Explained: Stacks (STX) and the reason for its 330% rally since the start of 2023

To earn the right to mine a new block, the miners must commit a certain amount of Bitcoin to the network. The Stacks protocol then randomly chooses a miner to write the next block on the Stacks blockchain. Usually, a miner’s chances of being chosen to write the next block depend on the amount of BTC they have committed. The more BTC they commit, the higher their chance of being chosen to write the next block.

Once the miner is chosen, they will verify transactions, bundle them into a block and add it to the Stacks blockchain. In exchange for their efforts, they will receive newly minted STX, plus all the fees attached to the transaction they have just added to the block. The BTC committed by the chosen miner is distributed amongst the stackers. Each stacker will receive BTC in proportion to the amount of STX they have stacked on the network. Through this unique consensus mechanism, Stacks leverages the security of Bitcoin for its mining process.

Stacks began its journey in 2013.  At the time, two Princeton University students, Muneeb Ali and Ryan Shea decided to create an open-source blockchain that brings smart contracts and decentralized apps (dApps) to Bitcoin. After more than two years of research and hard work, Ali and Shea released the platform design for a network they called “Blockstacks”.

Fast forward two years and plenty of venture capital later, Ali and Shea renamed the platform as Stacks, and its testnet was launched in Q2 2018. Once the two developers were happy with the project, the mainnet was rolled out in October 2018. Fun fact: Stacks is also one of the only projects to hold an SEC-qualified sale of STX tokens in July 2019. Since then, the network has grown from strength to strength. Today, it is currently home to hundreds of DApps and NFT projects. One of the more popular projects on Stacks is CityCoins, a project that helps raise funds for citizens and administrative bodies of several cities, including New York and Miami.

STX’s recent price action can be attributed to the craze around Bitcoin Ordinals. These are nothing but text, video, or image files that are inscribed into satoshis, the smallest denomination of a Bitcoin. The resulting token is similar to a non-fungible token (NFT). Before the Ordinal protocol, NFTs did not exist on Bitcoin. Therefore, these digital artefacts on the world’s oldest blockchain have garnered massive interest from the cryptoverse. In fact, according to data from Dune analytics, the number of Bitcoin Inscriptions crossed 200,000 on Feb 27.

This craze for Bitcoin NFTs has set off a race amongst developers trying to introduce tools that will help users create these digital artefacts. One such platform is  Gamma, an NFT marketplace built on Stacks. Gamma has recently introduced a paid service that allows users to create Bitcoin Ordinals without the need for any coding knowledge. This has caused the platform’s trading volume to spike nearly 1,000 percent since last month. Further, Stacks’ most-used wallet, Hiro, also announced support for Bitcoin Ordinals on Feb 20. This increased user activity for protocols built on the Stacks network could be propelling the price of STX.

What’s more, is that Stacks could register further gains in the coming weeks. This is because the protocol is slated for a rather important upgrade in March. After the upgrade, which is called Stacks 2.1, the protocol will improve and strengthen its connection to Bitcoin. The upgrade is expected to go live on March 20, at Bitcoin block #7,81,551.

Stacks is a unique project. It leverages the security of Bitcoin and brings smart contracts and DApp capabilities to the legacy network. This link with BTC, along with the introduction of the Ordinals protocol, has caused the price of STX to shoot for the moon. Moreover, the project’s upcoming upgrade could spell further gains for the token. However, cryptocurrencies are highly volatile and can move against even the strongest indicators. Therefore, it is important to do your own research and invest only as much as you can afford to lose completely.

At the time of writing, Stacks was changing hands at $0.8815 per unit, up 16 percent for the week and 316 percent since the start of 2022.