airdrops, and other campaigns that offer varying levels of ways to get involved and earn prizes.

Audits and Recent Issues

Has the codebase undergone a 3rd party audit by a reputable company/extensive public testing?

Stacks engaged in several 3rd party security firms (including NCC Group 6, Trail of Bits 4) to conduct security audits on the Stacks Blockchain, as well as the Stacks Wallet.

In Q1 2021, Hiro partnered with Least Authority, a leading security consultancy with experience in the crypto space, to audit Hiro’s Stacks Wallet for Web, a browser extension for managing your STX holdings securely and connecting with Stacks apps using your digital assets and identity.

Does the project have any known, recent (within the last 6 months) technical issues?

All issues identified have been resolved; No audits were identified within the past six months.

Roadmap

Is there a clear roadmap for development?

At the time of researching the project, a roadmap was available. However, the roadmap originally identified has since been taken down.

Have any significant milestones within the roadmap been reached?

In October 2017, the first public alpha version of the Blockstack Browser (now Stacks Browser) was released. The release included a browser for dApp built on the Stacks network, a decentralized identity manager, a storage hub, and a Bitcoin wallet.

In January 2021, Stacks 2.0 was a major upgrade to the Blockstack network. The upgrade introduced Clarity, a new smart contract language, and Proof of Transfer (PoX). 

Tokenomics

Coin Use-Case

What is/are the intended use(s) of the project coin within the project?

Stacks cryptocurrency (STX) is designed primarily to be used as “fuel” to execute Clarity smart contracts. Stacks are also used for other network functions like registering digital assets, paying for transaction fees, and to publish Clarity contracts on the blockchain.

Stacks can be locked by STX holders to participate in consensus and earn Bitcoin rewards. This process is called Stacking. To participate, STX holders run a full node, lock their STX, and publish useful information periodically on the network. The annual earning rate of Bitcoin rewards depends on several factors:

  • As of May 2021 around 60 BTC are being rewarded per cycle, this is split proportionally throughout the engaged participants.
  • Staking STX follows the PoX Parameters: A block reward is given to the Bitcoin miners of 1000 STX/block for first 4 yrs; 500 STX/block for following 4 yrs; 250 for the 4 yrs after that; and then 125 STX/block in perpetuity after that. This inflationary STX payment is given to the Bitcoin miners to incentivize them to participate in the PoX consensus mechanism. The Bitcoin miners dispense BTC rewards to the STX participants.
  • Block time: Stacks blockchain produces blocks at the same rate as Bitcoin. Bitcoin blocks are produced roughly once every 10 minutes, so that will be the rate for Stacks 2.0 mainnet. However, microblocks can give faster initial confirmation.
  • Block reward maturity window: 100 blocks, meaning if a miner wins a block, they will earn the coinbase reward for that block after 100 blocks have elapsed.
  • Stacking parameters: 2 reward addresses per block; reward cycle 2000 blocks (~2 weeks) for a total of 4000 reward slots.
  • Stacking threshold: the minimum number of STX needed is dynamic based on participation. This threshold is 0.025% of the participating amount of STX when participation is between 25% and 100% and when participation is below 25%, the threshold level is always 0.00625% of the liquid supply of STX.

Transaction Validation

How is consensus determined?

  • Proof of Transfer (PoX) is a novel blockchain consensus mechanism, the first to connect two separate blockchains (Bitcoin and Stacks). This unique relationship allows builders to leverage and extend Bitcoin’s powers without modifying Bitcoin itself.
  • All Stacks transactions settle on Bitcoin, enabling Stacks transactions to benefit from Bitcoin’s security. PoX also has a sustainability benefit, as electricity already spent to secure Bitcoin is reused by Stacks, allowing builders to create more value from energy already spent.
  • PoX is an extension to Proof-of-burn models where where miners compete by ‘burning’ (destroying) a proof-of-work cryptocurrency from an established blockchain as a proxy for computing resources. Unlike proof-of-burn, however, rather than burning the cryptocurrency, miners transfer the committed cryptocurrency to other participants in the network who are ‘Stacking’.
  • The Bitcoin transferred by miners is then used to provide Stacking rewards, paid in BTC to token holders for helping to ensure a stable network. Stacker do this by locking up their tokens for a certain time and signaling the canonical chain tip.

Coin Origination

When was the project’s coin launched?

STX was made available in 2017.

Initial Coin Offering (ICO)

Was there an Initial Coin Offering (ICO)?

The project raised $47M in a token offering for the Stacks cryptocurrency in 2017, and an additional $23M through the first-ever SEC-qualified US Reg A offering and concurrent Reg S offering in 2019. More than 4,500 Stacks holders participated in these offering, including USV, Lux, DCG, Winklevoss Capital, Blockchain Capital, Foundation Capital, Hashkey, Fenbushi, and others.

Hiro PBC (formerly Blockstack PBC), filed a form 1-U report with the SEC that summarizes the successful adoption of the Stacks blockchain by independent miners and the board approval of management’s determination to no longer treat the Stacks cryptocurrency as a security under U.S. federal securities laws.

What was the initial coin distribution?

The initial coin distribution in 2017-2018 consisted of 682,318,558 STX to accredited investors. In 2019, a preliminary offering was made to sell up to 295,000,000 additional STX tokens.

Coin Supply

How do coins come into public circulation?

ICO sales – Coins were also made available to the team and early investors prior to the mining process.

Miners receive Stacks fees for transactions mined in any block they produce.

Furthermore, miners receive coinbase rewards for blocks they win. The reward amounts are:

  • 1000 STX per block are released in the first 4 years of mining
  • 500 STX per block are released during the following 4 years
  • 250 STX per block are released during the following 4 years

What is the yearly inflation rate of the coin?

During the current stacking cycle, the APR is 10.2%. 

Are most of the coins in circulation (>50%)?

As of February 3, 2022, Stacks (STX) has a circulating supply of approximately 1.3b STX. Currently, this represents 71% of the total supply.

Community

Social

Which industry or community does the cryptocurrency project aim to serve?

The Bitcoin community: Bitcoin (BTC) was chosen as the blockchain to power consensus due to being the oldest blockchain protocol, having launched in 2009, and becoming a recognized asset outside of the cryptocurrency community.

BTC has held the highest market capitalization of any cryptocurrency for the past decade. Bitcoin champions simplicity and stability and has stood the test of time. Influencing or attacking the network is infeasible or impractical for any potential hackers. It’s one of the only cryptocurrencies to capture public attention. Bitcoin is a household name, and is recognized as an asset by governments, large corporations, and legacy banking institutions. Lastly, Bitcoin is largely considered a reliable store of value, and provides extensive infrastructure to support the proof-of-transfer consensus mechanism.

What is the size of the official project social media pages (Reddit, Telegram, Twitter, YouTube)?

As of January 23, 2022, Stack’s community is active Discord, Telegram, Twitter, and Reddit. The Stack Community also hosts a variety of events and discussion forums.

  • The Stack’s Community Discord has ~9K members.
  • The official Telegram group has ~14.8k members.
  • The Reddit page has 5.9k Stackers since February 2010.
  • Also, the project’s twitter page has 106.8K followers and has been active since July 2015.

Are the social media posts and reactions related to the project recent and do they appear organic? 

The posts related to the project are recent and the community appears to be organic.

Are community members generating their own independent content to promote the project (YouTube, TikTok, Etc.)?

There appears to be independent YouTube creators generating content for the project as well as various podcast series.

Partnerships and Investors

Does the project have any notable partnerships?

Metric not included in the current Dark Paper for the project. Check back for an updated version.

Here is a link to ecosystem partners and integrators for the project.

Does the project have any notable investors?

Metric not included in the current Dark Paper for the project. Check back for an updated version.

Governance

What is the project’s governance process (if any)?

The Stacks Foundation supports governance efforts of the open-source Stacks technology, serving as neutral ground for various independent parties to come together.

Blockchains have the potential to advance a more equitable Web. However, fulfilling that potential requires tackling several difficult research questions. The project addresses these questions through the Stacks Improvement Proposal (SIP) process: a collaborative research forum for procuring, testing, and deploying upgrades to the live Stacks blockchain in order to better promote user equity.

Stacks Foundation works closely with Stacksgov, a community-led governance initiative that serves to amplify the voices of community members in network-wide decision-making. Stacksgov advocates for decentralization and a “Can’t Be Evil” ethos that puts users in control of their digital assets. They also develop resources and tools that empower community members to actively engage in blockchain governance.

Competitors

What are the most prominent directly competing projects?

The largest competing smart contract platform is currently Ethereum (ETH), with a market capitalization of approximately $317b.

Ethereum is a technology that lets you send cryptocurrency to anyone for a small fee. It also powers applications that everyone can use and no one can take down.

experience, feedback, survey-3239623.jpg

DWR Score

Based on the research conducted, the project appears to be fundamentally strong. 

View the full Stacks (STX) fundamental analysis package for the scoring criteria.

fundamental analysis score stacks stx

Fundamental Analysis Package

Get the full Stacks (STX) Fundamental Analysis Package #001

The package contains the following original documents in high definition:

  • The Dark Paper (.pdf) – project fundamental analysis and research
  • Scoring Rubric (.xlsx) – project scoring and criteria
  • QC checklist (.xlsx) – peer-review criteria and scoring

Below are sample images of the Stacks (STX) Dark Paper.

Table of Contents
    Add a header to begin generating the table of contents

    Project Updates

    The Burning Village and a Brief History of Stock Investing

    A tale of investing and a brief history of the stock market.

    Web3 Project Research Questions

    Listed below are the queries used in our web3 project investigations. While not an exhaustive list of questions, we believe …

    Cardano (ADA) Letter of Dawn

    A living report of materially important events happening for the Cardano project and its cryptocurrency (ADA).

    Resources

    Advance your digital asset skills with these tools.

    Bitcoin Tokenomics (Supply and Demand)

    Learn the supply and demand characteristics behind the cryptocurrency.

    Bitcoin Governance and Forks

    Find out how the Bitcoin software is upgraded.

    Bitcoin System Limitations

    Discover some of the drawbacks of the Bitcoin protocol.

    Bitcoin Mining and Transaction Validation

    Learn the underlying mechanisms of the Bitcoin payment network.

    A Brief History of Bitcoin

    Understand the Bitcoin project’s purpose and how far it has come.

    Introduction to Bitcoin and Blockchain (19 Question Quiz)

    Test your knowledge with this Introductory quiz.

    Scroll to Top