Stacks (CRYPTO: STX) has been a favorite of mine for years. Layer 2, a Bitcoin (CRYPTO: BTC) compatible cryptocurrency, has been my best performer for a year.
Since my first investment in Stacks in May 2023 at $0.60, it has risen to $3.80, its highest level. As of March 30, my Stacks position is up 307% thanks to some fresh investments. Despite my comfortable gains, I have no plans to sell soon. This is why I think Stacks is just beginning.
Bitcoin is known to lack some features compared to other cryptocurrencies. Bitcoin can only be used to store value or pay without smart contracts. Thus, the growing decentralized finance (DeFi) industry cannot use it because it is not programmable.
This changes with Stacks. Stacks' Layer-2 blockchain combines transactions and finalizes them on Bitcoin's blockchain. Bitcoin is known for its security, thus Stacks is similar. Stacks' smart contracts let developers and consumers join the DeFi economy. DeFi, with its creative use cases like NFTs, stablecoins, yield farming, and more, is an important and popular area that Bitcoin can now leverage in via Stacks.
Stacks is improving. Bitcoin underpins Stacks' financial ecosystem. It's possible to argue Stacks allows Bitcoin to infiltrate the DeFi economy, but not totally. Stacks' layered infrastructure is interesting, but customers can't directly use Bitcoin in decentralized apps and must use STX to pay for transactions. That will change soon.
Stacks will get the Nakamoto Release in late April. These technical changes will allow Stacks to settle transactions in under 10 seconds and improve Bitcoin-Stacks security. Perhaps most importantly, it will enable the introduction of sBTC.
Users lock up their Bitcoin assets in a smart contract to receive sBTC, which they receive in equal amounts. No slippage occurs since sBTC tracks Bitcoin's price. Users can participate in Stacks-based DeFi activities with their new sBTC. After finishing, users can exchange their sBTC for Bitcoin.
Most current market processes involve counterparty risk. Using smart contracts and crypto miners to protect the Stacks blockchain, sBTC is the first decentralized collateralized Bitcoin asset. The Nakamoto Release and sBTC are vital to securely accessing Bitcoin's $1.25 trillion latent capital. How lucrative and paradigm-shifting the Nakamoto Release will be is hard to describe.
Quantifying Stacks' potential To speculate and explain why I won't sell, let's compare Ethereum. Ethereum has become the DeFi standard over time. It has some functional restrictions like Bitcoin, hence Layer-2 blockchains can speed up and lower the cost of transactions. Ethereum's Layer-2 ecosystem is worth $30 billion.
The possibility for Stacks is here. Stacks, with a $5 billion market cap, is expanding Bitcoin's use cases to match Ethereum's. But Bitcoin is worth over three times Ethereum. Stacks' potential is hard to calculate, but the Bitcoin-DeFi era is likely only beginning. I don't aim to sell Stacks soon because of its relationship with Bitcoin and its novel features.
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