Stacks proposes new Bitcoin staking with 3% native yield

Stacks Labs published a whitepaper on May 13 proposing a mechanism for self-custodial Bitcoin staking that would allow BTC holders to earn a native 3 percent yield. The protocol upgrade extends Stacks’ existing Proof-of-Transfer (PoX) consensus mechanism, aiming to unlock yield on what the paper calls over $1.3 trillion in idle capital without requiring users to bridge, wrap, or surrender custody of their Bitcoin.

“Bitcoin holders have been waiting for a way to put their capital to work without giving it up,” Alex Miller, CEO of Stacks Labs, said. “What we’ve built on Stacks has already distributed over 4,200 BTC in real yield since 2021. Bitcoin Staking takes that proven infrastructure and makes BTC itself the yield-bearing asset, under the holder’s own keys, on Bitcoin.”

The proposed mechanism involves participants forming six-month “protocol bonds” by pairing a timelocked BTC amount on the Bitcoin blockchain with a corresponding amount of STX locked on the Stacks layer. The yield is generated from BTC that Stacks miners bid to win STX block rewards and transaction fees, a system that has been in production since January 2021. The new proposal modifies the reward distribution, creating a waterfall structure that prioritizes these paired BTC-plus-STX positions.

This development positions Stacks to capture a share of the Bitcoin Layer-2 market, where other protocols like Arkade are also competing for traction. The whitepaper outlines a two-phase rollout, starting with a managed 12-month bootstrap period (PoX-5) targeting 3,000 BTC in capacity at a 3 percent APY, with a 5 percent minimum STX pairing ratio. This initial phase will involve institutional partners before transitioning to a fully permissionless and decentralized system (PoX-6) governed by on-chain economics.

How It Works

Under the proposed system, the yield distribution follows a waterfall model. The primary tranche consists of participants who have bonded both BTC and STX, and they are set to receive the target yield rate. Any excess revenue generated from miner bids is then split between a reserve fund and STX-only stakers, who form the third tranche of the waterfall. This structure is designed to provide a stable, targeted yield for the primary participants while creating a buffer to manage revenue fluctuations.

Participation is not limited to native Bitcoin holders. The whitepaper specifies that holders of sBTC, the Bitcoin-backed asset on the Stacks layer, can also participate through L2 smart contracts. This enables pooled participation and integrations with other DeFi applications on Stacks. STX holders can also continue to stake their tokens without a Bitcoin commitment to earn residual yield.

“Bitcoin is the world’s most trusted asset precisely because of its design and safety principles on the L1,” said Muneeb Ali, Founder of Stacks. “Bitcoin Staking changes the calculus; holders can now earn yield denominated in BTC, trustlessly, while their Bitcoin stays exactly where it belongs.”

The proposal is the first phase of the Stacks 2026 roadmap, which aims to build a comprehensive suite of Bitcoin-native financial products. Both the PoX-5 and PoX-6 phases will require community approval through the Stacks Improvement Proposal (SIP) process before implementation.

This article is for informational purposes only and does not constitute investment advice.