Proof of transfer is a modified version of proof of burn. Rather, it uses something known as proof of transfer. While Stacks is a Bitcoin Layer-2 solution, it does not use the proof of work mechanism. With Stacks, and therefore smart contracts, many doors are opened. So, without such capabilities, Bitcoin remains very limited in what it can offer. Many DeFi applications, such as automatic market makers (MMs) and liquidity pools, need smart contracts to function. The official Stacks whitepaper states it "enables smart contracts and decentralized applications to trustlessly use Bitcoin as an asset and settle transactions on the blockchain." Put simply Stacks lets you use smart contracts and decentralized applications (DApps), features that were not previously present on the Bitcoin blockchain. While Ethereum is often known as the prime place for using smart contracts, Stacks brings a similar capability to Bitcoin. Stacks is linked to the Bitcoin blockchain via its proof of work consensus mechanism. Since then, it has undergone its second mainnet launch, giving way to the Stacks we know today. Stacks (formerly known as Blockstack) is a Layer-2 solution implemented on the Bitcoin blockchain in 2018. And now, even the crypto industry's biggest player, Bitcoin, has delved into this useful technology through Stacks. Smart contracts began on Ethereum but have since been adopted by many other blockchains, including Solana, Stellar, and Waves. Smart contracts remove the need for third parties or intermediaries and add to DeFi's trustless model. These programs can automatically execute an agreement so long as a specific set of pre-written conditions are fulfilled. Smart contracts are a key component of decentralized finance (DeFi).
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