Stacks Enhances Bitcoin Ties with Nakamoto Upgrade

Stacks, a layer-2 network closely associated with Bitcoin, successfully completed a scheduled hard fork on Tuesday. This followed the Nakamoto upgrade, which was activated by network miners in September.

Smooth Implementation

Muneeb Ali, co-founder of Stacks, expressed satisfaction with the upgrade's execution during a live session on X. Developers in New York monitored the process overnight to ensure everything went smoothly.

Enhanced Alignment with Bitcoin

The Nakamoto upgrade enhances the relationship between Stacks and Bitcoin by further binding Stacks blocks to Bitcoin blocks. Stacks operates on a consensus mechanism known as Proof of Transfer (PoX), where transactions and Stacks blocks are anchored to Bitcoin.

The upgrade strengthens this connection, meaning any reorganization (reorg) in the Stacks blockchain would now necessitate alterations in the Bitcoin blockchain. Rena Shah, VP of product and operations at Trust Machines, emphasized the significance of this change.

Increased Security through Bitcoin Dependency

This reliance on Bitcoin enhances the security of the Stacks blockchain. Bitcoin's robust security and resistance to reorgs—thanks to the considerable hash power of its miners—offer Stacks additional resilience. Attempting to reorg the Bitcoin blockchain is extremely difficult due to the high financial and computational costs involved, which indirectly shields Stacks from such vulnerabilities.

Shah remarked that this upgrade effectively renders Stacks reorg-proof, aligning with the ethos of Bitcoin. She also noted that it sets the stage for sBTC, Stacks’ version of Bitcoin.

Upgrade Features

The upgrade introduces several enhancements:

• Faster Transaction Processing: Stacks now generates blocks approximately every six seconds, improving usability for developers and users alike.

• Reduced Miner Profit Opportunities: The upgrade limits chances for miners to profit from rearranging or prioritizing transactions, leading to a fairer and more transparent network.

The Future of sBTC

Granite, a new DeFi protocol focused on Bitcoin and incubated by Trust Machines, recently emerged, aiming to tackle the limitations of custodial BTC offerings in DeFi. The upcoming app will utilize the sBTC Bitcoin bridge enabled by the Nakamoto upgrade.

Granite aims to enable BTC to interact directly with DeFi dapps in a decentralized manner. Users of sBTC will be able to lend, borrow, and earn yield on their Bitcoin while minimizing counterparty risk, unlike traditional custodial solutions or wrapped BTC assets.

Innovative Features of Granite

• No-Rehypothecation Model: User collateral remains fully controlled by the owner, preventing entanglement in protocol dependencies.

• Soft Liquidations: This feature allows for collateral to be liquidated only as needed to maintain solvency, preventing catastrophic losses.

• Risk-Tranched Liquidity Provisioning: Liquidity providers can choose their risk exposure by selecting junior or senior tranches, with a reserve protecting all LPs against market downturns.

Muneeb Ali highlighted that only about 1% of BTC has been utilized in DeFi due to security concerns. Granite's security-oriented approach could unlock the remaining 99% of BTC capital, driving new adoption waves.

Stacks continues to work on bringing sBTC to Solana, while Bitcoin is currently retesting its June highs above $71,100. Stacks’ native token, STX, has seen a 5% increase today, although it remains down about 50% from its all-time high.