The Stacks (STX) protocol has initiated the Nakamoto Upgrade, which introduces Bitcoin (BTC) finality to its network. Over the next 21 days, the ecosystem is set to experience a range of activities linked to this significant upgrade.
Stacks is one of the largest Bitcoin Layer-2 (L2) networks by market capitalization. Earlier this year, the STX community approved the Nakamoto upgrade, aiming to make the network faster and enhance block times.
Bitcoin L2 Stacks Initiates Nakamoto Upgrade
The Nakamoto Upgrade marks a new era of scalability for decentralized finance (DeFi) within the Bitcoin ecosystem and is one of the most significant changes to the Stacks network. Activated on Wednesday, this upgrade enhances transaction speeds and reduces settlement times.
Bitcoin’s standard settlement times previously ranged from 10 to 30 minutes or more. The Nakamoto Upgrade has slashed this to around five seconds—a 10X improvement that significantly boosts the Stacks network’s usability.
The upgrade received strong community support earlier this year and sets the stage for several key developments in the Stacks ecosystem. One of the major upcoming events is the introduction of sBTC, a decentralized asset backed 1:1 by Bitcoin.
Stacks is specifically designed to enable smart contracts and dApps to use Bitcoin as a secure base layer. By extending Bitcoin’s capabilities without altering it, Stacks unlocks billions in latent capital, allowing for a more dynamic and functional ecosystem.
Read more: A Beginner’s Guide to Layer-2 Scaling Solutions
The Nakamoto Upgrade comes as projects built atop the Stacks blockchain endured less-than-desirable speeds. These slow transaction times negatively impacted the user experience, making it challenging to support high-volume use cases and limiting developers from delivering complex DeFi products.
Despite the positive changes brought by the upgrade, which began on Wednesday, the total value locked (TVL) on the Stacks network has decreased by over $7 million, dropping from $98.10 million to $90.62 million. This decline in TVL suggests that the upgrade’s immediate impact on market confidence was mixed, even as the network undergoes notable improvements.
BeInCrypto data shows STX, the native token of the Stacks network, is trading for $1.59 at press time, down 8.5% since Thursday session openned.
Bitcoin L2s Could Initiate New Wave
Bitcoin L2 solutions are progressively gaining popularity, and have attracted significant investment. As BeInCrypto previously reported, VC funding towards Bitcoin L2s continues to grow, collectively raising an impressive $94.6 million in the second quarter of 2024.
This represents a substantial 174% increase quarter-over-quarter. Experts also revealed that at least 65 projects identified themselves as Bitcoin Layer-2.
“The crypto industry is catching on to the fact that much of what is done on alternative blockchains can be built on top of Bitcoin. Fortune 500 companies like MicroStrategy are tailoring their entire business towards Bitcoin’s Layer-2. Layer-2 faces no more regulations than other crypto platforms. The only challenges are technical, and the brightest minds are being pulled towards Bitcoin along with nation-states, etc,” Manuel Ferrari, Money On Chain Co-Founder, told BeInCrypto.
Read more: Beginner’s Tutorial to Start Using the Lightning Network
There is also speculation that L2s could spark a new bullish wave for Bitcoin, especially as the focus on scaling increases. This rising demand might lead to capital rotation, with overflow potentially moving into Layer-2 tokens like STX, Elastos (ELA), SatoshiVM (SVM), and BVM (BVM).
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