Today, we’re proposing a potential major improvement to the Stacks consensus algorithm. Stacks 2.0 is expected to launch in Q2 this year. Stacks 2.0 is a major upgrade of the Stacks blockchain with a new Rust implementation, native Stacks mining, Clarity smart contract language, and other significant improvements. The current implementation uses a proof-of-burn mining mechanism where Stacks miners burn a base cryptocurrency (Bitcoin) to participate in the consensus algorithm and earn rewards (newly minted Stacks).

More specifically, with the Stacking consensus, we’re proposing to replace Proof-of-Burn (PoB) mining SIP-001 with a new concept of Proof-of-Transfer (PoX). With PoX, instead of burning a base cryptocurrency, miners transfer the base cryptocurrency to existing holders of a new cryptocurrency who participate in the consensus algorithm. In our proposed implementation using Bitcoin, Stacks miners would transfer Bitcoin to Stacks holders who are participating in our new consensus algorithm.

If adopted, we believe SIP-007 would introduce a landmark innovation for Stacks 2.0. We call the new consensus algorithm Stacking . Stacking takes the same Bitcoin used in PoB, but instead of destroying it, transfers it to users who are (1) holding Stacks and (2) actively participating in the consensus algorithm, i.e., adding value to the network. Once every reward cycle (roughly once per month), every user who meets the eligibility for Stacking would receive a reward (a payout) of Bitcoin from the network.

Why Bitcoin: Our proposal uses Bitcoin because it is the most secure Proof-of-Work blockchain in use. Stacking allows anyone to use a secure PoW cryptocurrency like Bitcoin to participate in consensus algorithms for new blockchains without ever repeating the need to go from electricity to PoW. These new blockchains benefit from the security of Bitcoin.

Benefits of Stacking: We believe that Proof-of-Transfer (PoX) mining used by the Stacking consensus algorithm is superior to Proof-of-Burn as it avoids destroying the base cryptocurrency. It also has a potential economic benefit for Stacks holders by allowing them to earn rewards in Bitcoin for participating in the consensus algorithm and Stacking their holdings.

Comparison with PoW and PoS: We believe that the Stacking consensus algorithm enables the network to reap the benefits of a standalone PoW blockchain without modifying Bitcoin’s core protocol. It does so while avoiding burning Bitcoin in most cases. Additionally, similar to Proof-of-Stake, holders of the new cryptocurrency who participate in the consensus algorithm can earn rewards. A major difference from Proof-of-Stake is the rewards in Stacking are in Bitcoin.

We’re currently looking for feedback on the initial proposal which is released today as a Stacks Improvement Proposal (SIP-007). We’re excited about this potential upgrade to the core consensus algorithm of Stacks 2.0 and look forward to hearing your thoughts!

<< Give feedback on SIP-007 >>

Important disclaimer

The Securities and Exchange Commission (SEC) has qualified the offering statement that we have filed with the SEC under Regulation A for our offering of certain of our Stacks Tokens. The information in that offering statement is more complete than the information we are providing now, and could differ in important ways. You must read the documents filed with the SEC before investing. The offering is being made only by means of its offering statement. This document shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

An indication of interest involves no obligation or commitment of any kind. Any person interested in investing in any offering of Stacks Tokens should review our disclosures and the publicly filed offering statement and the final offering circular that is part of that offering statement here . Blockstack is not registered, licensed or supervised as a broker dealer or investment adviser by the SEC, the Financial Industry Regulatory Authority (FINRA) or any other financial regulatory authority or licensed to provide any financial advice or services.

Forward-looking statements

This communication contains forward-looking statements that are based on our beliefs and assumptions and on information currently available to us. In some cases, you can identify forward-looking statements by the following words: “will,” “expect,” “would,” “intend,” “believe,” or other comparable terminology. Forward-looking statements in this document include, but are not limited to, statements about our plans for developing the platform, future utility for the Stacks Token, our Clarity smart contracting language, and potential mining operations. These statements involve risks, uncertainties, assumptions and other factors that may cause actual results or performance to be materially different. More information on the factors, risks and uncertainties that could cause or contribute to such differences is included in our filings with the SEC, including in the “Risk Factors” and “Management’s Discussion & Analysis” sections of our offering statement on Form 1-A. We cannot assure you that the forward-looking statements will prove to be accurate. These forward-looking statements speak only as of the date hereof. We disclaim any obligation to update these forward-looking statements.