Introducing the Bitcoin Staking SIP v1 Draft

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Following up on sharing the Bitcoin Staking whitepaper last month, SIP authors have put together a first draft of the PoX-5 SIP - the formal proposal to bring Bitcoin Staking to the network. This post introduces the SIP, summarizes why Bitcoin Staking is the right mechanism to anchor Bitcoin capital on Stacks, and covers some important requirements for Staking that include a change to the STX emission schedule.

Bitcoin is the largest pool of capital in crypto, near $1.57 trillion (Bybit, May 2026), yet less than 1% of supply earns any yield, against 19% to 67% on major proof-of-stake networks. Closing even part of that gap is the largest capital-formation opportunity available to any Bitcoin layer.

What Bitcoin Staking does: Bitcoin Staking upgrades the consensus mechanism on the Stacks network by giving Bitcoin holders a reason to obtain and hold STX that is delegated to signers. The Bitcoin holders lock their BTC on the Bitcoin chain, under their own keys, and earn Bitcoin-denominated yield without bridging or giving up custody. Participation is structured through protocol bonds that pair a timelocked BTC commitment with an STX commitment for a fixed bonding period, with yield funded by the same miner competition that already secures Stacks through Proof-of-Transfer.

What the SIP Covers

The previously shared whitepaper specifies the full mechanism for how Bitcoin Staking works. This SIP specifies the consensus changes required to implement it on the Stacks network - it references the whitepaper at some points and builds on top of it, including

  • The technical mechanism for how Bitcoin Staking works on the network

  • Details of how protocol bonds will be enacted on the Stacks network

  • The economic specifications of the waterfall and how rewards are distributed

  • The voting and activation criteria for the SIP to be approved by the community

  • Appendices with the detailed research and economic modeling that informed the decisions proposed by the SIP authors

The staking process improvements in this SIP were inspired by an earlier proposal labelled SIP-032. PoX-5 carries most of those improvements forward and adapts them to fit the Bitcoin Staking design. We are excited to work with the author, Friedger, directly to make sure they land appropriately in both the proposal and the implementation.

Why PoX-5 and Bitcoin Staking?

  • The opportunity: Around $25 to $30 billion sits in wrapped and Bitcoin yield products today, capital that accepted a custody, bridge, or denomination compromise to earn a return. A further $220 billion in ETFs and corporate treasuries (Bitwise, February 2026) can accept none of those compromises and has no native way to earn yield today, and a self-custodial product paying native BTC yield is the first that fits its constraints.

  • Bitcoin Staking is the lowest-barrier way for a Bitcoin holder to start using Stacks: We see Bitcoin Staking as the top of the funnel for the whole ecosystem. A holder arrives for native yield. Everything else on the roadmap, from lending against locked BTC to a future liquid-staking variant, becomes a natural next move for capital that is already on the network rather than something a holder has to be convinced to try from scratch.

  • The staking mechanism brings capital that compounds into the ecosystem. Every protocol bond pairs STX against BTC as the capacity asset, so the capital that arrives for yield carries ongoing STX demand with it. As a participant’s STX appreciates, the position needs less STX to meet its ratio, leaving a surplus free to deploy elsewhere on Stacks. That capital does not sit idle in a single product. It flows into lending, liquid staking, and the applications the roadmap describes, and the holders behind it become active users of Stacks interfaces, wallets, and economic activity. Bitcoin Staking is the entry point, with the broader Stacks ecosystem being what the entry leads into.

  • The staking mechanism carries the most distinctive risk profile in the Bitcoin yield market. No product in production combines Bitcoin-denominated yield with self-custody. BTC stays unencumbered on L1 and is redeemable in around ten minutes through Early Exit, there is no slashing, and the only incremental exposure is the paired STX, a single bounded risk an allocator can calculate with before committing. That profile is what makes the capital above willing to arrive in the first place, and it’s this novelty of the staking mechanism that makes the product compelling for Bitcoin holders and institutions.

  • It builds on what already works. The mechanism extends Proof-of-Transfer rather than replacing it. Miner competition, block production, and the routing of BTC through PoX stay intact, and the design works for holders of any size through pooling.

Why this SIP changes emissions

The proposal couples Bitcoin Staking with a change to STX emissions in order to provide for the most growth of the Stacks network and because the two are economically inseparable. Miners spend BTC competing for STX block rewards and transaction fees, and that BTC is the reward pool that funds staking yield. The SIP restores the block reward to 1,000 STX per block, removing the SIP-029 step-down, and applies a temporary boost of 500 STX per block for the first bonding period, raising it to 1,500 STX for approximately six months before it returns automatically to 1,000 STX.

The justification follows:

  • Yield capacity. At 500 STX, the reward pool and the BTC yield the protocol can sustainably target for both BTC holders and STX only holders, is materially constrained. Restoring the 1,000 STX baseline gives the mechanism the pool it needs to support the launch parameters, with the coverage to back it as the program scales.

  • Restoring 1,000 STX returns the network to its proven baseline for producing BTC yield. Stacks ran at 1,000 STX per block for its first five years, the rate Stacking was built on and grew under, with the step-down to 500 taking effect only in April 2026. With the rate being a controlled and historically observed condition, restoring to a known baseline reduces an additional variable during the launch.

  • Competitiveness at the start. The more capacity and reliability at launch, the stronger a position the network will be in, and the more new capital will flow into the ecosystem, leading to the most growth and benefit for long term community participants. A 3% Bitcoin-denominated, self-custodial yield clears the bar set by the live alternatives, and the restored baseline plus the temporary boost are what let the protocol offer it from launch, when momentum matters most.

  • Transition to fee-driven economics. The long-term intent is for fees, combined with emissions, to fund consensus, and Bitcoin Staking is designed to accelerate that shift by anchoring the capital whose activity grows the fee base.

  • A temporary launch boost is not new. Stacks 2.0 launched with a mining bonus that doubled the block reward before expiring on its own (Daemon Technologies, 2021). This temporary boost in block rewards brought in a larger pool of early credible miners.

  • The boost rewards the existing community. Because the target yield on paired bonds is fixed, the additional boost issuance flows past Tranche 1 to STX-only stakers in Tranche 2, concentrating the bootstrap benefit on the network’s existing base during the first bonding period.

  • The inflation is contained. First-year supply growth moves from approximately 7.8% at the restored baseline to approximately 8.5% with the boost, a one-time increase of roughly 0.7% of supply, after which the rate declines year over year and stays in single digits throughout. Compared with the top 50 crypto networks by market cap, the boost peak remains well below both averages, the 2025 average (15.9%) and the 5-year average (25.1%). Against the median, it sits modestly above the 2025 figure, at the 52nd percentile, and is effectively in line with the 5-year median (8.17%).

  • The sell-pressure impact is estimated to be negligible. As covered in the SIP’s Appendix A3, even under a deliberately conservative worst case where miners sell every STX they receive, the incremental daily volume from the restored baseline and the boost stays a small fraction of normal STX trading volume, within the range of ordinary daily variation. At current liquidity the restoration and boost together represent roughly 1% of average daily volume across major exchanges, a level the market would not register.

Read the full proposal

https://stacks.link/sip-pox5

Each of these arguments is developed in depth in the PoX-5 SIP and its appendices, including the market sizing, the risk-profile comparison against live products, the peer-network emission benchmarking, and the sell-pressure analysis behind the inflation claims. The most useful feedback at this stage is on whether the coupling of staking and emissions is sound, whether the launch parameters are right, and where the design can be strengthened before it moves toward ratification.

Get involved

  • Leave a Forum comment with feedback.

  • Join Friday’s SIP call [Link]

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First of all, I want to say I am very excited about this proposal. It’s a huge opportunity for Stacks and could unlock a lot of liquidity.

​That said, I am really bothered by the emissions schedule change. Wasn’t the Stacks Endowment created to boost $STX adoption by funding exactly this kind of initiative?
​I don’t understand why the boost is not funded by the Endowment. It was created only one year ago, secured 400M $STX, and its purpose exactly fits this need.

​It creates terrible optics. When the inflation rate can be changed at will, it destroys long-term holder confidence. Frankly, it is unprofessional and makes the project look scammy.

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The Stacks Endowment was created to fund the core development, marketing, and growth of the network, which it is. This funds things like the core developers building the system, grants for community members and builders, business development deals, etc. But it was never meant to directly fund block production or core economics of the Stacks network (which happens via consensus).

The emissions update that’s proposed as part of this SIP is about the core (or consensus mechanism) economics of the system and interactions between miners, signers, and stakers - something that necessarily requires being part of the core consensus mechanism so it continually functions and lasts for all time.

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If I understand this correctly, this is a ‘temporary’ boost designed to attract more miners and increase current miners BTC bids during the non-custodial staking launch.

​This is exactly what @StacksEndowment is supposed to fund. It falls 100% under the scope.

Do we absolutely need the boost or can non custodial staking be launched without boost?

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I support the Bitcoin Staking direction. Stacks needs stronger BTC-native demand and clearer reasons for capital to enter the ecosystem.

As builders, our job is to turn that capital into real on-chain activity: products, users, transactions, culture, and sustainable demand for STX.

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Right now, the new proposal wants to temporarily increase the block reward for miners by adding an extra 500 $STX per block for 6 months.

The goal makes sense on paper:

  1. Higher Bids: A bigger reward forces miners to bid more Bitcoin (BTC) to win each block.

  2. Better Yield: More BTC from miners flows directly into the system, which fills up the safety Reserve Fund and creates higher yields for Stakers.

  3. Easier Onboarding: This high yield attracts large amounts of new institutional Bitcoin capital to the network.

The Problem: While the goal is good, the execution is wrong. The proposal wants to mint new tokens to pay for this extra 500 $STX.

Using permanent inflation to fix a temporary onboarding problem dilutes current token holders. It treats the core protocol rules like a corporate marketing budget. These extra tokens are completely unnecessary for the actual security of the network.

A Better Solution: Treasury-Funded Miner Rebates: We can get the exact same benefits like higher miner bids, a strong reserve fund, and high yields without printing a single new token. The Stacks Endowment already has the money to pay for this.

Instead of a hard fork to change core emissions, we can use a smart contract:

  1. Keep the normal blockchain rewards exactly as they are.

  2. The Stacks Endowment puts a portion of its own treasury tokens into a new smart contract.

  3. This contract automatically distributes the 500 $STX bonus directly to winning miners as a rebate.

Miners still get the extra incentive, they still bid more BTC, and stakers still get a better yield.

Why this is much better:

  • :shield: No Dilution: It protects the value of $STX.

  • :bullseye: Fair Costs: The Endowment is responsible for growing the ecosystem. They should pay for marketing out of their own pocket, not by taxing token holders.

  • :bar_chart: Transparent: Anyone can look at the smart contract and see exactly how much money was spent.

  • :counterclockwise_arrows_button: Reusable: Once this smart contract is built, we can use it again in the future for other rewards without needing to update the whole blockchain.

The Math: An extra 500 $STX per block for 6 months costs about 12.6 million $STX.

At today’s price (~$0.21), that is only about $2.7 million USD.

The Endowment has an official $27 million USD operating budget for this year. This entire campaign costs just 10% of their budget. They easily have the capital to fund this without printing new tokens.

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I think this proposal, because of the incentives, can attract huge Bitcoin capital to the Stacks network, as its end goal is to establish the Bitcoin economic foundation.
Honestly, I was a bit frustrated about the inflation part. Still, after careful review and research, the proposal will be beneficial immediately (in yield side) and in long term sustainability for all parties involved, including:
STX holders, as the temporary boost will flow to them since BTC staking yield is a targeted fixed APY
BTC stakers, as their BTC staking fixed APY is guaranteed
STX miners to spend more BTC to win blocks for the incentivized STX coinbase reward
Stacks Endowment funds to focus on ecosystem and network development and growth.

All this is in line with Stacks’ plan to keep upgrading the network until Stacks provides a first-class UX experience to power the Bitcoin economy. So, YES, I am in favor of the proposal.
All that matters to me is the EXECUTION of the scenario and the market value of the STX token.

I will also suggest considering Token Burn mechanism for the future when STX will appreciate, and probably cutting down the emissions when all parameters are in place, which will be up to the SIPs community.

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We deeply align with the strategic direction of PoX-5, which aims to natively anchor the massive pool of Bitcoin capital and upgrade the consensus mechanism of the Stacks network. However, after a rigorous analysis of the initial draft from the perspectives of tokenomics and business sustainability, we have identified critical contradictions that compromise protocol credibility and disproportionately transfer risk to existing participants. We formally submit our objections and demand a clear justification and reconsideration from the Foundation on the following points.

1. Severe Erosion of Monetary Policy Credibility (Reversing Emissions Post-Halving)

The proposal explicitly acknowledges that the scheduled step-down (halving), which reduced block rewards from 1,000 STX to 500 STX, was executed just recently in April 2026. Yet, merely two months later, the authors propose rolling back the baseline to 1,000 STX and artificially inflating it to 1,500 STX for the initial six months, citing difficulties in meeting launch parameters and the 3% institutional yield target.

For a protocol that prides itself on being a Bitcoin layer, altering the emission schedule based on short-term capital acquisition needs undermines the very concept of “predictable scarcity” that long-term investors rely on. This sets a highly dangerous precedent that monetary policy can be manipulated whenever convenient, severely damaging the foundational trust of the protocol.

2. The Illusion of ‘Favoring Tranche 2’ and Asymmetric Dilution Risks

The draft claims that the 500 STX launch boost is beneficial to the existing community because institutional yields are fixed, causing the excess emissions to flow directly to Tranche 2 (STX-only stakers).

This narrative is a superficial distraction from a deeper structural flaw. The Foundation is ensuring that institutional whales—the newly targeted VIP users—receive hard, non-dilutive Bitcoin (BTC) denominated yield. Meanwhile, it attempts to pacify the existing retail community with newly printed, highly dilutive STX tokens. Consequently, the long-term risk of asset dilution from increased supply is borne entirely by existing holders.

3. Highly Optimistic and Biased Assessment of Miner Sell Pressure

Citing the modeling in Appendix A3, the authors confidently assert that even if miners liquidate 100% of their rewards, it represents less than 1% of average daily trading volume, meaning the market will easily absorb it.

This represents a textbook analysis that completely ignores the reality of an illiquid market and the economic incentives of miners. Stacks miners spend ‘actual Bitcoin (BTC)’ as an explicit opportunity cost to compete; therefore, they have an extremely high propensity to immediately liquidate their STX rewards to hedge risk. In a transitional phase where ecosystem volume is thin, a triple-sized daily influx of new supply will inevitably accumulate into a massive overhead resistance on the charts.

4. Delayed Transition to Fee-Driven Economics and Admission of L2 Utility Insufficiency

The proposal correctly highlights that network transaction fees and MEV revenue, rather than block emissions, must ultimately fund the consensus mechanism in the long term.

Despite this statement, the decision to dramatically spike emissions is an ironic admission by the Foundation that the current level of Stacks L2 activity and fee revenue is completely insufficient to organically sustain the yield expectations of institutions. It exposes a fundamental business limitation: utilizing short-term token inflation as a painkiller to mask the slower-than-expected progress of creating ‘real use cases’ via the Nakamoto upgrade and sBTC.

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Hello, I am very much against this. What is the point of having a planned emissions if you are going to be changing it? Where is the credibility in the system here? Please know about the stacks halving and accumulate STX to have more before the halving and you are just going to say that you are going to rollback and just change it? Stacks will become another chain just as Ethereum where people were afraid because Vitalik was able to revert transactions and what not. This is definitely NOT a good look. I really hope people push back against this.

What is the issue on having a controlled release? Yes, the BTC capacity will be capped by the STX capacity, but this will get the STX price UP!! when the STX price is up, it will release extra capacity for BTC to be stacked again! Come on people, BTC staking idea is awesome, I fully support it, but reward the STX holders and stakers that have been accumulating and dont simple change things when ever you want.

We need structure, we need stability and we need to have emissions set for clarity.

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During SIP-031, you also said that increasing token issuance and using those tokens would help develop the ecosystem.

What has been the result so far?

Over the past year, the price of STX has fallen to one-fifth of its previous level. Trading volume has continued to decline, and virtually no one is paying attention anymore.

Please answer clearly: who exactly is this policy for?

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Regarding the “game theory” argument mentioned on X: arguing that a 1,000 STX emission is required for ideal stacking yields feels entirely miner-centric. It is no coincidence that when the emission rate dropped by 50%, all miners simultaneously cut their BTC burn by half. This uniform behavior strongly suggests a coordinated effort to maintain profit margins, rather than independent bidding driven by game theory. Do we really believe the current bidding process reflects true market competition?

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Overall I think the native L1 staking is really great and will be a huge win for Stacks.

I only wish every time the folks in the castle came up with a great idea like this, it wasn’t the people in the villages below that ended up paying for it.

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My other question would be how will this impact the following goal of SIP-29

”Ensure that the year 2050 supply of 1.818B does not change.”

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The roadmap said we go for Bitcoin Staking, so here we go!

The emission/staking coupling in §3.2 is the right framing. I ran the launch parameters (3,000 BTC @ 3% target, 1,000 STX/block, ~500M STX stacked, 5% pairing ratio) against the current STX/BTC rate and want to raise two related points.

1. The emission rate should track the STX/BTC price, not be fixed.

The reward pool that funds yield is miner BTC, which tracks the market value of the STX coinbase — so coverage is a direct function of sats/STX. The fixed 1,000 STX/block is effectively calibrated to a single price point. At the current ~282 sats/STX, 1,000/block produces roughly 1.65x coverage on the 3,000 BTC book — inside the healthy band but below the 2.0x target, and it slips toward the caution band (~1.3x) once you assume a realistic miner margin (~20%).

The problem is what happens when the price moves. With a fixed rate, the only stabilization lever in caution/stressed bands is to choke capacity (halt new bonds) — which throttles exactly the BTC inflow the mechanism exists to attract. That’s the reflexivity risk in §8.2, and a fixed rate leans into it. A coverage-targeting emission (flex issuance to hold ~2x, within a bounded band) would instead use emission as a shock absorber, and — importantly — would let growing fees crowd out issuance over time, automatically executing the fee-driven transition §3.2.3.3 describes and lowering terminal inflation.

I recognize algorithmic yield/capacity is explicitly PoX-6 scope; my ask for PoX-5 is narrower: treat 1,000 as a soft anchor subject to future coverage-driven adjustment rather than a permanent floor, and make sure the contract exposes the coverage/fee data PoX-6 would need to parameterize this.

2. What STX-only stackers (Tranche 2) can actually expect is highly price-dependent.

Because Tranche 2 is the residual (85% of pool above the 90 BTC Tranche 1 obligation), its yield is very convex in price. Holding 1,000 STX/block and ~500M STX stacked:

sats/STX Coverage @ 1,000/blk Excess → Tranche 2 (BTC/yr) STX-only BTC APY
150 0.88x 0 (reserve tapped) 0%
171 1.00x 0 0%
200 1.17x ~13 ~1.5%
250 1.46x ~35 ~3.2%
282 (current) 1.65x ~50 ~3.9%
350 2.04x ~80 ~5.0%
500 2.92x ~147 ~6.3%

Two things stand out with current parameters. First, there’s a zero-yield cliff at ~171 sats/STX — below it, emission can’t even fill Tranche 1, so STX-only stakers get nothing and the reserve drains. We’re only ~40% above that cliff today; a one-third STX drawdown wipes out second-layer yield entirely. Second, this is for miners mining at the edge, a realistic miner margin would lower the yield.

Both points argue the same thing: tying emission to coverage would stabilize the STX-only experience and keep the system off that cliff through a downturn, rather than concentrating the volatility on Tranche 2.

Let’s plan for dynamic emission for PoX-6!

More points:

  • The sell pressure analysis does not reflect sales from investors of SIP-031. Please add that as well. My understanding is that there are around 5m STX unlocking each month.
  • I agree with @axopoa that boosters should come from the Endowment, not from consensus.
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@friedger’s coverage math is the killer detail in this thread. We’re 40% above the price where STX-only stackers get zero yield and the reserve starts draining. That’s not a tail risk. That’s a one-third drawdown away from new bonds halted and the system running stressed.

I want to add what’s upstream of that.
The whole thing depends on BTC capital showing up at scale to make the capacity-asset story work. We’re not seeing the cohort that would be accumulating STX in anticipation. If BTC holders were positioning for paired bonds, you’d see it in price. You don’t.

Dual stacking is the closest test we have. 20% sBTC collateral didn’t pull capital at scale. The bet now is that 4x cheaper collateral plus L1 self-custody unlocks what 20% bridged couldn’t. Maybe. But that’s a specific claim about a specific cohort, and the market isn’t validating it.

Combine that with @friedger’s coverage math. If the cohort doesn’t show up, we’re running at parameters that put STX-only near the cliff while we’re still in bootstrap. Existing holders are absorbing the risk during exactly the window when their price support is what makes the whole mechanism function.

What’s the basis for expecting BTC participation beyond the curated bootstrap? Dual stacking didn’t pull it. Current price action isn’t signaling it. The SIP assumes it materializes but doesn’t show why this time is different.

And +1 to @friedger on the SIP-031 unlocks not being in the sell-pressure model, and to @axopoa on the boost coming from the Endowment instead of consensus emissions. Both points stand on their own.

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Thanks for all the comments everyone, a few initial thoughts and then of course we’ll discuss more on the community space today.

re @friedger question on coverage & issuance

The 3,000 BTC in the first issuance is what we expect to target issuing, the actual amount would be determined at the actual time that the first cycle is starting based on the capacity of the system, same as on other cycles, it’s just the indicative number used based on the inputs/prices at the time of writing

Adding actual flex in emissions would add for more variability to the system that I think would be worse for all participants which is why it was designed around varying the capacity of the system rather than the emissions or or the rates for BTC earning. Introducing dynamic issuance would introduce reflexivity risk in the other direction with majorly increased emissions (all of which would be expected to immediately come to market since most miners are going to sell coinbase rewards to cover their costs)

re changing this for PoX-6? While that wasn’t something we had explicitly planned to consider for PoX-6 we could definitely put it in the range of options - the whole point of PoX-5 is to get this out there and start getting real world performance and data explicitly to inform and make the best decision for PoX-6 so I definitely won’t say we wouldn’t end up doing it if it looked like it made the most sense. It also seems less risky as the system is more mature, rather than in early days.

re the 500 STX boost for 6 months

Definitely hear you on the questions about funding from new issuance vs Endowment - the actual issuance of them definitely needs to be via the actual coinbase as doing a separate smart contract would be massively more complicated. But it’s fair to ask whether this should effectively be funded by the endowment as a growth program (eg by burning an equivalent number of tokens out of the treasury) - we’ll need to investigate this from both a financial and regulatory perspective and will report back next week on it.

cc @friedger @axopoa @PeaceLoveMusic.btc @codeonedotzero

re SIP-031 Unlocks

These are not explicitly in the model because they don’t actually come to market, just because the tokens unlock doesn’t mean they’re sold right away by the Endowment (the majority are held, the ones that are sold are done on private deals to long term holders, etc). It does factor in some percentage that are expected to hit the market based on normal movements from previous unlocks cc @friedger @PeaceLoveMusic.btc

re the coinbase adjustment back to 1,000 STX

As noted in the SIP and analysis, restoring the coinbase reward to 1,000 STX is moving it back to where it has been for the last several years and ensures both greater capacity for the system as well as Stacks community members.

The appendix in the SIP that analyzes the STX market already factors in assuming that all coinbase rewards are immediately sold as that is the expectation given the costs of mining and the mining is competitive on Stacks and miners spend as much BTC as they can to earn the STX reward while covering their costs (what I referred to above as the game theoretical maximum) and we have very good data to base this modeling on given the length of time at which the network operated with a 1,000 STX coinbase.

More generally, as to whether this undermines the economic credibility of Stacks: no, I don’t believe it does in any meaningful way. Stacks as a network is still working towards full acceptance and product market fit (unlike Bitcoin for example, which has solidified itself) and is not viewed as a hard money asset by the market - it is a gas and capacity asset that enables the operation of the network. While we want to obviously be very deliberate and thoughtful to any changes to the tokenomics/economics and how it affects the operation of the overall system, now is the time in the lifecycle of a system in which changes should be made so that it can be solidified as PMF is reached and the market reaches a level of acceptance at which we don’t want to see any further changes.

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Thanks for engaging, @alexlmiller. Appreciate the commitment to investigate the Endowment-burn alternative for the boost. That’s a meaningful path forward on what several of us flagged.

I want to push on the gas-and-capacity-asset framing because I think it’s incomplete in a way that matters for this proposal.

STX has utility functions, gas, capacity, governance, sure. But PoX also requires STX to be valuable enough that miners spend meaningful BTC competing for blocks. That’s not a marketing claim about STX as a “hard money asset.” It’s a mechanical requirement of the consensus mechanism. Miners bid BTC up to the expected value of STX rewards. If STX value falls, miner bids compress, the reward pool shrinks, yield compresses, consensus security degrades. That dependency isn’t eliminated by reframing STX as a utility token. It’s a structural feature of PoX.

What Bitcoin Staking actually does, on this dimension, is shift which cohort is responsible for supporting STX value. Under PoX-4, STX-only stackers held STX because it generated BTC yield, and their demand supported price. Under Bitcoin Staking, STX-only stackers are demoted to residual claim, and the new value-supporting cohort is BTC stakers buying STX as paired collateral. The role of “value supporter” moves from one cohort to another. The role itself doesn’t go away.

This is why the demand cohort question I raised in my earlier post is load-bearing, and why I don’t think it was addressed in your reply. If BTC participation at scale doesn’t materialize, the new cohort expected to support STX value isn’t there. The mechanism degrades exactly as the reflexivity risk in section 8.1 describes. Dual stacking is the closest empirical test we have, and it didn’t pull capital at 20% collateral. Current price action doesn’t show BTC holders accumulating in anticipation. What’s the basis for expecting different results this time?

On the SIP-031 unlocks: the framing that unlocked tokens “don’t actually come to market” because the Endowment holds most or sells privately to long-term holders is worth surfacing more directly. SIP-031 committed to publicly traceable on-chain addresses and detailed reporting. Could the team publish the actual flow data for the past several months of unlocks, so the modeling reflects observed behavior rather than assumed disposition?

Looking forward to the report back next week on the Endowment-burn analysis, and to hearing the team’s thinking on the demand cohort question.

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LOVE YOUR POSTS, YOUR VIEWS and AGREE with eveything you said. Stacks likes Bitcoin because of hard money. Then use the same hard money principals and stop shifting so much!

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Covered a lot of these topics in the community space today in more depth - you can listen to the recording here

https://twitter.com/i/spaces/1dxYllLEqgMJX

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I assume more than one reader will use AI to distill and analyze this proposal and commentary. Let me offer up an AI straw-man (it’s actually more durable) case for dynamic emission. Think of it like the difficulty adjustment in Bitcoin—useful marketing spin—because it becomes adaptive to actual market dynamics. In that way, the market decides how emissions get temporarily adjusted. From a modeling perspective, it gives a range of total emissions we can plan around.

Based on the SIP proposal and community commentary, the optimal design tradeoff is coverage-targeting dynamic emission with a 12-month bootstrap phase — accepting moderate short-term inflation costs to stabilize the system and attract institutional capital.

Key Tradeoff Analysis

Dimension Short-Term Cost Long-Term Benefit Optimal Balance
Emission Rate Higher inflation from flex issuance (~1.65→2.0x coverage) Stable yields through downturns, no capacity choking Dynamic emission tied to sats/STX price
Bootstrap Length 12-month managed period with vetted partners Track record for institutional confidence before PoX-6 PoX-5 managed bootstrap, PoX-6 permissionless
Supply Cap Increased issuance threatens SIP-29’s 1.818B by 2050 Institutions arrive = fees crowd out issuance naturally Flex issuance bounded, fee-driven transition automatic
STX-Only Yield Zero-yield cliff at ~171 sats (33% drawdown wipes yield) Stable ~3.9% BTC APY even in downturns Coverage-targeting keeps system off cliff

Why This Balance Works

  1. Attracts institutional capital now: Self-custodial yield (3% BTC APY, no slashing, early exit) is the first BTC-native staking product institutions need

  2. Stabilizes through volatility: Currently at ~282 sats/STX with 1.65x coverage (below 2.0x target); dynamic emission would use issuance as shock absorber instead of choking capacity

  3. Fees transitions cleanly: Growing transaction fees eventually crowd out issuance, executing the fee-driven transition §3.2.3.3 automatically

  4. Avoids social conflict: Community rightly worries “castle pays, village pays” — dynamic emission protects Tranche 2 (STX-only stakers) from concentrated volatility

The Critical Risk

The zero-yield cliff at ~171 sats/STX is the biggest vulnerability: a one-third STX drawdown wipes out second-layer yield entirely and drains the reserve fund. Dynamic emission is the only parameter that can keep the system off this cliff through a downturn.

The SIP will likely pass with a soft anchor (1,000 STX as adjustable target, not permanent floor) and explicit PoX-6 scope for algorithmic yield/capacity.