Bitcoin Layer 2 stacks token to a top performer in March
Stacks (STX), the original token of the Stacks Network, has soared in March amid a booming hype for Bitcoin Ordinals and growing Total Value Locked (TVL) on the protocol. The project will also undergo an upgrade later this year for additional speed and scalability.
Known for being the first token distributed through the first-ever US Securities and Exchange Commission (SEC) Qualified Token Offering in 2019, STX has gained 23% in March, reaching $1.25, the token’s highest level since a year ago. Although the token’s gains have slowed slightly towards the end of March, it is still up 350% over the past three months, bringing its value to $1.5 billion.
Looking at tokens with a market capitalization above $1 billion, Stacks is the second best performing digital asset during the month of March, behind XRP, according to data from Messari.
Stacks is a Bitcoin layer 2 for smart contracts that seeks to transform and expand Bitcoin’s functionality from its widely known role as an alternative payment system to a more versatile platform that is programmable.
The token began climbing last month amid market participants’ growing interest in creating Bitcoin Ordinal non-fungible tokens (NFT). Stacks has a built-in functionality to create NFTs and users have created 650,000 Bitcoin NFTs on Stacks L2, according to Stack’s co-founder, Muneeb Ali.
Stacks Network’s TVL also increased in recent months, rising from $8 million in February to $35 million in mid-March, according to data from DeFiLlama. It has since retreated to $25 million.
“The hype around Stacks is definitely due to Ordinals, but can be sustained if the developers stick around,” said DeFi analyst Michael Nadeau. “Bitcoin needs projects like this to sustain itself in the long run.”
Stack’s smart contract protocol has a ledger to store data outside of Bitcoin’s Layer 1, enabling developers to build apps on the platform, similar to what they can do on Ethereum or Solana.
Stacks aims to make Bitcoin more programmable, a feature more associated with the other two platforms, which currently have the majority of DeFi activity.
Stacks’ Ali said in an interview with CoinDesk that the recent interest around STX may stem in part from anticipation of Stacks’ upcoming Nakamoto upgrade later this year.
He said the release will give users access to full layer 2 smart contracts, allowing them to move bitcoin in and out of the layer while their layer 2 transactions are secured by Bitcoin layer 1.
Ali said that unlike Ethereum and Arbitrum, users cannot easily move BTC into the Stacks layer right now. This is the biggest bottleneck.
The update is set to increase the network’s liquidity and capacity.
Ali also explained that unlike many blockchains that require powerful hardware to run nodes, Stacks allows users to run nodes on less sophisticated hardware such as Raspberry Pi or regular laptops, making it more accessible to users. Unlike Solana or ICP, Stacks does not require you to run nodes in data centers, which is the typical way to deploy nodes with high hardware requirements according to Ali.
In a report, NorthRock Digital, a hedge fund that invests in cryptocurrencies, wrote that “despite limitations in developing a crypto-economy on top of Bitcoin, Stacks has a potentially ‘massive opportunity’ for Stacks due to the relatively small crypto-economy currently is built on Bitcoin..
NorthRock identified three main layer 2s on Bitcoin, Lightning, RSK and Stacks. “Each L2 is complementary and has different goals, but of the three, Stacks is the furthest along in developing an ecosystem for more traditional crypto applications (NFT, DeFi, Name Services, etc.),” wrote NorthRock.
NorthRock also noted that Bitcoin’s upcoming halving will likely benefit Stacks. “Even the halving will reduce Bitcoin’s security budget and further reinforce the need to develop a larger fee pool through a more productive Bitcoin ecosystem. This will reinforce the importance of L2s, such as STX,” the report said.
