Stacks Halving Schedule: Reports and Recommendations

[blocks8]

Emissions Research and Proposed Adjustment Discussion

The Stacks layer’s first token-emissions halving is scheduled for January 2025, so it’s important for the community to review the projected change in advance. These halvings are a key part of tokenomics which plays into miner participation, network growth, and overall token supply. To best understand any changes, we commissioned two research reports to provide the community a more detailed look into the planned token emissions.

The Stacks token-emissions halvings were scheduled years ago based on projections so it’s a healthy habit to revisit the schedule with more real-world blockchain data in hand and see if the schedule is still best aligned with the health and growth trajectory of the network. Further, the Stacks layer is headed for its most significant upgrade since the original mainnet launch with Nakamoto and sBTC upgrades expected, making it timely to revisit the emission schedule now.

To lead research into the Stacks halving schedule, we commissioned 7th Avenue Group, a third party with expertise in tokenomics, to:

1. Review and surface any potential risks inherent to the current schedule
2. Provide a framework for the community to use should it determine a change is desirable
3. Make specific recommendations for possible improvements to the halving schedule

In the course of their research, spanning two reports, 7th Ave offers:

“a few compelling reasons for the Stacks community to consider an adjustment to its emissions schedule”

Namely, the impact on miner participation and the 2050 token supply. Their second report includes potential emissions schedule adjustments that optimize for different outcomes. The purpose of these reports and recommendations is to present the information required to draft a SIP to alter the current emissions schedule. It is important to remember that no token emissions changes can be made without explicit community vote and SIP process.

Emissions Research

As laid out in the 7th Avenue Group Emissions schedule report, in the current Stacks halving emissions plan, in January 2025 the mining reward for Stacks miners will drop from 1000 Stacks per block to 500 Stacks per block if no changes are made. This reduction in mining rewards may have two major impacts. First, it may decrease the number of opportunities for miners to be profitable, further reducing the total number of miners. Second, it may create barriers to the potential success of sBTC by reducing the mining rewards. To mitigate these risks, they laid out the criteria to consider changes below.

Decision-Making Framework

To support a potential SIP for emissions, 7th Avenue Group created a “Framework for Evaluating Adjustments” to consider emissions schedule adjustments to address the above risks.

This framework, available in full in this report, suggests the community should first decide what it is optimizing for from among a few key criteria:

1. Maintain the current block reward at 1000 Stacks for as long as feasible, essentially optimizing for maximum ecosystem maturity prior to an initial halving.
2. Maintain the 2050 supply at the originally projected 1.818 billion Stacks, ensuring that there is no further dilution to Stacks holders when viewed through the lens of 2050 supply.
3. Maintain a halving schedule whereby each halving decreases the supply by 50% every ~4 years, ensuring a relatively gradual decrease in block rewards going forward.

As noted in the report:

“These three priorities present something of a trilemma” and “the Stacks community could evaluate any change to the emissions schedule […] optimizing for one or multiple at the expense of others.”

Potential Emissions Schedules

Using the framework for guidance, 7th Avenue Group has offered 3 potential halving schedule optimizations in the report:

• Schedule Optimized for Criteria 1 and 2 (2.3.1)
• Schedule Optimized for Criteria 2 and 3 (2.3.2)
• Schedule Optimized for Criteria 1 and 3 (2.3.3)

Emissions Recommendation:

We encourage each of you to read about each schedule in more detail in the report. For the purposes of this post, however, we’ll focus on 7th Avenue Group’s recommendation. Their recommendation, considering all the constraints, is to optimize for Criteria 1 and 3 noting:

“It’s in Stacks’ best interest to consider solutions that will allow it the most time and flexibility to thrive as it grows. An emissions schedule that decreases mining incentives too early, or too quickly, may artificially hinder Stacks’ growth and potential. As a result, we believe an emissions schedule along the lines of Schedule D would be most promising at this stage, with little cost in the form of modest added emissions, when viewed through the lens of 2050 supply.”

Schedule D:

Halving Number	Approximate Timing	Stacks Block Reward After Halving
1st	Mid-2028	500
2nd	Mid-2032	250
3rd	Mid-2036	125
4th	Mid-2040	62.5
5th	Mid-2044	31.25
6th	Mid-2048	15.625

Notes about this schedule and approach from 7th Ave Group:

• With the above emissions schedule, the 2050 fully circulating supply is estimated to be around 1.870 billion Stacks tokens. This is an approximate 2.8% increase from the originally projected 1.818 billion. It is worth nothing that the 2050 supply is on track to be below what was originally projected, so even without adjustment, the original 2050 supply is not going to be on target.
• We do believe that there is greater risk allowing the current halving schedule to continue as originally implemented, as opposed to making some adjustments that could allow for increased runway, and Stacks ecosystem maturation, at the current 1000 Stacks per block emissions rate.
• Only four years into Stacks existence, it will be emitting a smaller portion of its supply than Bitcoin does at 14 years in. This minimal emissions budget so early on may not be ideal for Stacks, particularly in light of the specific risks and issues we discuss in the Emissions Report. Given all of this, we believe it would be reasonable for the Stacks community to prioritize the first criterion – that is, seeking to extend the period for which 1000 Stacks are emitted for as long as reasonable.

We’re encouraging all members of the community to read the report in full to understand the tradeoffs. Again, you can view the initial risk factors report here and the follow-up recommendation report here.

Next Steps

If the community deems it necessary, a change in emissions will require consensus on the solution and a SIP proposal to move it into the necessary governance process.

To support this process there are two additional resources available:

• As part of their research, 7th Ave Group published a Stacks halving model anyone can experiment with. You can download a copy here.
• A special Spaces edition of the regular Friday SIP Call on Friday, December 1st at 12pm ET. At 12:45pm, the discussion will move to Zoom with the SIP steering committee. Find more information and register here.

[muneeb]

Thanks @blocks8 for starting this discussion! Awesome to see 7th Ave Group do such extensive work on the topic. I wanted to chime in with some comments.

I think the Stacks community broadly aligns on the view that “Stacks is different from Bitcoin” meaning Bitcoin is meant to be digital gold, and sound money; Stacks is not trying to compete with Bitcoin there. Stacks is trying to make BTC productive and make BTC more useful as an L2 and STX serves a different purpose from BTC. It’s extremely important for Bitcoin to have a clear, fixed 21M supply that can never be changed but STX is different where the community, by following the SIP process and proper voting, can collectively agree on any tweaks that are needed to ensure success of Stacks as a Bitcoin L2.

Fun fact: in the original Stacks offering in late 2017, the proposed supply was 6 billion STX by year 20 after launch. See page 16 here. The original offering from Oct 2017 is archived here. Then there was a community-led discussion in 2019 (before the SEC qualified offering) where 2050 supply was reduced to approx 2B (archive here). And then further reduced to 1818M (even less than 2B) afterwards and before Stacks mainnet launch in early 2021. So there is a long history of the Stacks community coming together to discussing this topic, engaging relevant experts to provide in-depth analysis of the issues at hand, and then reaching some common ground that can be voted upon.

It’s also interesting to see the decentralized ecosystem in action when some times proposed changes to token emissions are effectively rejected by the community! For example, this SIP proposal in 2022 never made it to voting stage and community feedback sort of killed the proposal. Decentralization at work!

Now, with Nakamoto launch around the corner early next year. This seems like a great time to look at token emissions and coinbase rewards with a fresh eye and double-check if they make sense in the new reality out there. sBTC signers need to be properly incentivized and mining decentralization is an imp topic.

I might chime in with more thoughts later but wanted to leave some historic context here and leave my initial thoughts that I welcome this discussion! The 7th Ave Group report is making some valid points.

[jude]

@blocks8

This framework, available in full in this report, suggests the community should first decide what it is optimizing for from among a few key criteria:

• Maintain the current block reward at 1000 Stacks for as long as feasible, essentially optimizing for maximum ecosystem maturity prior to an initial halving.
• Maintain the 2050 supply at the originally projected 1.818 billion Stacks, ensuring that there is no further dilution to Stacks holders when viewed through the lens of 2050 supply.
• Maintain a halving schedule whereby each halving decreases the supply by 50% every ~4 years, ensuring a relatively gradual decrease in block rewards going forward.

Just want to emphasize that this is the trilemma we need resolution on. Stacks can have at most two of these three properties in its emissions schedule, if it is to change at all. The questions we need resolution on are:

• Is a change desirable?
• If so, then which of the above properties should be dropped?

[cuevasm]

Yep, good to point this out. On initial examination, I tend to agree with the report’s suggestion that optimizing for Criteria 1 and 3 makes the most sense relative to our current status and goals. At least as far as my current understanding, it prioritizes those, with minimal impact to 2.

And in terms of the first question, for me, it’s pretty clear a change is desirable as it seems to provide the best chance for optimal miner participation over a longer period as the network sees these upgrades and grows.

[muneeb]

@cuevasm

optimizing for Criteria 1 and 3 makes the most sense

+1 to this.

One interesting aspect of the report is that the current Stacks implementation and how Bitcoin halvings/blocks are projected don’t even get you 1818M by 2050! That number is already off and supply will be less than that. I personally view the 1818M mark as an approximation. The exact number really depends on Bitcoin blocks.

Also, there was an original intention to align Stacks halving blocks with Bitcoin blocks. This is not the case in the current implementation. Maybe one thing to consider is to also align the halving times, which means that any potential changes to help (1) and (2) can have a minimal impact on (3) because:

(a) Stacks halving is scheduled for Jan 2025 vs April 2024. That is roughly 8 months of 1000 STX coinbase rewards already.
(b) The current supply projection is slightly off from 1818M for 2050, so there is some extra “space” coming out from there.
(c) The 1818M by year 2050 was always an approximation. Is that by start 2050? by end 2050? What if Bitcoin blocks go faster in ten years? So I’d suggest to use it as an approximation.

Given the above three facts. Designing a proposal that achieves (1) and (3) with minimal impact to (2) might be possible here.

[jonastgerber1]

Nice job @blocks8! I’m all for this, makes a ton of sense to me. Also agree that dropping 2 - but doing it responsibly and moderately as proposed - is the way to go.

[will-at-stacks]

@blocks8, your leadership in spearheading this initiative is commendable.

I wholeheartedly endorse the revisions outlined in Schedule D. These strategic modifications strike a crucial balance between fostering growth and sustainability, while effectively addressing concerns regarding miner centralization and the progress of sBTC. This forward-thinking approach aligns seamlessly with the Stacks blockchain’s long-term vision.

[Tycho]

Hey very nice job on this. Fully optimising for criteria 1 and 3 makes most sense. I think we should look at passing a SIP as fast as possible here to show commitment to maintaining the current Stacks Miner reward without increasing the total supply of STX

Some investors have mentioned that they are concerned about the Stacks Miner reward halvening already, so showing that we hear those as a community and are able to take swift action will be a great signal to the market at this important time

[diwaker]

Thanks @blocks8 for starting an important and timely discussion. The report is comprehensive and thoughtful.

I found this finding in Section 1.2 of the report pretty interesting:

“We found that based on the rate of creation of Stacks blocks and more accurate timing for halvings, the 2050 supply appears to be closer to around 1.787 billion Stacks tokens rather than 1.818 billion. Which means that, if all else is to remain the same, we’d estimate that the 2050 supply would be about 31 million fewer tokens than had originally been projected.”

Further, it’s good to remember that assets with an uncapped supply, looking at the total supply on an arbitrarily chosen date (like 2050) has limited utility – one needs to consider multiple other factors in assessing the trade-offs of different emission schedules.

All of which to say, I very much support optimizing for (1) and (3). If anything, I’d argue for pushing out the first halving even further out, but otherwise the proposal in Schedule D looks good as-is.

[acrossfire.btc]

A bunch of community members chatted about this on an X space today. I think overall the feedback was positive that these issues were being discussed in a mature way and there seemed to be an understanding of why this needed to be done.

Some comments/concerns voiced:

• Can these changes come a bit after Nakamoto after the ecosystem has had some time to adjust from the update. It appears there may be time for this as the expected halving date was Jan 2025.
• Would it be possible to add a lock up period for the additional emissions which could potentially shunt the effect of the additional emissions vs. what was previously expected. (This would understandably come with more complexity in implementation as well as may shunt the effects of the incentives we may be trying to create with miners in the first place).
• Some aspects of Nakamoto may alleviate some of these areas of concern and market forces may adjust for this change naturally. For example, reduced emissions may lead to higher absolute price of the stacks token which could nullify the difference in profitability of miners as 500 STX with reduced emissions could be equivalent to 1000 STX without the reduced emission after the price increase from reduced sell pressure. Additionally, the removal of bitcoin miner MEV in Nakamoto as exploited by some such as F2Pool may cause PoX rewards to increase enough to where we feel that the stacker incentives will be strong.

Overall the sentiment on the change was positive and in alignment with the recommendation of 1 and 3 being prioritized, but these were just some topics discussed.

My personal take is that this change makes sense and I feel like we should move forward with whats best for the ecosystem, my only reservation is that we do not make this a habit and we try to make this the final change to emissions if at all possible. We dont want to set the expectation that tokenomics is something highly maleable in STX that can change on a whim no matter how important those changes might be for more growth and security.

[m0bb]

I’m admittedly not a distributed systems expert but have been taking the time to go through the reports. As an investor on the markets side, we appreciate the thoughtfulness, civility and overall process going on regarding a critical issue for the protocol’s long-term token economics and look forward to the discussion on Friday.

[xan]

Echoing what others have said, but for the foreseeable future optimizing for criteria 1 and 3 make most sense. The fact that this can be done at the moment with what I see as minimal impact on criteria 2 makes it all the more important. This can much better set the network up to capitalize on growth that comes in the next year or two, without mining and therefore network security becoming a central point of concern.

Will add more comments to this thread as I have more time to play with the model and go through the report again, but as of now I’m in full support.

[diegomey.btc]

Thanks for bringing this up, I do see it as a high-priority topic. I’d like to share my 2 cents.

Firstly, it’s evident that there’s flexibility regarding emissions, especially considering the 2050 supply projection isn’t being met and has previously been revised by us, the Stacks community.

While I appreciate the idea of aligning STX emissions closely with the BTC halving schedule, I recognize this as a secondary benefit rather than a primary goal - but for the sake of correlation and branding, this is a plus.

I support the proposed emission schedule that extends the current rewards till mid-2028, followed by quadrennial halvings. But, I think we should stick to our guns on not bumping up the total supply. Just because we’ve got room to increase it doesn’t mean we should, right?

My backing for this proposal primarily stems from the risks outlined in the reports - particularly, the potential increase in mining centralization and the challenges it might pose to the success of sBTC.

To sum it up, I’m leaning towards giving a thumbs up to focusing on criteria 1 and 3 - as long as these changes are driven by community consensus, and with a clear interest in why key stakeholders are supporting and benefiting from it- they will not adversely impact STX community perspective on the tokenomics.

[MVX]

I don’t see why moving the halving to 2028 would make sense. The halving reduces supply, which should naturally drive up the price according to forecasted cycles. Usually, this price increase is significant enough that the rewards in USD terms outweigh the benefits of maintaining usual block rewards.

In my opinion, the issue isn’t with the halving; there’s a different problem leading to the low number of miners. For instance, we still lack mining pools that would allow people to use their BTC to earn extra yield. Additionally, the DeFi ecosystem on STX is underdeveloped, which might change with the Nakamoto update and hopefully with the introduction of EVM and rust subnets. This could make mining STX more appealing.

Lastly, changing the tokenomics drastically, like altering supply frequently, undermines trust in a predictable future for the currency.

[Algorithm]

I want to extend my appreciation to the entire Stacks community for actively engaging in protocol decisions, a practice I believe empowers the community over a select few leaders.

While I find the proposition in the report commendable, it raises concerns for users and builders, even for miners. Although maintaining block rewards at 1000 STX until 2028 can foster network growth and resilience, I don’t believe it entirely addresses the mining rewards issue. It seems we aim to solve challenges for miners while simultaneously providing value to users and builders, ensuring the profitability and appeal of Stacks mining and the lasting value of Stacks tokens for network health and expansion.

My suggestion is to consider a DYNAMIC EMISSION approach after the first halving in 2025 until the second halving. This approach can enhance miner profitability, positively impacting the market price for users and builders. Dynamic emission allows flexibility, enabling both small and large miners to secure a block honestly based on their bid, with block production potentially rewarding more or less than 1000 STX, depending on a minimum Bitcoin bid. Real-world and blockchain data can guide the determination of minimum and maximum block rewards.

After the second halving:

1. Maintain the dynamic emission till 2050 with the 1.818 Billion cap

Or

2. The block reward can be reduced by 50%, given the maturation of the network and the anticipated significant growth.

[Hadan-ALEX]

ALEX Lab Foundation: A Dapp Builder’s Perspective

TLDR: We’ve carefully read through both the “Review of Mining Emissions and Risks of the Halving” and the “Halving Proposals: Final Draft” reports commissioned by the Stacks Foundation and authored by Jesse Soslow for the 7th Avenue Group. Our perspective, as Dapp builders on Stacks, is that we are in favor of the emissions schedule being adjusted, however we are against any inflation of the Stacks token supply. Excluding inflationary solutions while optimizing for delaying the first halving and mirroring Bitcoin’s halving schedule, leads us to support Schedule A in the “Halving Proposals” report.

No Inflation

The “Halving Proposals: Final Draft” proposes 4 different schedules for adjusting emissions. The report itself favors “Schedule D” which skips the 2025 halving, follows a 50% halving schedule from 2028 onwards, however the 2050 fully circulating supply is estimated to be 1.87 billion Stacks, a 2.8% increase from the originally projected 1.818 billion.

Although the report argues that this amount of inflation is “minimal” the truth is that we believe even modest token inflation would cause irreparable damage to the reputation and perceived value of Stacks. For us Schedule D, despite its apparent simplicity, is simply a non-starter because “printing money” to fix its problems would turn Stacks into digital fiat and make a mockery of claims of respecting the foundational principles and ethos of Bitcoin.

Stick to the Bitcoin Halving Schedule

Having ruled out Schedule D, that leaves A, B and C. These three schedules do not inflate the overall circulating token supply, however the trade off is that each has a “complication” that alters either the emission schedule of halving percentage from that of Bitcoin. Which then, is the “least complicated” to explain to the existing and future community of Stackers?

Schedule B, would have the first 50% halving in 2028, then 2030, 2032, 2036 and 2040. The inconsistency of halving occuring 2030 is strange and unmoors Stacks from mirroring Bitcoin’s halving schedule.

For this same reason, Schedule C which would only delay the first halving for ~1 year to late 2025 / early 2026, with the next halving in mid-2032 also seems strange and divorced from Bitcoin’s rhythm.

The extension of the halving deadline for 1 year doesn’t really provide that much more time for Stacks to grow and mature. It seems to be a bit of a gamble that we’ll see a bull run with ATH in 2025, which isn’t a guarantee. History doesn’t always repeat itself but it often rhymes. If there isn’t a bull market until 2026, Stacks in late 2025 / early 2026 may not be all that different than it was at the beginning of the year.

Our Preference for Schedule A

By process of elimination, we are left with Schedule A. Schedule A skips the 2024 halving for Stacks, but follows Bitcoin’s schedule from 2028 onwards similar to Schedule D.

The catch however, which differentiates Schedule A from the inflationary Schedule D, is that avoiding inflation requires “halving” of 60% instead of 50% in 2028 and 2032.

Delaying the first halving until 2028 allows for a greater likelihood of capturing a bull market cycle than the one year extension provided by Schedule C. If by 2028 there hasn’t been a bull market or new ATHs, then crypto has either faded or evolved into something very different from what we currently understand.

In Conclusion

From our perspective as Dapp builders on Stacks, we favor Schedule A. We entirely reject Schedule D as token inflation would destroy the reputation of Stacks. The one year extension of the first halving deadline in Schedule C, doesn’t seem to provide enough time to assure Stacks is thriving or has benefited from a possible bull market.

Schedule B has an odd 2030 halving, making it our second choice after Schedule A.
Our final ranking: Schedule A > Schedule B > Schedule C > No change > Schedule D

[Frank_NRD]

Frank from NRD here - sharing my thoughts on this.

While this proposal could potentially be beneficial (not delving deep here) - this is definitely not the right time to push for vote for this initiative.

Stacks is at its most important juncture right now to deliver its long-awaited Nakamoto, which is and will be the cornerstone of Stacks’ growth - every market participant (incl. ourselves) is watching closely if Stacks will be able to deliver on its promise on time, in full. Having a revamp to another cornerstone of Stacks now (halving/emission) will only introduce new noise & dilute what matters to Stacks next 4 months - Nakamoto.

I suggest everyone to delay this discussion/vote until after a fully operational & functional Nakamoto. Then we might have new data points to look at in determining if we need to extend security budget.

One focus at a time - which only should be Nakamoto right now.

Frank (NRD)

[Tycho]

I agree with Frank here.

Would add that it’s good that the community has voiced clear support on this post for not changing the STX supply cap, which is valuable to investors to know as we go into Nakamoto. LFG

[cuevasm]

Yeah, I haven’t seen anyone pushing for a vote on this now. It is responsible to do the research well out in front of halving to leave ample time for discussion and further observation. FWIW, I’m in touch with Stacks supporters who are only able to pay close attention every 6 months to a year, so discussions (especially those around tokenomics) need time to filter through a very decentralized global community. I’m happy we have the benefit of this research now and can apply the framework to the information we’ll hopefully get this upcoming year.

[novariver]

Agree with this.

Nakamoto and SBTC upgrade are by far the most important objectives for the community to focus on, and it doesn’t make sense to risk slipping on timing for an emissions change (which can wait until the scheduled Jan 2025 halving).

This discussion is important, but moot because hopefully usage and miner dynamics will change materially after the Nakamoto and SBTC upgrades.