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Great personalities tried to make changes to Bitcoin. Each and every one of them failed. Among those attempts was Vitalik Buterin, who, seeing his proposal rejected, created his own network.
There is a team of people, who opted for a different solution. I’m talking about the Stacks team, who managed to create a blockchain, layer 1, that processes its own Smart Contracts and of course, contains decentralized applications that give rise to a DeFi ecosystem.
But the biggest particularity of this network, which makes it stand out from the rest, is that it is natively integrated with the stability, security and economic power of Bitcoin.
Beyond the benefits of this network, today it is my turn to answer the question: How to mine Stacks? As you can imagine, the previous paragraph will be of great importance in this article.
What is Stacks?
Before knowing what we are going to mine, I think it is important to know the project that gives life to this cryptocurrency called STX.
As I clarified in the introduction to the article, Stacks is a blockchain, specifically a layer 1, that seeks to create a DeFi ecosystem built around Bitcoin.
Long discussions have been going on around the future of the first blockchain and all have come to the same destination, Bitcoin is unchanged. But the Stacks team insisted that Bitcoin deserves a DeFi ecosystem. And how did they solve it?
They created a blockchain, a programming language, christened Clarity, and a very particular block creation consensus called “Proof of Transference”.
Stacks is capable of processing its own transactions and hosting its own DeFi ecosystem, laurels already held by a motley crew of networks.
The most remarkable thing about this team is that through the unique consensus method they have created, they achieved the goal of having the security of their chain resting on the Bitcoin core network.
Now, let’s dig into the workings of this surprising consensus.
How does the unique Stacks consensus work?
The creators of what was originally called Blockstack and is now known simply as Stacks, Muneeb Ali and Ryan Shea, have always shared the certainty that Bitcoin is the most secure network in existence. That is why they chose it as the security provider for Stacks.
Generally, we talk about the consensus methods of Proof of Stake, Proof of Work and perhaps now, because of Solana, Proof of History. But little mention is made of the Proof of Burn method and it is the next to be dismembered in this article.
Proof of Burn and its mutation to Proof of Transference
The mechanism known as Proof of Burn, is a method in which miners, instead of offering their computational power (Proof of Work) or an economic guarantee (Proof of Stake), “burn” or destroy cryptocurrencies in order to mine a new block. Yes, that’s right, the burning or destruction of a certain coin is offered.
Of course Muneeb Ali and Ryan Shea knew, from the beginning, that this method would not work with Bitcoin, as who would want to destroy BTC?
It was then that they got creative and developed the consensus mechanism they called Proof of Transference. This method could be summarized as identical to Proof of Burn, except that, instead of destroying coins, miners, in order to compete to mine a new block, transfer these cryptos to another agent in the ecosystem.
Now, to whom do the miners send BTC? To the second participants of this network, known as “Stackers” or accumulators. Stackers must offer as a guarantee their stacks, around 10,000, which will be housed in the Stacks network and in this way they will be in charge of the network’s security. On the other hand, it is worth mentioning that their reward for this participation will be nothing more and nothing less than Bitcoins.
I can imagine the doubts generated by this consensus and, in particular, how it works. Not to worry, I will unveil it in the next paragraph.
How to mine Stacks?
So far we have learned that Stacks secures its network through Bitcoin, with the Proof of Transfer consensus method, and that this consensus involves two actors, miners and accumulators. With this information base, let’s move on to the process itself.
What do I need to mine Stacks?
Important point, which will probably generate more than one smile. As for the hardware, a computer, common and wild is enough to be a STX miner and enjoy the rewards for mining a new block.
On the economic side, perhaps the previous smiles are now dissipated, since it is necessary to have BTC, which will be transferred, in order to be drawn and be able to mine a block of Stacks.
How to mine a block?
To have a chance of being chosen to mine a new block of Stacks, miners must send, on the Bitcoin chain, the same amount of BTC to two different addresses. These addresses, contained in the BTC chain, belong to two different accumulators, who offered their Stacks as collateral. It is important to know that these two addresses are selected by a random algorithm.
But how is it determined who will be the miner in charge of mining the next block? This depends on the amount of BTC sent to the accumulator addresses. The miner who has sent the most BTC to the accumulators’ wallets will be the one to mine the next block. In exchange for his task, he will receive a reward in STX in the Stacks network.
Calculating the chances of mining a block of Stacks
To calculate the probability of being chosen, the following exercise must be performed: we take the amount of BTC sent by the miner and divide it by the total amount of BTC sent by the total number of miners.
We already see that it is not simple to mine a new block of Stacks, so I will leave some tips to calculate the amount of Bitcoin to send to increase the chances.
How much BTC should I send to have a chance of Minar Stacks?
Stacks does not impose a minimum amount of BTC that miners must send, but naturally an amount known as “dust” was adopted. When a transaction is sent and the cost of the transaction exceeds the amount sent, we are in front of the, not at all well weighted, “dust”.
To calculate this amount, many factors must be taken into account, but the Stacks community considers 5,500 satoshis to be a good floor. Taking into account that transactions must be made to two different wallets, 11,000 is the minimum number that is usually transferred to participate for the mining draw of the next Stacks block.
Also from the community, the following recommendations were born when calculating the necessary amount of BTC to transfer:
- Estimate the BTC / STX price for the next day (100 block Bitcoin network)
- Estimate the total amount of BTC sent by all the miners.
While it may be intimidating at first, in the words of the miners themselves, these are decisions that you learn to weigh with practice.
STX minimum returns
This item is composed of two concepts. Rewards related to the creation of the block itself and those related to the fees that users pay to use the Stacks network. Let’s see how each one is composed.
Reward for mined block
The rewards for mining Stacks blocks follow, unsurprisingly, the monetary policy of Bitcoin. Following this similarity, we find the following scheme. In the first four years, 1000 STX were created per block. After this time, the first halving will halve the amount of STX created with each new block and the same will happen every four years. Each halving is synchronized with the same event in the Bitcoin network.
Benefits from transaction fees
Stacks users are required to pay a fee for each transaction they make in the chain.
In normal blocks, which follow the timestamp or creation time of Bitcoin blocks, the miner receives 100% of the fees paid.
On the other hand, the network has so-called micro-blocks. These are partial blocks that make up the actual blocks of the Stack network, and serve to reduce waiting times when using the Stack network. In this case, the miner who validates the micro-block takes 40% of the transaction fees. The remaining 60% will serve as a reward for the miner who validates the complete block, composed of as many micro-blocks as necessary.
What does the future hold for Stacks?
It is undoubtedly an innovative network in several points, which make it attractive, both in the eyes of users and miners. Making use of the security of the Bitcoin network, through its Proof of Transfer consensus, is an extra point.
At the time of its adoption, its creators emphasize that they provide Bitcoin with a new use case. Today we can say that Bitcoin is used for peer-to-peer transactions without intermediaries, but also for mining blocks of Stacks.
The future of Stacks will depend on two points, which are, to date, still awaiting definition. On the one hand, increasing its DeFi ecosystem and, on the other hand, convincing users that spending their BTC to mine STX is a good business…