Proof of Transfer (PoX) consensus mechanism

How PoX Works

Proof of Transfer (PoX) is the consensus algorithm used by Stacks. Unlike Bitcoin's Proof of Work, which requires miners to spend computational resources, PoX leverages the existing security of Bitcoin by having miners commit BTC as a proxy for computational resources.

The PoX system involves two types of participants:

Miners:

• Transfer their BTC to compete for the right to produce the next block
• Earn newly minted STX tokens (Stacks' native token) as rewards
• The probability of being selected is proportional to the amount of BTC they transfer

Stackers:

• Lock up their STX tokens for a certain period
• Receive BTC from miners as rewards
• In the Nakamoto upgrade, signers validate and approve blocks produced by miners. While all signers must be stackers and meet the stacking minimum, not all stackers necessarily become signers.

Election Process and Block Production

The process for selecting a miner to produce blocks works as follows:

1. Miners compete by transferring their BTC to Stackers
2. One miner is randomly selected based on how much BTC they transferred
3. The selected miner earns the right to produce blocks until the next election
4. The miner earns STX rewards, while Stackers earn BTC rewards

Bitcoin Finality

Stacks achieves Bitcoin-level security through a process that anchors Stacks transactions to the Bitcoin blockchain:

• Each block produced on Stacks is tied to a Bitcoin block
• Transactions in Stacks blocks are cryptographically grouped and hashed
• This hash is committed to the next Bitcoin block
• The next elected miner builds on that commitment

This process ensures that once a Bitcoin block is produced, all state changes on Stacks are permanently recorded on the Bitcoin network. Reversing a Stacks transaction becomes as difficult as reversing a Bitcoin block, providing Bitcoin-level finality to Stacks transactions.*

The Nakamoto Upgrade

The Nakamoto Upgrade represents a significant improvement to the Stacks network, addressing several limitations of the original design:

Key Improvements

Faster block production:

• Previous design: Stacks block production was limited by Bitcoin's ~10-minute block time
• Nakamoto upgrade: Elected miners produce multiple Stacks blocks between Bitcoin blocks

Reduced forks:

• Previous design: Causing forks on Stacks was economically cheaper than on Bitcoin
• Nakamoto upgrade: New processes make creating forks harder, reducing transaction reversals

Enhanced security:

• Makes it infeasible for miners to block other miners' BTC transfers
• Adds validation responsibilities for Stackers to double-check blocks produced by miners

These improvements make Stacks faster, cheaper, and more secure, fulfilling its vision as an efficient Layer 2 solution that enables programmability on Bitcoin while inheriting its security guarantees.

Set up a Stacks wallet 

Step 1: Installing the Leather Wallet Extension

• Visit the official Leather website at https://leather.io
• Click on "Install Leather now" and "Install from Chrome Web Store"
• This will take you to the Chrome Web Store where you can add the extension
• Click "Add to Chrome" (or your browser of choice - Leather works with Chrome, Brave)
• Once installed, pin the extension to your browser toolbar for easy access

Step 2: Creating Your Wallet

• Click on the Leather icon in your browser toolbar
• Select "Create new wallet"
• You will be presented with a 24-word Secret Key (seed phrase)
• Click "Show key" to reveal your Secret Key
• IMPORTANT: Write down this seed phrase and store it in a secure location. This is your only backup if you lose access to your wallet. Never share this with anyone.
• Click "I've backed it up" once you've securely saved your Secret Key
• Create a strong password to protect your wallet
• Confirm your password
• Your wallet is now created!