Understanding the Stacks Nakamoto Upgrade

The Stacks ecosystem extends Bitcoin's functionality by enabling smart contracts and decentralized applications without modifying Bitcoin itself. As a Layer-2 blockchain, Stacks is designed to anchor to Bitcoin, providing additional features while benefiting from Bitcoin's security.

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The Nakamoto upgrade is a critical enhancement to the Stacks network. It introduces faster transaction confirmations and 100% Bitcoin finality. This upgrade will decouple Stacks block production from Bitcoin's block intervals, allowing for more efficient and reliable transaction processing. The changes also include mechanisms to mitigate miner extractable value (MEV) issues and harden the network against potential reorganizations.

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Blockdaemon is committed to supporting this transition as a Signer, and by providing infrastructure services that align with the new protocol changes, ensuring a smooth upgrade process and reliable operation once the Nakamoto rules are live.

Key Improvements with the Nakamoto Upgrade

‍Faster Block Times

The Nakamoto upgrade decouples Stacks block production from Bitcoin's block intervals, solving the problem of slow transaction confirmations. Historically, Stacks blocks were produced in tandem with Bitcoin blocks, resulting in delays tied to Bitcoin's ten-minute block intervals. Nakamoto changes this by allowing Stacks to produce new blocks approximately every five seconds, independent of Bitcoin's timing.

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This improvement enhances application performance by significantly reducing transaction confirmation times. Developers and users no longer experience delays caused by Bitcoin's slower block times, creating a smoother and more responsive user experience for DeFi apps.

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100% Bitcoin Finality

With the Nakamoto upgrade, Stacks transactions achieve the same level of finality as Bitcoin transactions. This ensures that once a transaction is confirmed on the Stacks network, reversing it becomes as difficult as reversing a Bitcoin transaction.

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This strengthens security by eliminating the possibility of Stacks forks occurring independently of Bitcoin. As a result, developers and institutions can operate with increased confidence. The upgrade also mitigates the risk of chain reorganizations.

Blockdaemon's Role

Blockdaemon will become a Signer, a role introduced by the Nakamoto update, following the Nakamoto upgrade.

Stacks Signers play a crucial part in the Stacks ecosystem by:

• Signing and validating Stacks blocks produced by Stacks miners.
• Signing and validating sBTC mint and redeem transactions (once sBTC is live later this year)
• Securing BTC rewards for their work.

Stackers must become signers themselves to receive PoX rewards for stacking their STX tokens, or delegate this responsibility to another Signer, like Blockdaemon.

Timeline

The Nakamoto upgrade began its activation process on August 28th, 2024. On this date, the final code was delivered to network operators, marking the start of the activation window. This window allows operators one full Stacking cycle, ending with Cycle 92, to implement the necessary upgrades. The handoff to Cycle 93, expected in mid-September, will confirm the successful transition, after which core developers will determine the final block for the hard fork. The new Nakamoto rules, including faster blocks and 100% Bitcoin finality, will go live at this hard fork block.

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What Institutions and Developers Should Anticipate

During the activation period, institutions and developers should prepare for the transition to the new Nakamoto rules. This includes updating nodes, testing applications against the new protocol changes, and ensuring that all systems are compatible. Institutions must also be alert for any updates or issues reported by core developers, as these could impact the final activation timeline.

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Stay Updated

To stay informed throughout the Nakamoto upgrade, stakeholders should monitor official communication channels. For real-time updates and detailed technical information, visit the Stacks Documentation.

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