Stacks (STX) Brings DeFi for Bitcoin (BTC)
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Stacks (STX) is a lesser known DeFi platform, gaining attention for the outsized gains of its native token. STX was up nearly 18% on Thursday while the rest of the market remained in the red, reaching a valuation of $1.12.
STX doubled its price in the past two weeks, showing the highest trading volumes for the past three months. The asset may be gaining traction as more investors are on the lookout for potential high performers. STX peaked above $2.67 after a long history of trading below $0.20. Because it is still a relatively unknown asset, STX has offered significant upside in the past.
With higher volatility, STX is offering a risky upside as it is still discovering a price range.
STX Brings DeFi to Bitcoin
BTC prices have encouraged traders to use the asset as collateral, due to its deep liquidity and relatively low slippage. But DeFi is mostly related to Ethereum (ETH), as well as Binance Smart Chain (BSC).
Stacks offers the opportunity for a second-layer solution to BTC, as well as building DeFi applications. According to CoinMarketCap data, Stacks already locks in more than $432M in liquidity.
Stacks offers distributed apps that also place a record on the Bitcoin blockchain, with most of the computation happening off-chain. To increase security, the native STX token is staked to avoid malicious network usage. For retail users, STX can be locked for a predetermined time period, while accruing rewards in BTC.
The Stacks team claims each BTC block now contains a transaction that also bundles up the state of the Stacks network. At the same time, some amount of BTC gets transferred to STX owners.
How BTC Participates in DeFi
BTC is mostly used as highly valuable, liquid collateral in various crypto lending projects. Based on projects reporting, about $6.54B in value is locked in Wrapped BTC, or WBTC, an asset that represents the value of BTC and can move across the Ethereum network.
Projects like NEXO also use BTC as collateral for fast loans. One of the rationales is that BTC can be staked as collateral instead of selling, thus making use of potentially growing prices.
BTC is accepted in some form for most DeFi projects.
BTC Offers High Security to STX
The chief selling point of STX is that its transactions are recorded both on its native ledger and the Bitcoin blockchain. The Bitcoin blockchain has recovered its hashrate after a recent bout of shutdowns, with mining still clocking in close to 100 TH/s.
BTC is also protected from spam transactions, as the fee to include a transaction in a block is growing in proportion to the demand for new transfers.
What Boosted the STX Market Price
The most recent rise in STX prices arrived as a trading anomaly. STX is still relatively illiquid and even small volumes may achieve significant price swings. In the past days, STX moved up against BTC in one of its trading pairs.
STX is widely distributed to markets like OKEx and Binance Exchange. The most active pairs are on the Binance exchange, and most STX trading is high in confidence. The least slippage is observed in the STX/BNB pairing.
STX also rose after a recent mention from Dan Held, one of the leading crypto influencers.
Altcoin trading remains unpredictable, and assets can go down as easily as making fast gains, with STX having a short-term period of outperforming the market.
Distributed Apps Arrive to STX
The Stacks project is just beginning to accrue its portfolio of distributed apps. At the end of June, Stacks announced its first investment into a batch of 25 dApp startups, including DeFi, encrypted communication, NFTs and copyright networks.
Stacks already has one working NFT and staking combined dApp, Boomboxes. The dApp combines unique NFT collectibles with STX staking and BTC rewards.
Holding STX and Native Wallet
The STX asset differs from the usual DeFi tokens which are available through the MetaMask wallet and other online, mobile and multi-asset wallets. Acquiring STX requires a new native wallet. The Stacks mainnet launched in January 2021, and currently hosts a small number of transactions after accumulating about 20,000 blocks.
The Hiro Stacks Wallet is a desktop app and browser extension allowing the transfer of STX tokens, as well as participation in distributed apps built on the Stacks protocol. Hiro Systems announced its wallet recently had a security audit.
STX transactions have an additional feature that allows for mistakes to be repaired through a fee. A STX transfer is initially included in preliminary micro-blocks, which are still pending before being included in a Bitcoin block. This allows users to issue a second transaction that negates the first one, by paying a larger fee. STX block producers will mine and include the second transaction to gain the higher fee.
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