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The Stacks protocol provides a unique, compelling benefit found in few places in the crypto ecosystem — bitcoin rewards.
The act of “Stacking” rewards Stacks (STX) token holders with bitcoin for locking up their tokens and participating as consensus-critical signers.
While Stacking has been live since the Stacks launch, the Nakamoto Upgrade introduced a new role of "Signer." Signers participate in the Stacks protocol by validating and signing blocks produced by Stacks miners. These Signers will ultimately enable programmable Bitcoin via sBTC later this year by processing deposits and withdrawals of BTC into the system.
Since Nakamoto instantiation in April 2024, dozens of signers have joined the network as signers.
World-class infrastructure providers like Figment, Luganodes, Chorus One, Blockdaemon, along with Stacking pools Xverse, Fast Pool, and StackingDAO have become signers and are already earning bitcoin rewards.
Critically, the Nakamoto upgrade makes the Signer network open for anyone to join. This guide will give an accessible introduction to help anyone become a Signer for the Stacks network, securing the network and earning bitcoin.
Here’s a quick outline of the post. Feel free to jump around, depending on your existing knowledge.
Before we get started, here are some terms to help guide you through the post.
Terms
Proof of Transfer (PoX): the Stacks consensus mechanism. It’s similar to Proof of Burn, except miners transfer the committed bitcoin to other participants in the network.
Stacking: Stacking rewards Stacks (STX) token holders with bitcoin for locking up their tokens for a certain time and participating as consensus-critical signers.
Stacking Cycles: Stacking happens in reward cycles of 2100 Bitcoin blocks (roughly two weeks). Reward cycles are split up into two phases — the prepare phase and the reward phase.
Stacker: an entity locking their STX to receive PoX rewards. This is a broad term including solo Stackers and Stackers who use pools.
Solo Stacker: an entity that locks their own STX and runs a signer. They don’t receive delegation.
Pool Operator: an entity that runs a Signer and allows others to delegate their STX to them. A pool operator doesn’t need to Stack their own STX, but they can. They will also run a signer, but the pool operator and signer address may be different.
Delegator: a Stacker who locks their STX and delegates to a signer or pool operator. They don’t run the signer.
Signer: an entity that runs the stacks-signer software and participates in block validation.
Introduction to Stacks
Stacks is the leading Bitcoin Layer, bringing smart contract functionality to Bitcoin, without modifying Bitcoin itself. There is currently a major upgrade to Stacks underway called the Nakamoto Release, an upgrade that will bring significant improvements to both security and speed.
Important: this guide will focus on how Stacks will work in the post-Nakamoto world (not how it currently works).
For a broader introduction, the Welcome to Stacks Guide gives a high-level overview of Stacks.
Stacking rewards token holders with bitcoin
Stacking rewards Stacks (STX) token holders with bitcoin for locking up their tokens for a certain time and participating as consensus-critical signers.
Since Stacks launched, Stackers have earned over 3,000 BTC, according to Signal21.
Stacking provides native bitcoin yield through the Proof of Transfer (PoX) consensus algorithm, where users lock STX and earn BTC rewards.
Proof of transfer (PoX) is an extension of the proof of burn mechanism. PoX uses the proof of work cryptocurrency of an established blockchain to secure a new blockchain. However, unlike proof of burn, rather than burning the cryptocurrency, miners transfer the committed cryptocurrency to some other participants in the network.
PoX enables yield similar to Proof of Stake networks. However, there are some key differences.
Key Differences Between Stacking and Staking:
Stacks is not a PoS network. This comes with two key differences.
Yield Generation: In Stacking, users lock STX and earn BTC. In contrast, PoS networks generate yield in the same token that is locked.
No Slashing: Stacks does not implement slashing. If a Stacker fails to perform their duties, they simply won't receive their BTC rewards or unlock their STX tokens.
PoX connects Stacks to Bitcoin. Core to the Stacks’ design is the understanding of the importance of Bitcoin and the reliance on Bitcoin and a foundation. Read more about PoX in the Stacks docs.
There are three primary ways to Stack:
Solo Stacking: an entity that locks their own STX and runs a signer. They don’t receive an STX delegation from others.
Pool Operator: an entity that runs a Signer and allows others to delegate their STX to them.
Delegator: a Stacker who locks their STX and delegates to a signer or pool operator. They don’t run the signer.
This post focuses on Solo Stacking and Pool Operators, the entities that run a signer.
Stacks Signers
The Nakamoto upgrade introduces a new role of "Signer."
Signers participate in the Stacks protocol by validating and signing the blocks produced by Stacks miners.
In order to receive PoX payouts for stacking their STX tokens, Stackers must become Signers themselves or delegate this responsibility to another Signer, such as via a Stacking Pool or hosted service.
Stacks Signers play a crucial role in the Stacks ecosystem. They:
Sign and validate Stacks blocks produced by Stacks miners.
Sign and validate sBTC mint and redeem transactions (again, this guide is focused on a post-Nakamoto activation world).
Earn BTC rewards for their work.
Ideals vs Reality
Ideally, every Stacks holder would be a signer for the network, creating a maximally decentralized network. However, similar to running a Bitcoin node, technical and financial requirements (and time and effort) mean that not every Stacks holder will be a signer.
That is ok, not every Bitcoin holder runs a Bitcoin node.
The purpose of this post is to help to increase the numbers of Stacks Signers. As the Stacks Signer network is open to anyone (different than a federated multi-signature model), the more Stacks signers onboarded, the more decentralized the network becomes.
3 Hours to Start Earning BTC
For technical folks with DevOps experience, one should expect to allocate about 3 hours to get started as a Stacks signer — expect a similar setup time to running a validator on Ethereum.
For non-technical folks starting from scratch, one could expect to take about 10 hours to get going as a Stacks signer. These are rough estimates, and it may take longer or shorter than estimated!
It will be technically challenging. However, we have experts, resources, other signers, small Discord chats, and more to guide you on every step.
We want you to succeed, so please reach out with questions.
Also, if you decide running a signer is not for you, token holders have a variety of providers and tools to support their participation in Stacking. The Stacks website contains a list of pools and stacking options.
How to Run a Signer
Requirements to Become a Stacks Signer
As a Stacks Signer, you will interact with the protocol directly. You’ll Stack in a trustless manner, earning BTC yield with no intermediaries.
Let’s look at some requirements you’ll need to meet to become a signer.
Meet the Financial Requirements:
Meet the System Requirements:
Signer, Stacks node and Bitcoin nodes
Signer only
1 cpu
250MB memory
100MB storage
Meet the Technical Requirements:
Is Running a Signer Profitable?
Based on these requirements, you might be asking, is it worth it to run a signer?
Let’s break it down.
Based on the storage requirements and Google Cloud Vm instance pricing, it will cost about $341/month to run the equipment.
Given a potential APY BTC yield APY locking Stacks (we’ll use 6% APY as an illustration, not financial advice), let’s break down the profitability threshold. This is a rough estimate to give an illustration.
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First, let’s look at the annual cost of running Google Cloud (our breakeven)
$341 per month * 12 months = $4,092 per year
Now, we need to find out how much money, when invested at 6% APY, would yield $4,092 per year (how much do we need to invest to break even).
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We can use the formula: Principal = Annual Return / Interest Rate
Annual Return = $4,092 Interest Rate = 6% = 0.06
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Let’s plug in the numbers
Principal = $4,092 / 0.06 = $68,200
Based on this illustrative calculation, you would need to lock up $68,200 in Stacks to generate enough BTC yield (at 6% APY) to break even with the annual cost of running Google Cloud at $341 per month.
Given the 100,000 STX dynamic threshold, one could expect becoming a signer to be profitable if one already meets the minimum.
Of course, this calculation is based in USD, and earning in BTC is a special perk.
High Level Process
In order to run a signer, you'll need to run a signer and a Stacks node side-by-side.
The signer will monitor for events coming from the stacks node and is in charge of using the generated account (next section) to sign incoming Stacks blocks sent from the Stacks node.
At a high level, the Stacking Flow is as follows:
Prepare for Stacking: Make API calls to get details about the upcoming reward cycle and confirm eligibility for a specific Stacks account.
Lock STX Tokens: Confirm the BTC reward address and lockup duration, then broadcast the transaction to lock STX tokens before the next reward cycle.
Receive Rewards: During the reward cycle, BTC rewards are sent to the designated address. After the lockup period, STX tokens are released.
Running a Stacks Signer
If you’ve made it this far and you’re ready to run a singer, we’ve created two resources to walk you through each step.
If you prefer to read and follow step-by-step, check out our docs: How to Run a Signer.
If you prefer a video guide, watch our two-part YouTube series.
Earn BTC, Secure the Network, Become a Signer in 3 Hours
In conclusion, the Stacks protocol offers a unique and rewarding opportunity for participants — earning BTC rewards.
By becoming a Signer, you can actively contribute to the security and functionality of the network while earning Bitcoin rewards. The recent Nakamoto upgrade has introduced the role of Signers, who validate and sign blocks, ensuring the integrity of the Stacks ecosystem.
This guide aims to provide you with a clear, accessible path to becoming a Stacks Signer, highlighting the requirements, processes, and benefits involved.
Whether you're an experienced blockchain participant or new to the Stacks community, this guide will help you navigate the steps needed to join the network and start earning Bitcoin rewards. Happy Stacking!
