Stacks (STX) uses a unique consensus mechanism called Proof of Transfer (PoX), which connects the Stacks blockchain to the Bitcoin blockchain. Through this mechanism, STX token holders can participate in supporting the network through a process called Stacking and receive rewards in Bitcoin.
Here is the detailed process on how to earn Bitcoin with STX:
1. Buying STX
To get started, you need to purchase Stacks (STX) tokens. This can be done through cryptocurrency exchanges such as Binance, OKX, and others where STX is traded.
2. Creating an STX wallet
You will need to create a wallet that supports STX tokens. An official wallet from Stacks, such as Hiro Wallet, may be a good choice. This wallet allows you to interact with the Stacks ecosystem, participate in staking, and earn Bitcoin rewards.
3. Stacking STX
Staking in Stacks is the process of locking your STX tokens for a certain amount of time to secure the network and participate in its governance. Unlike regular staking, Stacking requires active participation in the process, as you need to lock your tokens and participate in voting to support the network.
Minimum STX for staking: In some cases, you will need a minimum amount of tokens to participate in staking. However, if you do not have enough STX, you can join a staking pool where other STX holders pool their tokens to reach the minimum threshold.
Lockup Period: STX tokens are locked for one cycle, which is about two weeks. You can choose how many cycles you want to stake by re-locking your STX after each cycle.
4. Rewards in Bitcoin (BTC)
When you stake, you are rewarded in Bitcoin (BTC), which is what sets Stacks apart from other blockchains. Under Proof of Transfer, users who mine new Stacks blocks send Bitcoin as a reward to stakers.
How it works: On the Stacks network, miners compete to add a new block to the blockchain by sending BTC as a fee to participate. These bitcoins are then distributed among those who lock their STX as a reward. The more STX you lock, the more bitcoin rewards you receive.
Staking Pools: If you don’t have enough STX to stake yourself, you can join a staking pool. Pools allow you to pool STX from multiple participants so that everyone can earn rewards together. This lowers the barrier to participation, making the process accessible to more people.
5. Risks and benefits
Advantages:
Receiving rewards in Bitcoin (one of the most popular and stable cryptocurrencies).
Participation in supporting the decentralized Stacks network.
The ability to earn passive income without selling your STX.
Risks:
If the value of STX decreases, your tokens may become worthless while they are locked.
The need to lock tokens for a fixed period, which means limited liquidity during this period.
An example
Imagine you decide to lock up 10,000 STX to participate in staking. Let's say the reward for one cycle is 0.001 BTC for every 1,000 STX. At the end of the two-week cycle, you could receive about 0.01 BTC in rewards.
