I have been part of the Stacks community since 2018, having participated in the initial public token offering under Reg A+. Over the years, I have mostly observed and learned, occasionally contributing through blog articles and technical analyses. My intention has always been to support Stacks’ growth in the ways available to me and to help it gain the recognition it deserves as the most robust and resilient Bitcoin layer.
During the Blockstack era, I placed “Can’t Be Evil” stickers throughout my town in the Netherlands. That slogan captured a principle: decentralization, integrity, and resistance to unchecked power.
When SIP-031 was published, it immediately raised concerns. The proposal to mint and centrally allocate a large amount of new tokens feels at odds with those founding principles.
This is the first time I have felt compelled to respond publicly to a SIP. I chose to set emotion aside and engage with the proposal analytically. I read it in full and studied the accompanying Nomiks model carefully. While the goals are commendable, the implementation raises substantial questions across legal, economic and governance dimensions. Below is a structured analysis of my findings and concerns.
1. Legal and Regulatory Structure
The proposed structure introduces real regulatory risks. Minting and allocating tokens through a committee may resemble a securities offering under both US and EU law. This diverges from the original Reg A+ structure, which emphasized decentralized earning through mining.
Under MiCA (Regulation (EU) 2023/1114), the issuance and centralized distribution of new tokens may be classified as a crypto-asset with investment characteristics. This could trigger registration, AML and disclosure obligations, especially if the structure meets criteria for an ‘asset-referenced token’ or ‘significant crypto-asset’, based on scale and control.
In the US, this structure could be assessed under the Howey test[2], which determines whether a token distribution arrangement qualifies as an investment contract. While recipients do not contribute capital directly, the expectation of profit derived from the managerial efforts of a centralized committee may raise questions under the remaining prongs of the test. If interpreted broadly, this could still result in retroactive classification as a security, triggering SEC compliance obligations.
What is currently missing:
- An independent legal review covering MiCA classification, SEC exposure under the Howey framework, AML obligations, KYC procedures, and potential legal implications of centralized token allocation mechanisms.
- Explanation of how this structure diverges from Reg A+ compliance (Reg A+ under Securities Act of 1933[3])
- OTC allocation policies and conflict of interest frameworks
- Contingency planning in case of regulatory pushback.
Introducing centrally controlled token flows without legal safeguards puts the whole ecosystem at risk.
2. Governance
SIP-031 envisions a Treasury Committee with control over potentially hundreds of millions of dollars in STX value. Yet there are no elections, no term limits, no audit mandates, and no on-chain ratification. Several stakeholders who may receive funding are also positioned to decide allocation. This creates structural conflicts.
Without enforceable checks and public accountability, power concentrates without recourse.
What should be added:
- Community voting for committee appointments and renewals
- Fixed terms with enforced rotation
- Mandatory audits and quarterly public reporting
- A formal, transparent conflict of interest framework
The proposal claims decentralization but lacks the structures that make decentralization meaningful.
3. Economic Architecture
The Nomiks report offers robust modeling, yet omits key transparency elements. Runway projections are based on STX price scenarios but there is no clear breakdown of circulating versus total supply, nor a public unlock schedule for the 100 million STX.
Findings from the model:
- If STX remains below 2 dollars, runway lasts less than 3 years[4]
- At 50 cents, funding depletes within 12 months[4]
- Emission paths are simulated, not fixed; OTC deals are unlisted
What is not addressed:
- Long-term dilution effects across different unlock paths
- Liquidity impact modeling and stress tests
- ROI or KPI thresholds for tranche release
- Psychological and behavioral impact on the STX market: sudden changes in token issuance or allocation policies may undermine perceived stability, weaken user trust, and increase volatility through speculative sell-offs. Even a modest perception of inflationary drift can significantly reduce confidence among long-term holders and discourage new participation, amplifying systemic fragility.
- Absence of a backstop mechanism or ‘kill switch’ in the event the funding mechanism fails to deliver intended outcomes. Without a predefined fallback or deactivation protocol, risk management remains reactive rather than proactive.
The proposal projects activity, not resilience. Without built-in return flows or feedback mechanisms, capital leaves the treasury with no structural path back.
4. Control and Framing
SIP-031 introduces centralized discretion over funding without mechanisms for participatory governance. There is no on-chain voting, no PoX-based decision-making, and no DAO approval structure. While these mechanisms may be technically feasible within the Stacks framework, they are not part of the current design.
Without structural input or feedback channels for STX holders, governance remains top-down and opaque. To truly align with decentralization principles, participatory mechanisms must be considered and integrated.
5. Suggestions and Questions
Some ideas came to mind as I reflected on potential ways to strengthen the sustainability and feedback design of the treasury. These are not grounded in technical certainty, but represent open questions worth exploring:
- Could funded projects return value to the treasury, for example through revenue sharing, milestone repayments, or token swaps?
- Could sBTC fees or an adjusted (dual) stacking yield be partially redirected as an alternative income stream to reduce reliance on minting?
- Could PoX lock-ins or governance-linked staking mechanisms guide or inform funding decisions?
- Could inflationary effects be offset through built-in return loops or regenerative capital structures?
Without mechanisms for value to return, this remains a finite fund with a countdown, not a self-reinforcing treasury system.
Summary (TL;DR):
- SIP-031 introduces regulatory risk and lacks legal contingency planning.
- Governance structure is opaque and lacks democratic mechanisms.
- Treasury lacks circular capital flow, return incentives, or resilience tools.
- The design omits user trust dynamics and psychological market effects.
- The proposal is grounded in vision, but remains incomplete and vulnerable without major revision.
Final Thoughts
SIP-031 is ambitious and grounded in vision. The proposers clearly care about the future of Stacks and have invested time, energy and vision into designing a mechanism they believe is necessary for growth. Their willingness to take bold steps where stagnation might seem safer deserves recognition.
Still, when minting new tokens, centralizing funding power and asking the community to place its trust in a new structure, the design must be watertight. It must hold up legally, economically and institutionally. Good intentions are not enough.
As it stands, SIP-031 falls short on those fronts.
Without significant revision, I cannot support the proposal. Not because I oppose progress, but because the current approach risks undermining the very principles that have defined the Stacks ecosystem: decentralization, legitimacy and community accountability. Supporting this proposal in its current form would compromise those values rather than reinforce them.
To everyone who continues to build: thank you. I hope this response encourages further dialogue.
References
[1] Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 on markets in crypto-assets (MiCA).
[2] SEC v. W.J. Howey Co., 328 U.S. 293 (1946), US Supreme Court.
[3] Securities Act of 1933, Regulation A (Reg A+), as amended.
[4] Based on modeling assumptions provided in the “Nomiks Analysis 5Y Plan Final” (2025), section 5.4.
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