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To inject fresh blood into Defi, see Stacks 2.0 unlock the huge value of native Bitcoin

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The superimposed effect of Bitcoin and Defi is likely to be the most far-reaching milestone of 2021. The launch of Stacks 2.0 will greatly accelerate this process.

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As the number one digital asset by market capitalization, Bitcoin is more consensual, liquid, and social than any other token, and it is bound to be part of the innovative wave of Decentralized Finance (DEFI).

At the beginning of the New Year, looking back to the year 2020 just passed, the digital asset industry with Bitcoin as the core has experienced a magnificent year: from the downturn of the slump at the beginning of December to the tranquility of "halving" in the middle of the year; Defi craze exploded in the second half of the year, and then Bitcoin broke through the historic high at the end of the year, further "out of the loop". We have seen the vigorous momentum of "relay" in the crypto world, and we have come to realize that the industry will also open up infinite possibilities in the New Year after bridging the traditional world and crypto world with the strong consensus and liquidity of Bitcoin.

Summary of key points:

Low & have spent Ethereum Defi's Three Dilemmas:

A. & have spent Restricted scalability: dramatically increased transaction time and transaction costs for users;

A. & have spent Security concerns: various security problems of DEFI continue to emerge, with frequent hacker attacks, resulting in heavy losses for the project and users;

A. & have spent Restricted asset size: If the market continues to show geometric growth, Ethereum will hit an asset ceiling.

Low & have spent Advantages and bottlenecks of Bitcoin unlocking Defi:

A. & have spent The increasing willingness of holders to enter the DEFI domain is recognized by traditional financial institutions.

A. & have spent Defi's further development requires Bitcoin: Bitcoin has a strong developer community, the underlying consensus mechanism has been proven to be the most secure and reliable over time, and its awareness, consensus, and circulation are far greater than other assets.

A. & have spent Implementing scalable smart contracts on the Bitcoin chain is a long-standing bottleneck.

Low & have spent The Stacks 2.0 upgrade from Blockstack will unlock Bitcoin's DEFI potential:

A. & have spent Stacks 2.0 aims to innovate around the Bitcoin settlement protocol and open up native Bitcoin smart contracts and decentralised applications while Stacks does not change the Bitcoin itself.

A. & have spent POX is a new consensus mechanism that grafts the Bitcoin chain and the smart contract chain, and the optimal choice of the two is cleverer: mining anchors the security of Bitcoin, smart contracts can be carried out on the Bitcoin blockchain, and STX miners write new blocks on the linked Stacks blockchain.

A. & have spent Clarity, the native programming language, enables smart contracts to operate based on behavior seen on the Bitcoin blockchain, ensuring "what you see is what you get." Clarity also eliminates the need for mediations such as EVM, further reducing the likelihood of errors.

A. & have spent The Stacks blockchain transaction can be expanded independently, not relying on the Bitcoin chain, but relying solely on Bitcoin for the ultimate purpose, and the new opportunity to code "Defi +Stacks 2.0".

Better suited to Defi's "towering" soil: Bitcoin or Ethereum?

Since mid-2020, the DEFI project has been in full swing, bringing a turnaround to the sluggish market. However, Ethereum's "foreseeable" asset ceiling, network bottleneck, underlying contract security and other major hidden dangers have gradually emerged, which have been continuously amplified with the rapid expansion of the market, which has aroused more urgent demands for assets, security, liquidity and other aspects of market participants.

And etheric fang, by contrast, the currency as the market value of the first asset, the asset attributes, liquidity and value is stronger than any tokens, although compared with the traditional financial market, the development history of currency does not seem to be very long, but its unique characteristics is not only favored by many investors, attracted a large institutions centralized admission this year, and is gradually evolved into an integral part of the global market economy, is a natural fit into the tide of decentralized financial.

Ethereum Defi's "Three Dilemmas"

Restricted scalability

Defi's wave of liquid mining has driven a flood of users into Ethereum, leading to a surge in miners' profits and, in turn, exposing the network's performance bottlenecks. For example, during peak trading periods, Gas costs soared, causing not only network congestion, but also the cost per transaction skyrocketed to more than $100, significantly increasing the transaction time and transaction costs for users.

According to the Ethereum block browser EtherscandataIt showed that Ethereum's daily trading volume on September 17, 2020 at one point exceeded 1.4 million, breaking the record set in 2018 and setting a new high. At the time, the price of Ethereum was near an all-time high of $1,400. On the same day, Ethereum network transaction feesTo achieve42,700 ETH, also a record high.

(Ethereum Network Transaction Fees, Source: Etherscan. IO)

Ethereum's scalability dilemma not only stifles the participation of some users but also limits the innovation and development of the project.

Etheric fang development community emergency action to solve the problem of scalability, throughput, security and other etheric lane 2.0 in early December 2020 completed the creation of beacon chain starts, but considering the work certificate (PoW) to the rights and interests (PoS) system, and deployment of subdivision (sharding) technology complexity, the etheric lane 2.0 real online is still a long and complicated process, and big probability will be postponed.

Smart contracts are not secure

As well as network performance, security for Ethereum smart contracts has lagged behind. Contract loopholes are like hidden time bombs, just waiting for hackers to discover and detonate. For example, the Defi insurance Protocol Cover Protocol, which was supposed to protect other digital assets, was hit by a "secondary issue" attack at the end of December 2020. Attackers cashed out on many Dex, causing the price of tokens to plummet and even fall to zero for a time. "The insurance agreement itself is difficult to protect", once again to the market sounded the alarm on safety.

Muneeb Ali, founder of Stacks and CEO of Hiro Systems PBC (former Blockstack PBC), addressed this issue in an interview with Stackstwitter"With all the DEFI vulnerabilities (Cover being the latest one), maybe we should pause and ask ourselves if a scripting language like JavaScript is really fit for use? It should be formally verified, human review alone is not enough," the comment said.

Jude Nelson of HirowritingThe eight most common smart contract vulnerabilities are listed as follows: Reentrancy, Access Control, Overflow and Underflow, Unchecked Return Values For Low Level Calls, Denial of Service, Bad Randomness, Time Manipulation), Short Address Attack.

Smart contracts are the standard part of public chain networks, and their programming languages are not the same. Stacks' native contract programming language is an all-new Clarity, which can protect against this bug.

Let me give you a concrete example. One of the deeper features of the Solidity language used by Ethereum is the low-level functions call, callcode, delegateCall, and so on, in view of the "low-level call unchecked return value" vulnerability. These functions resolve errors in a different way than other Solidity functions. Instead of propagating an algorithm or reverting to execution, they return an incorrect value and the code itself continues to run, giving hackers an opportunity. In Clarity, all publicly called functions must return encoded as either OK or ERR, forcing execution to be unterminable. If the function returns ERR, the transaction terminates and the contract does not continue to run -- eliminating the possibility of a hacker exploiting the vulnerability in the first place.

Ethereum Asset Ceiling

The year 2021 has just arrived, and crypto assets such as Bitcoin and Ethereum continue to set new prices. Ironically, if the market continues to show geometric growth, Ethereum will hit its "asset ceiling."

According to CoinMarketCap on January 4, 2021dataShows that Ethereum, the second largest crypto asset, has a total market capitalization of around $113.7 billion, but that's still nearly fivefold (about $460 billion) less than Bitcoin's current market capitalization of $572.8 billion. This means that $460 billion has not yet been effectively channeled into DEFI applications due to the limitations of the Ethereum application protocol, and may not even be able to match the market's evolving needs.

"Mortgage lending" is the fundamental driving force behind DEFI's explosive growth. June 2020 Compound Community was createdThe new proposalsModifying the market allocation mechanism for COMP tokens by first introducing the concept of "Farming" (Farming, mining), thus opening the way to "liquid mining" and pulling users into the fields farmed by various "Token crops". According to DeBankdataAs of January 4, 2021, Defi's total borrowings on the Ethereum market exceeded $3.6 billion -- so to say, the size ceiling for mortgage lending also determines Defi's innovation ceiling.

However, if we look at the data models of traditional finance, it is clear that Ethereum's current lending assets are still too small, not too large.

Take A-shares as an example. According to data from Databao on January 4, 2021, among the 3,926 A-share companies included in the statistics, 2,594 listed companies, accounting for more than 66%, have stock pledge. As shown in the figure below, the proportion of stock pledge is mostly between 10% and 30% and less than 10%.

(Credit: Databao)

If we take the equity pledge data of A-share listed companies as the model (which is actually extremely conservative), and make A rough calculation with 10% of the pledge ratio, we can find that the current total market value of about $572.8 billion of Bitcoin assets is just used as lending pledge, and there is about $57.2 billion of potential untapped demand. By comparison, Ethereum's $3.6 billion loan is tiny, not even an appetizer.

Summary: Defi requires Bitcoin, and Bitcoin requires its own native Defi

In fact, Bitcoin has already started to enter the DEFI domain, which proves the acceptance of DEFI by Bitcoin holders. The common solution in the market is "anchor currency" : such as WBTC, RenbTC and other protocols to exchange bitcoin for "Bitcoin anchor currency" in ERC 20 format. According to DeBankdataShow, flow Defiant At one point in early November 2020, more than 150,000 Bitcoins were sold.

The BadgerDao project, which focuses on bringing Bitcoin to Defi, has been a market hit since its launch on December 4, 2020. The total amount of the project will be one month after its online operationLock positionsIt has exceeded $550 million in the DEFI projectlistAt number 10, Defi is also in strong demand from Bitcoin holders.

It is well known that Bitcoin has the largest acceptance among traditional institutional investors. Unlike the bull market at the end of 2017, this one has been dubbed an "institutional bull" and has been driven more by institutional investors such as Grayscale. More and more mainstream, traditional financial institutions are still first in Bitcoin, and their largest holdings are still Bitcoin. If any of these institutions were to enter the DEFI proving ground, they would surely take their Bitcoins with them -- bringing with them assets of a scale and effect that Ethereum cannot match today.

Finally, the fully decentralized and stable operation of Bitcoin for 10 years is also the safest asset in the blockchain field. Bitcoin has a loyal and strong developer community, and the underlying consensus mechanism of PoW is recognized as the most secure and reliable, without any single point of control or change. The awareness, consensus and circulation of Bitcoin are far greater than that of other crypto assets.

If an institution enters the DEFI test site, it has high requirements for the security and stability of assets. Bitcoin is the only asset that fits this bill. It's not hard to imagine that institutional funds might be more willing to accept a DEFI ecosystem built on native Bitcoin than to "anchor" their Bitcoins to a risky and near-term Ethereum network.

Stacks 2.0 provides secure scalability for native Bitcoin

In order to solve the above problems and improve the universality of DEFI, many teams and projects are also working on introducing Bitcoin into DEFI. As mentioned earlier, the market is still receptive to a centralized "Wrapped BTC" solution, which involves converting one's native bitcoin into an etherium-based ERC 20 version of bitcoin.

This kind of centralized "asset cross-chain" has many problems such as single asset risk, centralization, trust, cost and so on. Institutions and large businesses, in particular, often don't choose third-party cross-chain solutions -- because that means putting their coins in custody with a DEFI protocol. If you can get native Bitcoins into DEFI, you can also get institutional level money into Defi.

Distributed computing networkStacksJust focus on this whole new solution. Stacks 2.0 supports decentralized applications and smart contracts while Stacks 2.0 enables access to native Bitcoin for maximum security.

Unleash the power of native Bitcoin

Bitcoin can be seen as the first application of blockchain and the most powerful and secure blockchain, providing a new type of currency that neither party can control or change. The Bitcoin network provides the foundation not only for the currency itself, but also for general settlement protocols.

The untampered and unforgeable highest security layer of Bitcoin, as well as clever design limits its business function and model, but this is also the advantage and consensus of Bitcoin native, which should not be abandoned when accessing Defi.

Just as TCP was the network standard in the traditional Internet and innovation could be built on top of it without changing it, the decentralized protocol and application in the DEFI field could be built on top of Bitcoin. Back in 2017, the predecessor of Hiro BlockstackPut forwardThe decentralized application layer concept has been recognized by top investors.

(Source: Stacks)

Many people refer to bitcoin as "digital gold." This only clarifies its value storage capabilities, ignoring that as a program, it is essentially extensible for other purposes. Stacks 2.0 is an attempt to change this misperception by exploring innovations around the Bitcoin settlement protocol that enable native Bitcoin's Defi smart contracts and decentralised apps without making any changes to the Bitcoin itself.

Stacks 2.0 uses Bitcoin as the standard for value settlement and proposes a new consensus algorithm between the two blockchains, called Proof of Transfer (POX), which connects the Bitcoin network and the Stacks blockchain and expands the capabilities of Bitcoin.

PoX mining anchors the security of Bitcoin and enables smart contracts to be implemented on the Bitcoin blockchain. STX (Stacks' tokens) miners can write new blocks on the connected Stacks blockchain, and through POX, a new experience of "Bitcoin + Defi smart contracts and applications" can be unlocked.

Imagine the new experience of Defi +Stacks 2.0

At the beginning of this article, we discussed the "three dilemmas" of Ethereum DEFI. We'll go into more detail on how Stack 2.0 is cracked one by one.

In terms of expansion, the Stacks 2.0 blockchain deal can be expanded independently and does not rely on the Bitcoin chain, but merely rely on Bitcoin for the ultimate purpose. There will be a hash from the hundreds of thousands of transactions on the Stacks 2.0 blockchain, and as part of the agreement, Stacks will automatically "settle" on each Bitcoin block.

In addition, Stacks introduces the concept of Micro Blocks, which can be initially confirmed within seconds. Microblocks are also a major area of scalability research in the future, where theoretically faster consensus algorithms could run on microblocks that build data on the bitcoin of each bitcoin block. At the same time, the Stacks are available as the underlying standard settlement protocol, which not only stores the history of the block hash, but also allows transactions to be closely linked to the Bitcoin.

Up at the time of project, in addition, Hiro team has been working on establishing a can achieve decentralization application (DApp) development, a series of functions such as data storage, and authentication of the whole ecological, and wants to remain with the traditional Internet high performance at the same time, through a decentralized approach to solve the problem of trust, the security line.

Guard the safety bottom line

Stacks' decentralized authentication system (DID) allows users to manage their own data and identity information and can authorize DApps to read that information when they log in or start an app. Even developers do not have access to users' data and sensitive information, which fundamentally blocks the possibility of evil.

In addition, the native smart contract language Clarity enables smart contracts in DEFI to operate based on behavior seen on the Bitcoin blockchain, ensuring "what you see is what you get." The code itself tells the developer what the program will do, and Clarity is a Turing incomplete language, avoiding "Turing complexity." Finally, Clarity is published and executed by a node without intermediation like an EVM, further reducing the possibility of errors and attacks.

With Stacks 2.0, the "centralized asset cross-chain" solution is dwarfed and we have found an even better way to bring BTC into the DEFI space. Below is a comparison of these options:

How can Stacks 2.0 build a smart contract

Stacks 2.0 brings smart contracts and decentralized applications to Bitcoin through the new consensus algorithm POX and the native smart contract language Clarity.

Transfer Proof POX

Stacks 2.0 establishes a new consensus algorithm between the two blockchains & NBSP; Pox (Proof of Transfer Mining with Bitcoin).

Specifically, Stacks use Bitcoin as the base chain and Stacks as the connection chain. POX can reuse the bitcoin that has been minted as a "computational proof", and miners can directly use the bitcoin as the mining cost.

Stacks miners use Bitcoin to mine newly minted STX tokens. Stacks Holders can lock STX into a consensus to earn bitcoin, which makes STX a unique crypto asset that is priced on the basis of BTC and generates BTC yield. The process is to use bitcoin as a settlement protocol.

(Source: Stacks)

Smart contract language Clarity

Clarity is a new smart contract programming language developed over the past two years by computer scientists at Princeton University and the Massachusetts Institute of Technology. There is an emphasis on optimising predictability and security and the Stacks 2.0 mainnet will launch simultaneously.

Stacks 2.0 anchors the Clarity smart contract to Bitcoin and the cost and performance are transparent to developers and automated verification. The Clarity contract also has built-in SPV proof for bitcoin and makes it easier for developers to interact with bitcoin.

Not all decentralized applications require smart contracts, but Clarity can be used for decentralized applicationsunlockAll kinds of interesting features. Such use cases include, but are not limited to, access control (such as post-payment access); Non-homogeneous tokens (NFT) and homogeneous tokens; Business model templates (such as subscriptions); Application-specific blockchain; Decentralized Autonomous Organizations (DAOs), etc.

From a language design perspective, Clarity differs from most smart contract languages in two ways. First, the language is interpreted and broadcast on the blockchain (uncompiled). The second is that the language is decidable (not Turing complete, Turing incomplete).

Using interpreted languages ensures that executed code is human-readable and reviewable. Decidable languages such as Clarity can pinpoint exactly what code needs to be executed for any function, greatly reducing the vulnerability of smart contracts and allowing developers to write logic directly around Bitcoin state. This also makes Clarity scalable for large-scale use.

In addition, Clarity allows for complete static analysis of the entire call graph of a smart contract. Both the runtime cost of the code and the data usage can be analyzed, and developers can predict what a Clarity program will do and how much it will cost. As mentioned earlier, this greatly reduces the likelihood that smart contracts will go wrong and be exploited by hackers.

Stacks 2.0 incentives

The long-term value of Stacks often depends on the growth of the Stacks network and the demand for Clarity smart contracts. To run a Clarity contract over the network, users pay the Stacks token STX for Gas charges. For example, a decentralized exchange built with Clarity contracts requires STX as a fee for users to execute contract logic at trade time.

The economics of tokens for STX

The amount of bitcoin reward STX holders receive depends on both token reward and network usage.

There are 1.32 billion STXs in the Stacks creation block. Stacks has a projected future supply of the cryptocurrency, which will reach around 1.818 billion by 2050 (down from the previous design of 2.04 billion). By the end of January 2021, 1.006 billion STX of the approximately 1.32 billion STX in Genesis Block will be fluid, with the rest released monthly in accordance with the various unlock schemes.

Block rewards will be set at 1000 STX per block for the first four years, halved every four years, and will remain unchanged after being reduced to 125 STX rewards per block. In addition, the Stacks release time will be consistent with Bitcoin, which means that the Stacks release a block every 10 minutes or so.

(StX tokens are allocated from Stacks)

Stacks system value

Instead of focusing more on commercial revenue and revenue, Hiro is going back to the entire network itself, hoping that by having more and more developers in Stacks to develop more blockchain applications and use cases. In turn, these blockchain applications will expand the logic of their business models to promote the development of the entire ecosystem. At the same time, this provides a complete set of tools for more Defi domain developers and teams.

Goodbye Blockstack. Hello Hiro

Recently, Blockstack PBC was officially announcedrenamedHiro, a new name means a change of identity. Stacks 2.0 will be promoted by the community and Hiro will not launch its own nodes, but instead plans to develop tools on the web that will focus on serving developers. Let's review and summarize the history of Blockstack.

In late 2017, Hiro & NBSP; Blockstack, the predecessor of Blockstack, was launched and sold $50 million worth of tokens to investors. Among those investors: Union Square Ventures, which has backed Algorand, Helium, YouNow, Coinbase, and others; Winklevoss Capital, founded by the well-known Winklevoss brothers (who have invested in Blockfi, Angelist, Staked, etc.); ZhenFund, a top venture capital firm founded by famous angel investor Xu Xiaoping; More than 800 funds and individual investors also participated, including Blockchain Capital, Digital Currency Group, Kevin Rose, Michael Arrington, and Qasar Younis (former COO of Y Combinator).

In Asia, Blockstack has also been backed by well-known funds such as Hashkey Capital, SNZ, Spartan Group and Recruit, a Japanese-listed company.

(Source: Stacks)

The main members of the HIRO project team have many years of research and development experience in the field of distributed systems, including six PhDs in the field of distributed systems and two scientists who have received the Presidential Career Award. The Blockstack white paper has been cited by more than 15,000 research articles published in USENIX, ATC, and DCCL.

(Stacks: Stacks) Key team members and participating universities

Compliance model, continue to move forward

In mid-December 2020, the SEC formally filed charges against Ripple and two of its executives for over $1.3 billion in unregistered securities offerings. In less than half a month, the price of XRP fell by 70%. Many platforms, including Coinbase, the largest cryptocurrency exchange platform in the United States, suspended XRP trading, and well-known institutions also said that they would no longer hold XRP assets.

From the development course of the crypto industry, the SEC has repeatedly punished many projects explicitly, and the supervision of the industry has never been relaxed. The Ripple lawsuit not only involves huge amounts of money and damages the project itself, but also casts a shadow over the compliance of the entire industry.

It's only a matter of time before the entire blockchain industry becomes compliant. Hiro's predecessor, Blockstack, took the exact opposite approach to Ripple, making it a model of compliance in the industry.

In April 2019, Blockstack became the first company licensed by the SEC to sell tokens based on Reg A+. This creates a new compliance path for crypto digital assets and opens a new window for institutional capital inflows. Reg A+ is an exemption, the equivalent of A compliant "mini-IPO", that allows companies to raise up to $50m through public pitching.

Since then, Blockstacks has been committed to building a compliance framework that allows for the transition from "SEC regulated" to "no regulation" in the US. This continuous effort is coming to a perfect end.

According to ReutersreportsIn January 2021, Hiro has released a summary of a legal memo that states that in January 2021, the Stacks 2.0 blockchain will be decentralized and the Stacks crypto token STX will no longer be considered a security according to US law. After that, Hiro will stop filing reports with the SEC, cryptocurrency exchanges that are compliant in the U.S. will be able to add STX tokens to their lists, and U.S. residents and institutions will be able to trade STX freely. This will give a huge boost to the Stacks ecosystem.

Stacks 2.0 is coming soon

Sports a 2.0 networkIs due toIt will start on January 14, 2021. The overall ecosystem is also continuing to move in the direction of decentralization ahead of mainnet 2.0, and Hiro, along with other independent entities, is an organization within the wider Stacks ecosystem that can co-build projects with more ecosystem players.

OKCoin is expected to be the first in the USonlineThe STX token is a compliant exchange and will support Stacks 2.0 as an online partner. In addition to uploading coins, OkCoin also allows users to get bitcoin rewards through Stacking. Predictably, this is not the only exchange for the floating currency STX.

According to the sportsRevenue model, STX holders lock up their tokens for about two weeks at a time, and in return for their contributions to the development of the network, holders are rewarded with annual earnings in bitcoins.

Stacking money does not leave the wallet, does not require special hardware and software to participate in the threshold, in order to ensure high security at the same time can also gain income, and reward assets for STX native tokens, can reduce the pressure to sell.

Staking pledge model source: Stacks

There are currently over 500 apps and over 7,000 developers available on Stacks. Notable applications include Graphite (which functions like graphite-like documents) and Sigle (a decentralized open source blog).

The STACK fund provides for both developers and researchersFunded by, up to $5,000 for users who contribute to infrastructure, community resources, tools, research and education.

(Source: Stacks)

With Stacks 2.0 available, the new ecosystem will have the following major standalone entities:

Hiro: Focused on providing and maintaining developer tools within the Stacks ecosystem

Sports a fund(Stacks Foundation) : Supports the Stacks ecosystem through governance, R&D, education and funding

The spirit of science and technology(Daemon Technologies) is focused on supporting Stacks mining and Stacking business

Key StudioSecret Key Labs focuses on providing a Chinese mobile wallet that directly participates in Stacking

conclusion

Although Bitcoin has only been developing for about 10 years since its birth in 2009, it is still the crypto asset with the strongest consensus, the best liquidity and the largest share of assets in the crypto world. The "institutional bull market" since late 2020 has seen the entry of large institutions and the overwhelming impact of DEFI's financial innovations. Active institutional investors, if they join forces with the fledgling DEFI innovation, will take the entire crypto ecosystem to an incredible new level. The superimposed effect of Bitcoin and Defi is likely to be the most far-reaching milestone of 2021. The launch of Stacks 2.0 will greatly accelerate this process.