Stacks (STX) — A Game-Changer for Bitcoin’s Ecosystem
The largest Bitcoin layer-2 network in terms of market capitalization, one of the oldest and most dedicated Bitcoin projects, and home to a thriving ecosystem is undergoing its biggest upgrade in history. The Stacks (STX) network will change how many perceive Bitcoin with the activation of the Nakamoto Upgrade on August 28th.
The Nakamoto Upgrade: A Major Breakthrough
Several fundamental changes will take effect with the Nakamoto Upgrade, including:
- Transaction speeds: Transaction settlement times will drop from 10 to 30 minutes or more to around five seconds. This represents a 100x improvement and will dramatically transform the usability of the network.
- sBTC introduction: Four weeks after the Nakamoto Upgrade is implemented, sBTC — a decentralized asset backed 1:1 by Bitcoin — will be introduced. sBTC will facilitate the transfer of BTC between the Bitcoin blockchain and Stacks, and will also be used as gas in transactions.
A New Era for DeFi Applications
These advancements will be game-changers for the ecosystem of decentralized finance (DeFi) applications built on Bitcoin. Projects in the Stacks ecosystem have suffered from the Bitcoin network’s lackluster speeds, creating a sub-optimal user experience and restricting builders from providing complex DeFi products.
A Clear Example: Velar
A clear example of this challenge is Velar, one of the most popular decentralized exchanges (DEXs) in the Stacks ecosystem. Despite being fully optimized, its user experience falls far short of its peers on other networks — such as Uniswap. Once the Nakamoto Upgrade takes effect, Velar’s user experience should be on the same level as its peers — with the added advantage that it’s on the world’s largest and most decentralized blockchain.
Capitalization: A Growth Indicator
The Stacks network has seen significant growth in capital represented. As of Aug 26, 2024, the capitalization is at a remarkable level, indicating a thriving ecosystem.
Timing: Perfectly Aligned with Bitcoin’s Second Phase
What makes this upgrade even more special is its timing. Unlike Ethereum (ETH) and Solana (SOL), which have seen a variety of viral products built on their networks, the market has rarely shown much enthusiasm for developments around Bitcoin. Interest has traditionally focused on Bitcoin as an asset, rather than on its ecosystem.
However, this began to shift in early 2023 with the introduction of the Ordinals Protocol, which popularized the creation of non-fungible tokens (NFTs) and fungible tokens within the Bitcoin network. This reignited a wave of new interest and innovation around the world’s largest blockchain, leading many to refer to this period as Bitcoin’s second phase.
The Emergence of New Builders
Before Ordinals, there were only 4-5 Bitcoin L2s. After Ordinals, there are over 85 Bitcoin L2s, with more in development. Many of these are backed by investments from major funds such as Pantera, Coinbase, Polychain, OKX Ventures, and Binance — among others.
A Reflection for the Crypto Ecosystem
The biggest upgrade in Stacks’ history and the launch of sBTC couldn’t have come at a better time. The ecosystem is now much more vibrant and mature, ready to recognize the true value of this achievement. It will further fuel the fire of innovation that has been burning around Bitcoin since the emergence of the Ordinals protocol.
This situation prompts some intriguing reflections for the crypto ecosystem. With a growing number of projects exploring Web3 development on Bitcoin, and networks like Stacks paving the way with faster, cheaper platforms that support smart contracts, one has to wonder: What does the future hold for Ethereum, given that the same products can now be developed on Bitcoin?
While it’s too soon to reach definitive conclusions, it’s undeniable that this is a question few would have asked two years ago, but today it has become a key topic for reflection.
The Future of Web3 Development
Lugui Tillieris a guest columnist for Cointelegraph and the business development director of Lumx, a Web3 startup in Rio de Janeiro that counts BTG Pactual Bank, the largest investment bank in Latin America, among its investors. This article is for general information purposes only and should not be taken as legal or investment advice.
