Bitcoin Layer 2 Stacks Network's STX Token Spikes 50% as 'Ordinals' Boom

Stack Network is a Bitcoin layer 2 for smart contracts aimed at unleashing the world's oldest blockchain's potential as a programmable platform.

AccessTimeIconFeb 20, 2023 at 11:53 a.m. UTC
Updated Feb 21, 2023 at 3:48 p.m. UTC
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STX, the native token of Bitcoin layer 2 Stacks Network, is surging as the recent arrival of the Ordinals protocol has unleashed a new narrative of non-fungible tokens (NFT) and smart contracts on the Bitcoin blockchain.

Stacks Network is a Bitcoin layer 2 companion chain for smart contracts focused on establishing the world's biggest and oldest blockchain programmable – a dominant feature of Ethereum and its competitors such as Solana, which currently account for a majority of global NFT and decentralized finance (DeFi) activity.

Stacks has a separate ledger to store data outside the Bitcoin blockchain, allowing developers to build applications similar to those on Ethereum and Solana. STX, known for being the first token offering qualified by the U.S. Securities and Exchange Commission (SEC), is used to incentivize Stacks miners and participants in the proposed Stacks bitcoin (sBTC) system, which is aimed at making bitcoin fully programmable.

The token has risen nearly 50% to 60 cents in the past 24 hours, taking the month-to-date gain to 125%. Prices were quoted as high as 84 cents early Monday, the highest since May, CoinDesk data show. Meanwhile, market leader bitcoin (BTC) has risen just 6% this month.

The outsized move comes as the crypto community goes gaga over Ordinals, which went live on Jan. 21, allowing users to inscribe references to digital art into small transactions on the Bitcoin blockchain. In other words, Ordinals are like drawing artwork directly on satoshi (sats), the lowest denomination of a bitcoin, while NFTs on Ethereum are analogous to an authenticity certificate from the creator that is separate from ether.

The number of newly created Ordinals or NFTs inscribed directly into Satoshis on Bitcoin crossed the 100,000 mark last week, causing network congestion on the Bitcoin blockchain.

Per Muneeb Ali, co-founder of Stacks, the growing popularity of Ordinals would bode well for layer 2 systems.

"Ordinals on Bitcoin [layer 1] are complementary to Bitcoin NFTs on [layer 2s] like Stacks. Ordinals have a natural limit on the L1 scale, and L2s provide a clear scalability path," Ali tweeted Monday. "Wallets like Xverse and & Hiro are amongst the first to release or work on Ordinals."

Activity in NFTs on Stacks has picked up in the wake of the Ordinals' rising popularity. Data from DappRadar shows trading volume on Gamma.io, a Stack-based Bitcoin NFT marketplace, has increased by more than 1,000% in the past 30 days. Meanwhile, volumes on Megapont have increased by 125%. Per data tweeted by Ali, there is an active community of artists and creators on Stacks and people have minted 650K Bitcoin NFTs on the layer 2 system.

"Ordinals NFT on Bitcoin blockchain has been very successful, leading to a general Bitcoin NFT fever," CK Cheung, investment analyst at DeFiance Capital, said. "Stacks is a beneficiary of this as it is an L2 supporting smart contracts built on top of the Bitcoin Network. People could mint new Bitcoin NFTs on top of Stacks with a lower cost and higher speed."

Last week, the bitcoin-focused Web 3 wallet Xverse rolled out support for Ordinals. At the same time, Hiro Wallet added support for inscriptions on its testnet, with Ali describing the same as Metamask for Bitcoin.

Early this month, Gamma.io unveiled a no-code creator platform for NFTs on native Bitcoin through the use of ordinals, opening doors for users to create inscriptions without having to run a full Bitcoin node or write any code. Gamma's new launch essentially made Ordinals accessible to everyone.

"Ordinals (inscriptions) are similar to NFTs, are digital assets inscribed on the smallest value of Bitcoin (satoshis). This is now opening up the use case for NFTs and merging them with the Bitcoin network security layer," Markus Thielen, head of research and strategy at crypto services provider Matrixport, said in an email while pointing to the upcoming "Building on Bitcoin Hackathon" as the key event to watch out for in the short term.

The hackathon, scheduled from Feb. 24 to March 7, will have participants build their own smart contracts using Clarity, programming language for writing smart contracts on the Stacks 2.0 blockchain.

"This virtual hackathon is driving a lot of attention as Stacks uses 'Clarity,' a programming language for writing smart contracts that might be easier to learn than Solidity. The hackathon will reveal in the next two weeks if everybody can now build smart contracts without too much technical knowledge," Thielen noted.

Finally, on top of all this, STX is seemingly drawing a haven bid, according to Dubai-based crypto analyst and trader Reetika Malik.

"STX is also one of the rare tokens approved by the SEC. So in these uncertain times when the regulator is going after a lot of crypto companies, an SEC-approved token also sounds like a good thing to the market," Malik said.

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Omkar Godbole

Omkar Godbole is a Co-Managing Editor on CoinDesk's Markets team.


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