Source: Stacks
At 0:00 Beijing Time on December 18, 2024, sBTC will officially launch on the BTC L2 Stacks mainnet.
Stacks is the leading Bitcoin L2, and the launch of the sBTC mainnet is expected to bring $2 trillion in BTC liquidity to the on-chain ecosystem, potentially revolutionizing BTCFi.
Introduction to sBTC
What is sBTC?
sBTC is a 1:1 pegged asset on the Bitcoin Layer 2 network Stacks, enabling developers to create productive applications for Bitcoin, opening doors for Bitcoin decentralized finance (DeFi), non-fungible tokens (NFTs), and other fields.
Unlocking Bitcoin liquidity is a key narrative, especially considering that Ethereum, despite being worth less than 25% of Bitcoin's market cap, has a much higher total value locked (TVL) in its DeFi ecosystem.
sBTC aims to unlock over $2 trillion in Bitcoin liquidity through Stacks for use in DeFi and decentralized applications (dApps), paving the way for a thriving Bitcoin-driven economy.
sBTC is operated by numerous signers, including BitGo, Asymmetric, Ankr, and other institutional giants, making it one of the most decentralized Layer 2 networks for BTC. Additionally, transactions on the L2 network are secured by a 100% Bitcoin security budget, ensuring that Bitcoin transactions on the L2 network are as irreversible as those on the L1 network.
How does sBTC work?
The user's operation process begins with a Bitcoin mainnet transaction, where BTC is deposited into a multi-signature protocol monitored by a decentralized group of Stacks signers.
Once BTC is deposited, sBTC will be minted on Stacks, allowing users to interact with DeFi decentralized applications.
Thanks to this design, users can even participate in Bitcoin DeFi without knowing they are on Stacks. For instance, the Zest protocol will support deposits on the Bitcoin mainnet and automatically convert them to sBTC. As sBTC may become a Gas token for transaction fees on Stacks in the future, the user experience will further improve.
Will there be a cap on sBTC?
At this stage, a cap of 1000 BTC will be implemented for deposits to allow for controlled testing. As ongoing security measures continuously strengthen the protocol, the scale will expand.
In the early stages, only deposit functionality will be enabled; withdrawal functionality will be temporarily unavailable.
Will sBTC yield returns?
Imagine earning Bitcoin rewards just by holding BTC. No staking, no points, no complexity — just let Bitcoin rewards flow into your wallet. Early users of sBTC will earn an annual percentage yield (APY) of 5% when they connect their wallets to https://bitcoinismore.org/ (11 AM EST on December 17, Eastern Time, 00:00 on December 18 in Beijing).
This is now achievable through the sBTC reward program. Early users can earn Bitcoin rewards just by holding sBTC - distributed in the form of sBTC.
The sBTC reward program is supported by a group of participants who 'Stack' STX (the native token of Stacks).
When participating in STX Stacking, participants earn Bitcoin through Stacks' consensus mechanism. To enable the sBTC reward program, these participants will contribute their corresponding proof of transfer (Proof of Transfer) Bitcoin rewards to the sBTC reward pool.
BTC from the reward pool will be directly deposited into a smart contract that converts Bitcoin to sBTC, distributing rewards proportionally to sBTC holders. The protocol takes daily snapshots of users' sBTC holdings, and rewards are distributed bi-weekly (the duration of a PoX cycle).
Currently estimated Bitcoin rewards are annualized at 5%, distributed bi-weekly.
Key features of sBTC?
DeFi Use Cases for sBTC: Additional yields
Where can sBTC be used?
Multiple DeFi protocols will support sBTC, allowing users to earn over 5% additional yield just by holding sBTC:
1. Bitflow DEX:
Liquidity Pool: Users can deposit sBTC into Bitflow's liquidity pool to facilitate transactions and earn a share of the transaction fees generated.
Yield Farming: Liquidity providers can stake their LP tokens in yield farming programs to earn additional rewards, which typically come from trading activities or platform incentives.
Early projections suggest that deploying sBTC could yield an additional annualized return of 10 - 30%.
Bitflow Runes AMM:
Bitflow launched a Stacks Layer 2 network rune automated market maker, allowing you to bring runes to the Layer 2 network for a better user experience.
2. Zest - Lending Market
sBTC will be listed on the Zest protocol lending market from day one.
The Zest protocol will launch a yield enhancement campaign on its lending market from day one, offering up to 10% Bitcoin yield on sBTC supply.
Zest will also unlock more DeFi strategies involving sBTC, such as:
Depositing sBTC can yield up to 10% annualized Bitcoin rewards.
Use Bitcoin (or other stablecoins and convert them to the USD stablecoin USDh) as collateral to borrow USDh stablecoins.
Staking USDh on Hermetica can yield up to 25% annualized stablecoin rewards, with USDh being a yield-bearing stablecoin supported by Bitcoin on Stacks at 25% yield.
Reminder: Hermetica's DeFi protocol offers USDh, the first yield-bearing stablecoin backed by Bitcoin. Its yield is sustainably generated through the funding rates of perpetual contracts on centralized exchanges and distributed daily.
stSTXbtc is a new liquid staking token that users can use within Stacks' DeFi. By holding this token, users will receive staking rewards of up to 10% paid in sBTC directly in their wallets.
3. Velar, DEX
Liquidity Provision: Users can supply sBTC to Velar's liquidity pool to facilitate transactions and earn a share of the transaction fees generated by the platform.
Yield Farming: By participating in yield farming programs, users can stake the LP tokens earned from providing liquidity for sBTC to earn additional rewards in Velar's native tokens or other incentive forms.
Staking: If Velar launches sBTC staking options, users can lock their sBTC in staking contracts to earn rewards by supporting network operations, such as additional tokens or a share of the yield.
Velar will have its own incentive program, allowing you to deploy sBTC in one of its decentralized exchange pools to earn its native token, VELAR.
4. Arkadiko - USDA Stablecoin
Through governance voting, Arkadiko will allow sBTC to be used as collateral within its protocol, enabling users to borrow USDA or other assets using the Bitcoin they hold.
5. ALEX DEX
Users can deposit sBTC into ALEX's liquidity pool, pairing it with another asset (such as STX or stablecoins). This facilitates trading on the platform and earns a share of the transaction fees generated by that pool.
ALEX will provide additional yields through the 'Surge Campaign' in the form of its native token ALEX. This means that in addition to the 5% annual yield from the sBTC reward program, you can also earn yields by joining the sBTC pools and receive additional ALEX token rewards.
6. Granite (not yet launched) - Lending Protocol
Borrowers can obtain stablecoin loans by collateralizing their Bitcoin, while liquidity providers earn yields by supplying stablecoins to the protocol.
Borrowing: Users can use sBTC as collateral to borrow stablecoins, which can then be used for various DeFi strategies to earn yields.
Liquidation Participation: Users can act as liquidators to repay some under-collateralized loans in exchange for collateral and rewards, thereby earning yields through the liquidation process.
Granite currently has a waiting list, allowing early registrants to gain early access. Ultimately, a points system will provide additional benefits, giving early registrants significant advantages.
How does sBTC differ from other Bitcoin assets (like wBTC, cbBTC, ecc)?
These Bitcoin assets typically require sending Bitcoin to an intermediary or relying on a trusted signer consortium or small multi-signature mechanism.
sBTC will initially rely on 15 signers, including enterprise-level institutions like BlockDaemon, Figment, Luganodes, and Kiln, to handle peg-ins and peg-outs. Over time, this responsibility will be transferred to all Stacks signers, allowing anyone to participate in securing the network and making it decentralized. BitGo, the Aptos Foundation, and others are also expected to join this effort.
Moreover, thanks to the design of Stacks, sBTC will benefit from 100% Bitcoin finality, meaning transactions on the Stacks layer will be as irreversible as Bitcoin transactions.
Reminder: Signers are responsible for validating and approving each block produced; anyone can become a signer as long as they accumulate enough STX to become an independent signer — similar to the concept of validators.
sBTC Additional Information
1) Other Information about sBTC:
sBTC Website: https://www.stacks.co/sbtc
sBTC Documentation: https://docs.stacks.co/concepts/sbtc
sBTC Presentation: https://www.stacks.co/sbtc-deck
2) Nakamoto Upgrade Information:
Nakamoto Upgrade Website: https://www.nakamoto.run/
Documentation: https://docs.stacks.co/nakamoto-upgrade/nakamoto-upgrade-start-here
The Nakamoto upgrade is crucial as it brings the following outcomes:
Fast block times (currently reduced from 10 minutes to less than 1 minute after optimization)
100% Bitcoin finality
Fast blocks: Fast block times provide a Solana-like experience for transactions and Bitcoin DeFi interactions, significantly improving the overall user experience when interacting with the Stacks Layer 2 network.
Stacks' DeFi ecosystem has developed rapidly this year, and now applying DeFi strategies takes only seconds, making it easier for new users to join and retain.
Before the Nakamoto hard fork, Stacks blocks settled synchronously with Bitcoin blocks (averaging 10 minutes), making the chain slow and insufficient for DeFi activities. This limitation is no longer present. Instead, Stacks blocks can now generate in just a few seconds, and performance continues to improve. At the same time, the security of Bitcoin can still be utilized after Bitcoin blocks settle.
100% Bitcoin finality: Through the Nakamoto upgrade, transactions occurring on the Stacks Layer 2 network can utilize 100% Bitcoin security budget, meaning once subsequent Bitcoin blocks settle, Stacks transactions become as irreversible as Bitcoin transactions.
No longer is a single Stacks block tied to a single Bitcoin block; Bitcoin blocks are now tied to the miner's term, during which they can mine multiple Stacks blocks that can settle in seconds.
Currently, there are 50 signers, including enterprise-level institutions like BitGo, Aptos, Luganodes, Kiln, etc., responsible for verifying and approving each block produced during the miner's term.
Fast block times combined with Bitcoin finality make Stacks the safest and most scalable Bitcoin Layer 2 network, operating through a decentralized network of signers, allowing for a decentralized transfer of Bitcoin to Layer 2 through the upcoming sBTC upgrade.
3) Stacks Analytics Platform:
Signal 21: https://signal21.io/
DefiLlama: https://defillama.com/chain/Stacks
-Stacks Explorer: https://explorer.hiro.so/
