The Massive Stacks 2.1 Upgrade: What You Need To Know

With all of the attention that Bitcoin has been receiving as of late, it is not surprising that the Stacks blockchain has been thrust into the consciousness of the crypto community at large. While much attention has been focused on the massive increase in the Stacks market cap, and the infrastructure being built out around Bitcoin ordinals, an important upgrade has been made to the Stacks blockchain: Stacks 2.1 went live.

Understanding what this means for Stacks will put you ahead of the curve, and that is precisely where you want to stay in this rapidly changing space.

Stacks 2.1

The Stacks 2.1 upgrade is actually a hard fork of the Stacks blockchain. For the uninitiated, a hard fork occurs when a new set of rules changes how a blockchain operates. This is no small matter for a blockchain, and the fact that Stacks transitioned from 2.0 to 2.1 seamlessly at block 781,551 speaks highly for the quality and work ethic of the Stacks core devs.

Seeing as though an update like Stacks 2.1 is such a massive change it would be prudent to discuss how this occurred in the first place.

Stacks, like Bitcoin, is a decentralized blockchain. Essentially this means that there is no CEO and Board of Directors at Stacks making unilateral decisions. The decision-making process on the Stacks blockchain follows a formalized governance process. Without getting too deep in the weeds here, it is sufficient to say that before Stacks 2.1 could be implemented over 80% of Stacks holders had to vote in the affirmative. The voting process started on November 10, 2022, and remained open for a fixed number of blocks. At the end of the voting period, the consensus threshold established by the governance process was exceeded, and now 2.1 is live. Let us now take a look at some of the changes found in 2.1 and discuss what it means for the retail investor.

Stackers Stack

Stacks’ most unique feature is its Proof of Transfer (POX) consensus mechanism. POX is the means by which the relationship is established between the Bitcoin and Stacks blockchains. It is through the POX consensus mechanism that Stacks is anchored to Bitcoin. Similar to how Bitcoin miners use electricity to create Bitcoin blocks, Stacks uses Bitcoin to create Stacks blocks. Stacks holders can participate in the POX consensus by locking Stacks into a smart contract and in turn are rewarded with Bitcoin rewards.

In the Stacks 2.1 upgrade several notable changes have been made to how Stacking works and they are as follows:

• Previously Stacking had a “cooldown” cycle between reward cycles. In Stacks 2.1 users can Stack for as long as they want without interruption.
• Stackers can now increase their amount of stacked STX locked in the pool, whereas previously any increase had to meet the minimum threshold necessary.
• The Stacks 2.1 upgrade also provides support with native Taproot and Segwit addresses. This not only can save the user on Bitcoin transaction fees. In addition to this, the creation of decentralized Stacking pools is now possible. This is a major unlock, so lets dive a bit deeper into this below.

Decentralized Mining Pools

While anyone can participate in Stacking, the amount of STX necessary to do so is quite high for the average investor. The amount is always changing, but it is currently in excess of 130K STX required. This means that most Stackers have to join an already existing pool. So while I have used Xverse to stack and earn Bitcoin with much success and no complaints, the more easily new pools can be formed, the better. In this space we value decentralization, and while this may not mean much to people outside of crypto now, give it some time…it will. Decentralized stacking pools will greatly enhance the decentralization of the Stacks blockchain.

Building Bridges

Prior to the 2.1 upgrade building bridges between Stacks and other blockchains had several impediments that made this quite difficult to pull of. This was due to the nature of Clarity, the programming language of Stacks. Post 2.1 this process has been made much simpler, and now it opens the door for developers to build bridges that will make asset transfers between blockchains far more common. In addition to the transfer of assets, this will allow for the easier use of oracles and other services that are necessary for applications such as DeFi.

Stacks Assets in Bitcoin Wallets

Post 2.1 Stacks NFTs, tokens, and other assets can be sent to Bitcoin wallets. Now the owner can use Stacks assets, from their Bitcoin wallet by use of a smart contract that recognizes Bitcoin transactions as contract calls. This will serve to simplify the onboarding experience for Bitcoiners, devs and users alike. This also demonstrates, in a visceral way, the relationship between the Stacks and the Bitcoin blockchains.

There are some other upgrades that Stacks 2.1 brings to the table, but they are more applicable to programmers and developers. So I won’t be delving into those at this time.

Closing Thoughts

While the Stacks 2.1 upgrade is massive, the real takeaway here is that it ultimately serves as the building block for what is to come. In the coming articles, I will be highlighting two immense game-changers coming to Stacks this year, sBTC & The Nakamoto Release.

sBTC & The Nakamoto Release

With sBTC, the Stacks core devs have solved something known as “the Bitcoin write problem”, and by doing so have laid the foundation for DeFi on Bitcoin. If you were around for DeFi Summer on Ethereum, then you have some idea of what DeFi will look like on Bitcoin. Suffice it to say that there is a massive amount of Bitcoin liquidity just waiting to be put to work to build the digital economy of the future. This too will be the subject of a future article.

With the Nakamoto Release Stacks will be able to operate at a much faster speed than users are currently used to. Bitcoin blocks usually occur approximately every 10 minutes, and since Stacks is anchored to Bitcoin, Stacks transactions move at a speed much slower than many crypto users are accustomed to. With Nakamoto, that all changes.

In this space it is imperative to have an edge, understanding what is coming before the vast majority of retail is how to maximize your edge. As your Stacks Captain here at Flagship I will do everything possible to keep you ahead of the game. Thanks for reading. Looking forward to seeing you in Discord.