Source: Stacks

Reminder:

Stacks is the leading Bitcoin L2, unlocking BTC capital with new use cases, leveraging 100% Bitcoin finality for security, and benefiting from fast transactions. Activate the Bitcoin economy with Stacks.

What is sBTC?

Bitcoin is a 1:1 Bitcoin-backed asset on Stacks Bitcoin L2, which will allow developers to create efficient use cases for BTC, opening doors to Bitcoin DeFi, NFTs, and more.

Releasing BTC liquidity is a key factor, especially considering that despite only representing 25% of Bitcoin's market cap, Ethereum's DeFi ecosystem has a significantly higher TVL.

The goal of sBTC is to unlock over $2 trillion in BTC liquidity for DeFi and dApps through Stacks, paving the way for a prosperous Bitcoin economy.

sBTC is operated by a multi-signature setup that includes institutional giants like BitGo, Asymmetry, Ankr, etc., making it one of the most decentralized BTC versions on L2. More importantly, transactions on L2 are protected by 100% of Bitcoin's security budget, making BTC transactions on L2 as irreversible as L1.

How does sBTC work?

The user journey begins with transactions on the Bitcoin mainnet, where BTC is deposited into a multi-signature agreement monitored by a decentralized group of Stacks signers.

Once BTC is deposited, sBTC will be minted on Stacks, allowing users to interact with DeFi dApps.

Due to this design, users can even access Bitcoin DeFi without knowing it exists on Stacks. For example, Zest Protocol will support mainnet BTC deposits, automatically converting them to sBTC. As sBTC has the potential to become the Gas token charged on Stacks in the future, the user experience will further improve.

Is there a cap on sBTC?

This phase will implement a deposit cap of 1,000 BTC for controlled testing, while ongoing security work continuously strengthens the protocol as it scales.

Deposits are only supported in the early stage, and withdrawals are temporarily not possible.

Will sBTC have a yield?

Imagine earning Bitcoin rewards just by holding BTC. No staking, no points, no complexity — just Bitcoin rewards in your wallet. Early users of sBTC will receive an annualized 5% when they connect their wallets to Stacks (going live on December 17 at 11 AM ET).

This can now be achieved through the sBTC reward program. Early users just need to hold sBTC to receive BTC rewards (distributed in the form of sBTC).

The sBTC reward program is supported by a group of stackers 'Stacking' STX.

When stacking STX, stackers receive BTC through the consensus mechanism of Stacks. To enable the sBTC reward program, these stackers will transfer their corresponding proof of BTC reward contributions to the sBTC reward pool.

BTC in the reward pool is directly deposited into a smart contract that deposits BTC into sBTC and proportionally distributes rewards to sBTC holders. The protocol takes snapshots of users' sBTC holdings daily and distributes rewards every two weeks (the length of a PoX cycle).

The annual Bitcoin reward is currently projected to be 5%, distributed every two weeks.

What are the main features of sBTC?

DeFi Use Case: Additional Yield

Where can sBTC be used?

Multiple DeFi protocols will support sBTC, allowing users to earn additional yields beyond the target 5% simply by holding sBTC:

1) Bitflow - Decentralized trading platform for Bitcoin.

· Liquidity Pools: Users can deposit sBTC into Bitflow's liquidity pools, facilitating trades and earning a portion of the transaction fees generated by the platform.

· Liquidity Mining: Liquidity providers can stake their LP (liquidity provider) tokens in the liquidity mining program to earn additional rewards, which typically come from trading activity or platform incentives.

· Early predictions suggest that the annual yield from deploying sBTC will increase by 10-30%.

· Bitflow Runes AMM: Bitflow introduces the Stacks L2 Runes AMM, allowing you to bring Runes to L2 for a better user experience.

2) Zest - Lending Market

· sBTC will be listed on the Zest Protocol lending market on the first day.

· Zest Protocol will launch yield enhancement campaigns on the Zest Protocol lending market from day one, with yields of up to 10% on sBTC supplies.

Zest will also unlock more DeFi strategies involving sBTC, such as:

1. Deposit sBTC to earn up to 10% annualized yield on BTC.

2. Borrow USDh stablecoin (or other stablecoins and exchange them for USDh) using BTC.

3. Stake USDh on Hermetica to earn up to 25% APY on stablecoins (the annual yield for the USDh stablecoin on Stacks is 25%).

Reminder: Hermetica's DeFi protocol offers USDh, the first yield-bearing stablecoin backed by Bitcoin. The yield is paid sustainably through the perpetual funding rates of centralized trading platforms and is paid daily.

stSTXbtc is a new liquid staking token that users can deploy on Stacks DeFi. By holding this token, users will receive up to 10% API in stacked rewards, paid directly in sBTC to your wallet.

3) X-Chain Decentralized Trading Platform

· Liquidity Provision: Users can provide sBTC to Velar's liquidity pools, facilitating transactions and earning a portion of the transaction fees generated by the platform.

· Liquidity Mining: By participating in the liquidity mining program, users can stake the liquidity provider (LP) tokens earned by providing sBTC liquidity to earn additional rewards in Velar's native tokens or other forms of incentives.

· Staking: If Velar introduces a sBTC staking option, users can lock their sBTC in a staking contract to earn rewards, such as additional tokens or percentage yields, to support network operations.

· Velar will have its own incentive program, allowing you to earn Velar's native token VELAR by deploying sBTC in one of its DEX pools.

4) Arkadiko - USDA Stablecoin

Arkadiko will allow sBTC to be used as collateral within its protocol through governance voting, enabling users to borrow USDA or other assets against their Bitcoin holdings.

5) Alex DEX

Users can deposit sBTC into liquidity pools on ALEX and pair it with another asset (such as STX or stablecoins). By doing so, they facilitate transactions on the platform and earn a portion of the transaction fees generated by the mining pool.

ALEX will receive bonus yields in the form of ALEX's native token through the Surge campaign. This means that in addition to the 5% APY from the sBTC reward program, you can also earn yields by pooling sBTC, as well as additional ALEX token rewards.

6) Granite (not yet launched) - Lending Protocol

Borrowers can obtain stablecoin loans by collateralizing Bitcoin, while liquidity providers earn yields by supplying stablecoins to the protocol.

· Lending: Users can deposit sBTC as collateral to borrow stablecoins, which can then be deployed into various DeFi strategies for yield.

· Participation in Liquidation: Users can act as liquidators, repaying part of under-collateralized loans in exchange for collateral and rewards, thus earning through the liquidation process.

Granite currently has a waitlist that allows early registrants to gain access ahead of time. Ultimately, the point system will provide additional benefits, giving early access registrants a significant advantage.

How does sBTC differ from other Bitcoin assets like wBTC, cbBTC, ecc?

These BTC assets typically require sending BTC to intermediaries or relying on trusted signer consortia/small multi-signers.

sBTC will initially rely on a team of 15 signers, including enterprise-level institutions like BlockDaemon, Figment, Luganodes, and Kiln, to manage pegging and unpegging. Over time, this responsibility will shift to all Stacks signers, allowing anyone to participate in the security and decentralization of the network. BitGo, the Aptos Foundation, and other institutions are also expected to join this effort.

Additionally, thanks to the design of Stacks, sBTC will benefit from 100% Bitcoin finality, meaning that transactions on the Stacks layer will be as irreversible as Bitcoin.

Reminder: Signers are responsible for verifying and approving each generated block; anyone can become a signer, provided they have enough STX stacked into a single signer — similar to the concept of validators.

Additional:

1) sBTC Additional Material:

sBTC Website | sBTC Documentation | sBTC Deck

2) Satoshi Upgrade Information:

Satoshi Website | Documentation

The Satoshi upgrade is critical because it provides:

· Fast Block Production (shortened from the current 10 minutes to under 1 minute, optimizations are ongoing)

· 100% Bitcoin Certainty

Fast Blocks: Fast blocks bring a Solana-like experience for transactions and Bitcoin DeFi interactions, greatly improving the overall user experience when interacting with Stacks L2.

The Stacks DeFi ecosystem has grown significantly this year, allowing DeFi strategies to be applied in just a few seconds, facilitating onboarding and retention.

Before the Satoshi hard fork, Stacks blocks were synchronized with Bitcoin blocks at a stable interval (approximately 10 minutes), making the chain slow and insufficient for DeFi activities. This limitation no longer exists. Instead, Stacks blocks now take only a few seconds, and performance improves regularly. Once Bitcoin blocks are settled, Bitcoin's security can still be leveraged.

100% Bitcoin finality: With the Satoshi upgrade, transactions that occur on Stacks L2 will utilize 100% of Bitcoin's security budget, meaning that once consecutive Bitcoin blocks are settled, Stacks transactions become as irreversible as Bitcoin.

Bitcoin blocks are no longer tied to individual Bitcoin blocks but are tied to the miner's term, during which they mine several Stacks blocks that are settled in seconds.

There are already 50 signers, including enterprise-level institutions like BitGo, Aptos, Luganodes, Kiln, etc., responsible for verifying and approving each block generated during the miner's term.

The quick finality of Bitcoin's confirmation time makes Stacks the most secure and scalable Bitcoin L2, operating alongside a decentralized signer network that will allow BTC to transition to L2 in a decentralized manner through the upcoming sBTC upgrade.

3) Stacks Analytics Platform:

Signal 21 | DefiLlama | Stacks Resource Explorer

This article is a submission and does not represent BlockBeats' views.