Ethereum Under Threat? Stacks is the new Dapp and DeFi Contender.
Ethereum has matured into the Dapp and smart contract platform of choice with its constructs for fungible tokens, NFTs and smart contracts that are the heart of decentralized apps, or Dapps. But high gas prices, confusion and controversy over the years-long move to proof of stake, and security issues have called Ethereum into question. Is Ethereum the platform we all wanted or are there better options available? Many blockchains have tried to complete for better or worse, but none has become a true contender.
Stacks 2.0 (originally Blockstack) has reached a new level of maturity that makes this platform a solid contender in all the areas that Ethereum is strong, with the added benefit that it is built around and secured by the Bitcoin network. Stacks token is $STX and is openly traded on many of the larger exchanges, their fundraising began as an SEC-approved coin release, giving it a low likelihood of being banned or restricted in the US. Most importantly, recent releases have put Stacks at a level of maturity that makes it top contender status as a platform for powerful decentralization — a web wallet, NFTs and fungible tokens, a more secure smart contract platform using a language called Clarity.
While Stacks is still relatively new in the Dapps space (the web wallet was only pushed to the Stacks mainnet this year), Stacks has fully functional and working Proof of Transfer (PoX) mechanism with $BTC rewards that pays about 10%.
So this brings up the question: how does Stacks measure up to Ethereum? For anyone looking for a DeFi investment, which token is best? For anyone seriously investigating what chain to build on or what blockchains have massive potential in the future they have to ask how Stacks compares to Ethereum in all the areas of Dapps, smart contracts and tokens?
Let’s dive in and have a look at the issue.
DeFi: PoX Stacking vs. PoS Staking
Let’s start with the DeFi angle. On December 1, 2020 Ethereum 2.0 launched the Beacon Chain which includes Proof of Stake (PoS), which allows $ETH holders to “stake” their $ETH and earn rewards of up to 6%, paid in $ETH. This means that to earn $ETH, you no longer had to mine with processing power but you could now “stake” your Ethereum tokens and earn rewards. In Ethereum, you need at least 32 $ETH to stake, but you can pool if you have less. Once you stake your tokens, you cannot use them until you unstake them. And at current, you can’t unstake them at least until phase 1.5 of the Ethereum network is released (scheduled for this year or 2022). The upside of all this is that when Ethereum mainnet moves to Proof of Stake, this will offset the consensus process to PoS stakers instead of process-intensive miners, it should lower the carbon footprint of this chain.
The biggest issue with staking Ethereum is that in staking via PoS, you must be a validator. This means you have to download the entire Ethereum blockchain by installing the node software onto your computer (it can be a laptop or whatever, this is NOT proof of work mining). I believe at this point, it is over a couple hundred gigabytes. The cool thing about this is you are becoming part of the consensus mechanism (aka settling and validating the ledger). The not-so-cool thing is that if for some reason you don’t meet your obligations as a validator (e.g. you turn your computer off for a while), you can lose the Ethereum you staked. That’s right: there is a risk you can lose your $ETH.
Stacks uses PoX, which means you really just need to allocate your $STX to the stacking — you don’t have to run ANYTHING, you just need to have a wallet and some coin. There is no risk aside from taking your coin out of circulation (e.g. the price could drop and you would be unable to sell). You simply stack your tokens for the however many 2-week periods you wish to stack for, and then you earn ~10% APY until the period is over. This is paid at random intervals throughout the course of the stacking period, but some pools allocate on a more regular schedule (pools are run via smart contracts, so there can be some variation). When your allocated number of periods is over, you must then wait a full period until you can stack them again. The minimum $STX you need to stack at current is 90k, but there are pools available to stack if you have fewer. With $STX, because it is secured by the Bitcoin network, you will earn $BTC. So by holding $STX, you make $BTC. (Side note: if you use Friedger Pool, you can earn $STX.)
Tokens: SIP-010 vs. ERC-20
Let’s face it, Ethereum invented the fungible token standard. ERC-20 was the de facto standard for ICOs and token issuers, and remains a platform for releasing tokens that are secured by the Ethereum network but can be used for other things. The advantage of creating a token on Ethereum is that anyone who has an Ethereum wallet can hold your token. Any exchange that supports Ethereum can easily support your token. It’s a standard, plain and simple. You can easily create transferable tokens for any purpose.
SIP-010 is not much different, fundamentally, from ERC-20. In fact, it was inspired by it. Instead of using Solidity, the smart contract language of Ethereum, it uses Clarity, the Smart Contract platform of Stacks. The difference here is really a matter of preference. Both chains offer the same ability to create fungible tokens, without significant differentiation.
Tokens: NFT Support
Non-fungible tokens, or NFTs, are a way of attributing an asset to a single blockchain address. This can then be traded in exchange for money of some kind, saved, or divided up so that multiple people can have fractional shares of a single entity. As such, it’s not so much a token as it is a statement of ownership. The NFT will typically link to the asset it owns — an image, or some kind of URI that represents something digital or in the real-world. The use cases have been discussed and shared: the exchange of digital art (which has happened famously with Beeple for $69M), as proof of ownership of things in the real world like art or real estate, as proof of ownership of digital artifacts in gaming, and the list goes on.
The vast majority of NFTs are currently in Ethereum (including the infamous Beeple). That said, Stacks supports NFTs and there is a simple app in the ecosystem called Boom, that allows codeless creation of NFTs.
Dapps: Smart Contract and Dapp Development
When creating a new decentralized app, or Dapp, the single largest decision you will make is where you are going to create it. Ultimately, the blockchain you choose will determine its future and usability. Dapps rely on smart contracts — programs that execute against the blockchain and can be used to process transactions and process data. These are the core of all Dapps because they exist and execute on the blockchain so require no need for hosting or a centralized location as they reside across the blockchain — they are what make dapps decentralized.
There are a few key things to analyze when making this decision:
1. Ethereum uses Solidity which is a “Turing complete” language. In summary, Turing completeness means that a program operating on a Turing complete system can have infinite loops and can theoretically use up an infinite amount of memory — it has functions that won’t complete by themselves. Most non-blockchain languages today are Turing complete. Clarity, on the other hand, is non-Turing complete. The problem with Solidity’s Turing completeness is multifold: (a) you can’t do static analysis to determine gas prices; (b) vulnerabilities like the halting problem, The DAO hack (abusers called a recursive program and compromised The DAO’s funds, and reentrancy compromises; and © because of this architectural difference it can be easier for developers to analyze and debug Clarity before pushing to the blockchain.
2. Solidity is a compiled language, while Clarity is interpreted. This means that smart contracts are compiled on the Ethereum blockchain whereas Clarity contracts are, well, just the code. Solidity is object-oriented whereas Clarity is not. Solidity is imperative whereas Clarity is functional.
3. Clarity has some added security benefits. Without getting into too much detail, there are post conditions on tokens, more segmented data and other things beyond the Turing completeness, that are improvements on what has been seen to be the problem with Solidity.
4. Ethereum has a very active community, but Stacks is growing quickly and there are many grant options and communities of developers that are welcoming.
While Ethereum is still the most-used platform for building smart contracts, dapps and creating fungible and non-fungible tokens, Stacks is a comprehensive ecosystem that is rising fast and in many ways has solved some key problems discovered in Ethereum.
Additionally, Ethereum is moving into the DeFi space with their Beacon Chain, but Stacks has a more solid DeFi play due to reduced risk, higher interest and Bitcoin payouts.