DeFi (Decentralised Finance)

Ethereum has given birth to ‘DeFi’, or decentralised finance. This is a burgeoning industry which allows users to lend and borrow money in a peer-to-peer context without banks or other middle-men.

Defi coins are used to interact with the Ethereum smart contracts which the protocols run on.

Notable examples include HEX, which has seen the fastest rise in price of any cryptocurrency over the past 12 months, climbing over 11,000 per cent according to cryptocurrency data site Nomics.

Stacks is a Layer 1 blockchain that uses Bitcoin’s infrastructure as a secure base layer. Smart contracts and apps can be enabled with little modification, with “minimal transaction load” on the network.

Underpinning how scalable Stacks can be, developers claim that thousands of transactions result in a single hash – and microblocks result in quick confirmations. Crucially, this means that Stacks can scale independently of Bitcoin.

How the technology works

Whereas the Bitcoin blockchain relies on the energy-intensive proof-of-work consensus mechanism, Stacks uses a novel alternative called proof-of-transfer, which reuses energy already spent on a proof-of-work chain – in this case Bitcoin. Known as PoX for short, those building Stacks claim that this is the first consensus algorithm between two blockchains – and it has the objective of “eliminating the choice between flexibility and security.”

To eliminate the risk that a smart contract might perform in an unexpected way, which has become a common problem, a new programming language is being introduced with Stacks 2.0 called Clarity. This open-source project was jointly developed with Algorand, and is designed to give developers a safe way of building complex agreements.

“Clarity makes it much harder to have smart contract bugs and allows developers to write logic around Bitcoin state directly. We believe bringing smart contracts directly to Bitcoin can make BTC more valuable as it can be put to productive use instead of being a passively held asset,” the Stacks whitepaper says.

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