How to Stack Stacks (STX)

Introduction

Stacks is an open-source blockchain network that leverages the security and capital of Bitcoin for decentralized apps and smart contracts. The native token on the network is Stacks (STX) which is used for fueling the execution of smart contracts, processing transactions and registering new digital assets on the Stacks 2.0 blockchain. This tutorial will show you where you can buy STX and how to ‘stack’ your tokens to earn Bitcoin on the Stacks 2.0 network. 

How does Stacking work?

Stacking is locking your STX temporarily to support the Stacks blockchain’s security and consensus mechanism. As a reward, you earn Bitcoin that miners transfer to you as part of Proof of Transfer mining. In the same way that Bitcoin miners run mining software to support the Bitcoin blockchain and earn BTC, you can support the Stacks blockchain and earn BTC just by buying and locking up STX tokens.

The different ways to start Stacking

There are a few ways to start Stacking:

• On an exchange
  • Custodial exchanges make Stacking easy for you. They’ll hold your STX for you and pool it together with other stackers.
• In a non-custodial pool
  • Pool your STX with others 
• Liquid Staking through Stacking DAO (Recommended)
• On your own
  • If you have enough Stacks to meet the protocol minimum (generally above 100,000 STX), you can enter Stacking without joining a pool.

This tutorial will focus on liquid staking your STX through Stacking DAO.

But hold on, please explain what liquid staking my STX is?

Stacking is a currently a bad experience. It has a few main issues:

1. Stacking cycles last 2 weeks, leading to long unlock and restacking windows
2. Minimum requirement of locking ~90,000 STX
3. With the Stacks Nakamoto upgrade, stackers will have to run a node with liveness to stack
4. Stacking yield is considered income in many jurisdictions, and hence heavily taxed

The solution? A liquid stacking protocol that gives users an auto compounding tokenised representation of stacked STX (stSTX). Think Lido on Stacks.

• No more waiting 2 weeks to unstack. With stSTX-STX on a DEx, users trade back to STX anytime
• No more 90k STX minimum requirement to stack, any amount can be stacked
• No requirement for users to run nodes after the Stacks Nakamoto upgrade, StackingDAO is specialised in running nodes with liveness
• Stacking yield taxed more lightly as capital gains (versus income).
  • Stacking yield doesn't end up in the user's address as income, but ends up in the StackingDAO reserve contract that backs stSTX. As STX produces yield, stSTX appreciates hence producing capital gains instead of income (as always, nfa/dyor how this works in your jurisdiction).

stSTX has the potential to become a key primitive for the nascent Bitcoin DeFi ecosystem, especially as collateral. Borrowing against stSTX will be the most tax efficient way to get liquidity against STX for STX holders.

If I wanted to Stack through a pool, how long would I wait for?

Both when pooling and when Stacking by yourself, you can Stack anywhere from 1 to 12 cycles. A cycle is always 2,100 Bitcoin blocks, but the Bitcoin block time varies — a cycle generally lasts around 15 days. To decide how long you’ll Stack you’ll have to consider the cool down cycle.

What is a cool down cycle?

After your chosen duration, you’ll have to wait one cycle before you can Stack from the same address again. Your earnings will be higher if you Stack for more cycles at a time. For example, If you Stack for 3 cycles at a time twice, you’ll be earning rewards 6 out of 8 cycles, with two cool down cycles. If you Stacked for 6 cycles at a time, you would have earned rewards 6 out of 7 cycles.

Now that we’ve got that out the way, let us show you how to Liquid Stack with Stacking Dao!

Step 1: Make sure you have a Xverse wallet

Xverse is the most popular wallet for Stacks, it allows you to store, stack and connect with apps in the Stacks ecosystem, from your browser or on your desktop. You can download the Xverse wallet here. Make sure that you download the desktop application so that you can take part in a pool.

Step 2: Get yourself some STX tokens

Currently, you can purchase STX tokens on Coinbase, Kucoin, or using Binance.

STX uses a unique token standard, consequently, it cannot be bought on a decentralized exchange (DEX), so you will need to use one of the centralized exchanges (CEX) listed above. Once you have bought some STX, withdraw it to your Xverse wallet.

Step 3: Liquid Stack your STX through Stacking DAO

Your STX should be reflecting in your wallet and is now ready to be staked. Follow the steps below:

• Go to Stacking DAO
• Connect your wallet
• Enter the amount of STX you want to stake
• Click'Stake' and confirm the transaction in your wallet

Well done! You have now successfully Stacked your $STX.

Conclusion

Stacks has developed a simple, but flexible way for people to support the network and earn Bitcoin as rewards. By locking up STX tokens on the network, or ‘Stacking’, you provide valuable security benefits to the network and are contributing to the growth of the decentralized economy. For more staking courses and information, visit StakingRewards.com.