STX20: A Timely Case For Bitcoin L2s
by Mitchell Cuevas on December 20, 2023
Ordinals, BRC-20, and other experiments on the Bitcoin L1 are driving an influx of new Bitcoin-curious builders and users. This weekend, a group of self-described ‘Degens’ put the Stacks layer to the test by unleashing their vibrant community to mint with their new ‘STX20’ protocol, bringing an Ordinals-like model to the Stacks L2. In this post, we’ll talk about why this is awesome, and why, despite some of the temporary downsides for network users, this is ultimately an exciting development for Bitcoin L2s.
First, what actually happened?
On Sunday, Fess (Asigna) and Akva (Honey Badgers), introduced the STX20 protocol as a version of Bitcoin inscriptions on the Stacks layer. Having built support via Twitter and Telegram among Ordinals community, Stacks folks, and degens alike, the community swarmed the opening to mint the first STX20’s and experiment with the new protocol.

Fess says the STX20 protocol is a “novel approach to creating and sharing digital artifacts”. According to the team, it leverages the transaction memo field to offer a more efficient, gas-saving alternative to conventional smart contracts for specific use cases. He adds that with the anticipated Nakamoto upgrade, Stacks’ decentralization and integration with the Bitcoin network will be enhanced. Learn more about the protocol here.
How did the Stacks layer handle it?
In short, there was some good and some not as good. The good news is most of the ‘bad’ things are related to known throughput limitations of the current iteration of Stacks. The congestion issues and the symptoms they cause were certainly present as the coordinated nature of the release created an all-at-once influx of transactions.

Further, exchanges aren’t immune to impacts from surges like the one on Sunday. Two exchanges unprepared for the large uptick in activity without automated fee tools experienced long delays due to transactions with low fees. Obviously, this also impacted users who were likely caught off guard by the need for much higher fees than normal. (If your tx is stuck, remember you can increase the fee!).

On the positive side, other integrations such as bridges, oracles, custody providers, etc. seem to be unaffected sans adjusting fees where needed. Further, the Stacks layer was able to keep chugging through transactions, even compiling one block with over 8,000 transactions and another of over 10,000, a new record for the layer. For reference, the average number of transactions per day in November was 3,865, but since Friday evening that average is up to ~32,000 per day (total of approximately 126,000).

Recent improvements to mempool handling and other optimizations helped the Stacks layer deal with the spike, albeit still more slowly than we’d all like. Notably, thanks to recent optimizations to the transaction selection process, we saw miners able to build a full block in 10 seconds, whereas before, they couldn’t even fill it 2.5% in a full 30-second window. That’s 3 times faster for 40 times the block size.
Stacks is meant to help Bitcoin scale — so why did the network experience congestion?
The short answer: In the future, it won’t. Criticism about the speed of Stacks right now is fair, we all want it to be faster and are hotly anticipating the Nakamoto release to address this exact limitation.

If you’re newer to Stacks, it’s worth understanding that currently, to secure L2 transactions on Bitcoin, Stacks blocks progress in lockstep with Bitcoin blocks. This means that Stacks blocks will only be confirmed as soon as Bitcoin blocks are, sometimes that takes 10 minutes, sometimes longer.

So while admitting the Stacks layer has plenty of room to grow as a scaling solution, let’s also quickly look at scaling through the lens of cost. Today, this is where the Stacks layer shined: Consider that on the Bitcoin L1, a BRC-20 is roughly $20 USD in today’s fee environment. Most transactions we saw on the Stacks layer during this time were 10-100x cheaper.
Nakamoto will be a big step forward for Bitcoin L2s
Experiments like STX20 (and Ordinals before that) prove the need for Bitcoin L2s. These experiments bring in new developers, new users, and create value for Bitcoin L1 in the way of increased miner rewards and security budget.

Further, these experiments increase the chances that new use cases are born that could help Bitcoin to remain useful in the long-term, ensuring there is a healthy fee market and potential miner rewards long after all BTC has been mined. There has never been more support for building on Bitcoin, and bitcoin holders clearly want to engage with experiments and projects on Bitcoin layers. Bitcoin L2s will make that a much better experience and enable use cases that are simply not possible at the L1.

Looking ahead: Nakamoto will combine speed and Bitcoin security (100% finality), while sBTC will enable smooth movement of BTC between the L1 and L2, further enabling use cases for programmable Bitcoin at speed.
Ok, but how would Nakamoto have helped with ‘Degen Sunday’?
Or as I affectionately called it over the weekend, the DDOS (Degens Deploy Ordinals to Stacks) event.

Simply put, after the Stacks' Nakamoto update, a shift in block production mechanics will introduce significantly faster block times, meaning the mempool backing up like we’ve seen with previous NFT mints and this weekend with STX20 will be a thing of the past.

By decoupling Stacks block creation from the constraints of the Bitcoin 10-minute block intervals, the upgrade will facilitate quicker transaction confirmations and enhance the network's responsiveness.
Building on Bitcoin requires Bitcoin L2s
The Stacks community has long been espousing the viewpoint that all forms of building on Bitcoin are good and valid. This hasn’t always been a popular position, but in the case of Stacks folks, it’s a fundamental value.

Experimentation is critical. Surfacing and resurfacing needs in L2s that enable builders is critical. STX20 did both of these while further proving out the case for Bitcoin L2s. And not only that, they created a ton of fun and new energy within the community along the way.
Bitcoin fees and congestion have been at all-time highs this year and Bitcoin builders are looking for ways to bring interesting experiments to their communities anyway. This activity is just one example of network activity from the Bitcoin L1 needing a place to go and finding optionality on an L2 — a trend we expect to see more of in 2024.
Some other solutions:
Beyond Nakamoto, here are two other projects we’re aware of in the ecosystem that could also potentially help with the STX20 project, others like it, or just help to reduce congestion in general:

  • Off-chain data processing with ALEX: In addition to the expected scaling and security solutions that the upcoming Nakamoto Release will bring to Stacks, Bitcoin Decentralized Finance protocol ALEX has announced that the Bitcoin Oracle is set to support STX20. ALEX promises to establish a safer trading standard for Bitcoin-issued assets and ensure accurate off-chain data processing.
  • FastMint: There is a tool near the finish line that uses the Subnet architecture from Hiro to enable faster and responsive minting of NFTs on the Stacks layer. Potentially this, or a fork of this, could be used by the STX20 team to take some of the activity to a subnet layer.
Other digital gold linings:
  • Stacks miners are seeing increased block rewards. This is positive because more miners should be incentivized to join the network.
  • STX20 activity further validates the work ongoing to make the Stacks layer a better, faster L2
  • The Stacks layer has an opportunity to continue proving it is good for Bitcoin (and Ordinals), contributing to a robust fee market and security budget.
  • Fun, attention, and new builders: Embrace all the new community members this surge has brought in, we are all Bitcoin builders and they are all just friends you haven’t met yet.

See all you Degens in the Discord <3!