Stackswap is preparing to launch the first fully decentralized exchange (DEX) on the Bitcoin network after successfully raising $1.3 million in a private round. The DEX, which will be powered by the Stacks’ PoX mechanism, will operate through direct Bitcoin transactions on every block.
The Stacks Foundation led the first round of funding for Stackswap, which included participation from some of the biggest names in the crypto space, including HashKey, Genesis Block Ventures (GBV), and SOSV. The partners agree on the platform’s ultimate goal: to become the largest decentralized exchange on the Bitcoin network.
To power the smart contract capabilities that will support the DEX, the platform will use Bitcoin as its first layer and Stacks’ mainnet as a second layer solution, which will be launched this month, November 2021. Furthermore, the platform will take advantage of Bitcoin’s base layer security and decentralization to maintain an immutable record of every transaction.
To accomplish this, Stackswap has created a PoX (Proof-of-Transfer) consensus mechanism. As a result, it is the first and only DEX that can run its protocol on top of the Bitcoin network.
In that sense, Stackswap may usher in a new market dynamic for the DeFi sector. Stackswap could overtake Ethereum and the top protocols that provide decentralized financial services, such as Uniswap, dYdX, and others, by expanding Bitcoin’s utility beyond its use as a synthetic asset to provide collateral in the form of Wrapped Bitcoin.
The project and its goal herald a new era in which Bitcoin may supplant the altcoin-focused DeFi sector. Stackswap’s DEX has the potential to inject capital into the Bitcoin ecosystem by attracting the attention of institutional investors and users looking to benefit from its functionalities and leverage a new liquidity channel powered by the Bitcoin network’s advantages.
What’s the story behind the world’s first Bitcoin-powered decentralized exchange (DEX)?
The PoX consensus algorithm, which enables the Stacks Protocol to add smart contract capabilities to BTC’s base layer, is built on two independent blockchains: Bitcoin and Stacks. The algorithm acts as a link between the former and the latter, with a 1:1 block ratio.
As a result, Stacks can verify every single transaction on the Bitcoin blockchain. Because the PoX can recycle the computing power used to mint new BTCs, this mechanism is far more energy-efficient.
The Stacks protocol has already formed an alliance with MiamiCoin, a local initiative supported by the Miami government and Mayor Francis Suarez. It is a pioneering project in the United States, and it is expected to generate revenue for the city without the need to raise tax requirements for its citizens.
The projects demonstrate the Stack Protocol and the Stackswap Launchpad’s potential. This mechanism enables initiatives built on Stack, such as the Stacks Accelerator, a project supported by the Bitcoin Maximalists community that seeks to bring DeFi functionality to Bitcoin, to be automatically reviewed by the protocol’s venture capital partners for financial and accelerator support.
How Stackswap Will Power The Future DEX Protocol
Stackswap will provide its users with the traditional features that have helped DEX become so popular in the altcoin DeFi sector. This includes censorship-resistant trading via swaps, liquidity mining, and some new functionalities.
The DEX will enable users to launch their own tokens via a Launchpad, liquidity providers to create trading pools, and token compensation programs to be launched using Stackswap’s PoXL mining. As a result, the platform will give users more opportunities to maximize their profits by staking the platform’s native token STX, which will be supported by an innovative Bitcoin-based reward payment system. This design will provide unprecedented assistance to early-stage Bitcoin entrepreneurs.
Stackswap’s Stacks protocol has received investment from Coinbase Ventures and Winklevoss Capital, two of the most prominent firms in the space, in addition to the financial support received in their first private round. The Stack Protocol, which runs on top of Bitcoin, was the first token sale approved by the US Securities and Exchange Commission (SEC), lending credibility to the project.
The Stackswap team stated the following about their DEX and Bitcoin’s potential to become the new DeFi hub in the cryptocurrency market:
“Through this investment, we are very pleased that Stackswap will be able to engage with a broader range of audiences and institutions on our new trading platform.” We have a very capable global team of professional developers who have long researched and had extensive experience with DeFi and related systems.”