Research Summary
The report provides an in-depth analysis of Stacks, a smart contract layer for Bitcoin, and its potential growth in 2024. It covers Stacks’ use cases, adoption, revenue, tokenomics, governance, team, investors, competitors, risks, and audits. The report also highlights the upcoming catalysts for Bitcoin and Stacks, including ETF approval and the halving.
Key Takeaways
Stacks’ Unique Position in Bitcoin DeFi
- Expanding Use Cases: Stacks provides novel use cases for Bitcoin holders, including Bitcoin-backed loans, Bitcoin DeFi, and using Bitcoin to trade NFTs. It aims to unlock over $900b in capital by bringing DeFi to Bitcoin.
- Growing Ecosystem: Over 30 teams are actively developing on Stacks, with some of the largest projects being Alex (DEX), StackingDAO (Liquid staking), and Arkadiko (CDP).
Stacks’ Financial Performance
- Increasing TVL and Volume: The Total Value Locked (TVL) on the Stacks chain is at an all-time high of $63m, up about 6x from the September 2023 lows ($10m TVL). Volume has also increased considerably over the last few months.
- Tokenomics: The native token, $STX, is used to pay transaction fees and for stacking (locked on the network to earn BTC rewards). The total supply of STX is projected to reach 1.82B by 2050, with a current circulating supply of 1.43b and a market cap of $2.6b.
Governance and Team
- Centralized Governance: The Stacks community can submit Stacks Improvement Proposals (SIPs), which are then discussed and voted on by the Steering Committee. However, this process is still fairly centralized.
- Experienced Team: Stacks was founded in 2017 by Muneeb Ali and Ryan Shea and has raised over $45m from various funding rounds, private sales, and ICOs.
Competitors and Risks
- Competitive Advantage: Stacks faces competition from other solutions to Bitcoin’s inefficiencies, such as the Bitcoin Lightning Network, RSK, Ark, and Liquid. However, Stacks is unique as it’s the only one with its own native token- $STX.
- Risks: Stacks has faced several roadblocks in recent months, including the discovery of a critical bug in the ‘stacking’ mechanism and instances of ‘mass censoring’ at the mining layer.
Actionable Insights
- Monitor Stacks’ Development: Given the growing ecosystem and expanding use cases, it would be beneficial to keep a close eye on Stacks’ development and adoption.
- Assess Governance Structure: The centralized nature of Stacks’ governance could impact its future growth and adoption. It’s crucial to assess how this structure evolves over time.
- Consider Market Risks: The recent roadblocks faced by Stacks highlight the importance of considering market risks when evaluating the project.
- Track Upcoming Catalysts: The upcoming Bitcoin ETF approval and halving could significantly impact Stacks’ growth. Tracking these events could provide valuable insights into Stacks’ future performance.
