We’re excited for the launch of Stacks 2.0. It will mark the beginning of Proof-of-Transfer (PoX) mining and Stacking (earning BTC) on the network. As Stacks core developers are working on the launch, a few issues have come up related to incentive structures for STX miners and stackers that we want to address and get community feedback on.
First, there is some outdated information out there with respect to the total STX supply. A subset of future app mining tokens and user incentive tokens may never be minted, so the year 2050 supply will actually be lower than the earlier 2048M number.
Second, Blockstack PBC wants to propose an adjustment to the mint schedule of Stacks mining rewards to better fit PoX consensus. The current mint schedule of STX mining rewards was created prior to the creation of PoX and Stacking, and in light of those changes, we should reconsider the incentives structure.
Our proposal below will lead to fewer tokens being minted overall but more tokens would be minted in the early years of mining to help better align incentives in the initial years.
Here is a summary of the proposal:
The year 2050 supply of STX reduces from 2048M to 1818M as no new app mining and user incentive STX are minted and the future supply curve is adjusted for PoX consensus.
Higher initial rewards for Stacking (earning BTC).
An initial bonus mining period to kickstart miners and stackers on the network.
Now, let’s get into the details.
Future STX for App Mining and User Incentive
Originally, we were anticipating that during the first 10 years of mining, 12 million tokens per year would be minted to support app mining rewards. We ran the App Mining pilot in 2019, which resulted in 300+ apps on the network. We paused the App Mining program in early 2020. We had allocated 40 million tokens to that pilot program and distributed approximately 10 million tokens to app mining participants. The remaining 30 million unallocated app mining tokens have been donated to the Stacks Foundation for their use in grants or to restart an app mining-like program.
We propose that the remaining 120 million tokens, originally meant for app mining, no longer be minted by the network. 30M STX is a large enough budget for the Stacks Foundation to use for experimenting with grants and new versions of App Mining in the coming years. There is little point in minting additional STX for app mining while the program is paused. The open issues with app mining remain to be (1) objectively fair distribution of app mining rewards; (2) privacy-preserving analytics to determine quality metrics for apps that respect users’ privacy; and (3) a decentralized way for the program to be administered. For more information on these issues, please see the post regarding the pause of the app mining program.
It’s better to decide now, before increased decentralization and the launch of Stacks 2.0, that the remaining 120M STX will never be minted . This way there will be no confusion about STX supply.
We had previously proposed that 40 million Stacks tokens be allocated for user incentives. Approximately 32 million of those tokens were awarded as part of the Blockchain.com distribution early this year when we added 300,000 STX owners to the Stacks blockchain.
We propose the remaining 8 million user incentive tokens will never be minted.
To ensure the decentralization of the Stacks ecosystem, it’s important that no single entity is responsible for running a program like user awards going forward. We don’t see a realistic decentralized way of operating this program, and therefore these STX should not be minted.
These changes — not minting the new app mining and user incentive tokens — will result in approximately 128 million fewer tokens being minted. Now let’s look at the next section to see how PoX consensus adjustment potentially impacts the year 2050 supply.
STX Mining Rewards for PoX Consensus
We originally set the Stacks mining reward schedule prior to the creation of PoX consensus and Stacking. As we’re implementing PoX mining and Stacking, we’ve realized the importance of having a significant amount of BTC flow through the system in the early years to help bootstrap the mining and Stacking systems, hopefully resulting in wide adoption. Having a significant amount of BTC flowing through the system early will hopefully result in a strong incentive for people to participate in both PoX mining and Stacking.
The original mining reward schedule was a relatively flat curve where 500 STX per block would be released during the first five years of mining, 400 STX per block would be released during the next five years, and 300 STX per block would be released for all years thereafter.
Following the creation of PoX consensus and Stacking, we believe that releasing more STX earlier on, and fewer later, would be beneficial to kickstart the system.
The updated proposal we want to share with the community is a release scheduled where 1000 STX per block are released in the first 4 years of mining, 500 STX per block are released during the following 4 years, 250 Stacks tokens per block are released during the following 4 years and, finally, 125 STX per block are released from then on indefinitely.
The 1000 STX per block change for the early years also results in higher BTC rewards for STX holders for participating in consensus after Stacks 2.0 mainnet launch.
Halving Synchronized with Bitcoin
You may notice that this schedule looks a lot like Bitcoin’s schedule, and that’s not by accident. The Stacks blockchain connects to Bitcoin, and we believe in Bitcoin for security and finality. By using Bitcoin as a clock for future halving, we roughly follow the schedule of Bitcoin where transaction fees are meant to eventually become more meaningful than newly minted tokens.
Further, we propose that we align the STX halving with the halving blocks of bitcoin for simplicity . Bitcoin halving is a known event and a reason for celebration in the community i.e., the protocol is working as intended and no one can change the supply. We share these values with Bitcoin and want to make it easy to remember when Stacks halving happens.
Initial Bonus Mining
We’re currently looking at adding an initial mining bonus for the Stacks 2.0 launch. The mining bonus will be structured in a way that it does not change the year 2050 supply of STX. One way to do this is by picking the Bitcoin block starting at which STX rewards will begin to accumulate (the reward start block). Once the reward block is determined we will know the exact supply of STX for year 2050. The STX block rewards that are “accumulated” prior to the actual launch of Stacks 2.0 (the launch block) will be added to some initial number of blocks (e.g., 10,000 blocks or roughly 10 weeks), in order to ensure added incentive for the start of mining initially.
The total year 2050 supply of STX will be determined by the reward start block. We propose to pick a block close to Nov 1st 2020 giving the year 2050 supply of STX to be approximately 1818 million STX. This spreadsheet gives details on the future minting schedule and uses Nov 1st, 2020 as the reward start block and Dec 15th, 2020 as an example launch block. (The date is just an example here, see this blog post for details on mainnet progress.)
Here is a graph of the cumulative number of tokens in circulation comparing the previous mint schedule and this new proposed schedule:
This updated proposed mining schedule would result in approximately 100M fewer mining STX minted by the year 2050, combining this with the 128M fewer STX that minted for app mining and user incentives, the total approximate the year 2050 supply will be 1818M (instead of 2048M).
There are two changes:
a) No additional tokens other than mining . We’re proposing to not mint 128M STX originally allocated for app mining and user incentives. The tokens that exist in the Stacks 2.0 genesis block are precisely the tokens that exist now, and no STX other than mining can enter the system.
b) Reduction in total STX for mining along with higher mint in the early years. We’re proposing to change the Stacks supply curve to give additional miner incentives in initial years while reducing the total future supply.
c) Miners get an “early mining bonus.” We introduce a limited mining bonus that gives early miners even more than 1000 STX/block in the early weeks of the system.
More specifically the new STX mining schedule becomes:
- Years 0-4: 1000 STX/block
- Years 4-8: 500 STX/block
- Years 8-12: 250 STX/block
- Years 12+: 125 STX/block
We’re looking forward to feedback and input from the Stacks community and STX holders! Given that the the Krypton Phase 3 of testnet went live last week, it’d be great to finalize these proposals in the coming weeks — thank you!