The Bitcoin blockchain is a complex system of various protocols. His two protocols, stack and ordinal, are often mistaken for each other or lumped together. However, there are some important differences to note between stacks and ordinals.
What is Bitcoin Stack?
Smart contracts are a key component of decentralized finance (DeFi). These programs can automatically enter into contracts as long as certain prewritten conditions are met. Smart contracts eliminate the need for third parties or intermediaries, adding to DeFi’s trustless model.
Smart contracts started on Ethereum, but have since been adopted by many other blockchains, including Solana, Stellar, and Waves. And now even Bitcoin, the biggest player in the cryptocurrency industry, is delving into this useful technology through its stack.
Bitcoin stack is a layer 2 protocol
Stacks (previously known as Blockstack) is a Layer 2 solution implemented on the Bitcoin blockchain in 2018. Since then, a second mainnet launch has taken place, giving way to his Stacks as we know it today.
Stacks is linked to the Bitcoin blockchain via a proof-of-work consensus mechanism. Ethereum is known to be the go-to place for using smart contracts, but Stack brings similar capabilities to Bitcoin.
of Official Stack Whitepaper “It enables smart contracts and decentralized applications to trustlessly use Bitcoin as an asset and settle transactions on the blockchain,” it said. Simply put, Stack allows for smart contracts and decentralized applications (DApps), features that did not previously exist on the Bitcoin blockchain.
Many DeFi applications such as automated market makers (MMs) and liquidity pools require smart contracts to function. So without such features, Bitcoin remains very limited in what it can offer. Stacks, or smart contracts, open many doors.
Stacks is a Layer 2 solution for Bitcoin, but does not use proof-of-work mechanisms. Rather, it uses what is known as a proof of assignment. Proof of transfer is a modified version of proof of burn. By burning STX tokens (more on this later), a miner will be able to mine on his Stacks blockchain.
Stack is an acronym
The Stacks whitepaper also reveals that the name “Stacks” is an acronym. The meaning of each character is as follows.
- S: It is protected by Bitcoin’s overall hash power (Bitcoin finality).
- rice field: Bitcoin peg mechanism with minimal trust. Write to Bitcoin.
- answer: Assets owned by atomic BTC swaps and BTC addresses.
- Child: A clear language for secure and decidable smart contracts.
- K: Knowledge of the complete state of Bitcoin. Read from Bitcoin.
- S: Scalable and fast transactions settled in Bitcoin.
As you can see, Stacks solutions focus on several factors such as security, scalability, and reliability. His Clarity smart contracts for this protocol protect users from bugs and exploits.
As Stacks is a Layer 2 solution, it does not allow the creation of Bitcoin-based NFTs. However, its smart contract functionality can be used in NFT trading. Stacks also has its own NFT marketplace, with all products priced at STX.
Stack cryptocurrency is STX
The Stacks protocol also comes with its own crypto asset, STX. We briefly discussed this cipher earlier, but it’s important to understand its purpose and function within the stack ecosystem.
STX will be used to pay network fees, execute payments within stack-based DApps, and reward miners for securing the blockchain.
The Stacks protocol has its own network of important contributors, including miners. A miner must mine her STX tokens via a proof of transfer mechanism. However, to mine Stacks blocks, you must first perform Bitcoin transactions on the original blockchain. Each Stacks block needs his Bitcoin block to link to.
What is a Bitcoin Ordinal?
In early-to-mid 2023, Bitcoin ordinals have become a very hot crypto topic.
Many people choose Ethereum over Bitcoin simply because the previous blockchain offered more features. Ethereum has long been known as the primary blockchain for creating, minting, and selling NFTs, while the Bitcoin blockchain serves as the ledger used for Bitcoin transactions. In short, Bitcoin was never very versatile.
However, many Bitcoin enthusiasts have been enthusiastic about this versatility issue with some useful blockchain solutions such as Stack and Ordinal. We already know what Stacks are, but Ordinals brings a whole new element to the game: Bitcoin NFTs.
Bitcoin Ordinals protocol launched in January 2023. This is the layer 1 protocol used for Satoshi numbering. Like stacks, ordinals provide additional functionality to the Bitcoin blockchain, but the two are not exactly the same.
Bitcoin NFTs, or Bitcoin Ordinals, are created using Satosis. Satoshi is a small fraction of a single BTC coin, and one Bitcoin contains 100 million Satoshi. Although very small, Satoshi can transfer and track data.
This is done by writing data to SATOSHI, a process enabled by the Ordinals protocol. By attaching additional data such as comments and messages to individual SATOSHIs, you effectively create a Non-Fungible Token (NFT). For example, Satoshi can be imprinted with information about the location of a digital file, making it an NFT.
However, since the Bitcoin blockchain does not use smart contracts, neither do Ordinals. This separates Bitcoin NFTs from other well-known NFT-enabled blockchains such as Ethereum, Solana, and Cardano.
Ordinals are a 2023 phenomenon, but made possible by the 2021 Bitcoin Taproot update, allowing Satoshi to be imprinted.
When to use stack and ordinal
It’s easy to confuse stacks and ordinal numbers due to their similarities, but both protocols have different uses. So when should you use one of these Bitcoin solutions?
If you want smart contracts with Bitcoin, Stacks is the solution.
For example, say you want to create, mint, trade stack-based NFTs, or use Bitcoin protection to protect your NFTs. All this is possible with the Stacks protocol. Additionally, stacks can be used to create decentralized apps, which is not directly possible with the Bitcoin blockchain.
On the other hand, if you want to create or trade Bitcoin-based NFTs, the Ordinals protocol can help. Ordinals is a Layer 1 solution instead of Layer 2, so it can generate non-fungible tokens directly on the Bitcoin blockchain instead of a separate chain like Stacks.
Stacks and Ordinals Make Bitcoin Better
Stacks and ordinals have different natures and purposes, but there’s no denying that both solutions have their distinct advantages. If you love Bitcoin, but also want to enjoy the benefits of DeFi and its versatility, both of these protocols might work for you.
