sBTC official mainnet is online. Here is a comprehensive guide

Source: Stacks

At 0:00 on December 18, 2024, Beijing time, sBTC was officially launched on the BTC L2 Stacks main network.

Stacks is the leading Bitcoin L2, and the sBTC mainnet is online, introducing 2 trillion US dollars of BTC liquidity into the on-chain ecosystem, and is expected to completely activate BTCFi.

Introduction to sBTC

What is sBTC?

sBTC is an asset anchored 1:1 with Bitcoin on the Bitcoin second-layer network Stacks. It will enable developers to create effective application scenarios for Bitcoin and provide support for Bitcoin decentralized finance (DeFi), Areas such as non-fungible tokens (NFTs) open the door.

Unlocking Bitcoin liquidity is a key narrative, especially considering that despite Ethereum’s market capitalization being less than 25% of Bitcoin’s, its DeFi ecosystem’s total value locked (TVL) is much higher.

sBTC aims to unlock more than $2 trillion worth of Bitcoin liquidity through Stacks for use by DeFi and decentralized applications (dApps), paving the way for a booming Bitcoin-driven economy.

sBTC is operated by many signers, including institutional giants such as BitGo, Asymmetric, and Ankr, making it the most decentralized second-layer network BTC. In addition, transactions on the L2 network are guaranteed by 100% of the Bitcoin security budget, making Bitcoin transactions on the L2 network as irreversible as on the L1 network.

How does sBTC work?

The user flow begins with a Bitcoin mainnet transaction, where BTC is deposited into a multi-signature protocol monitored by the decentralized Stacks group of signers.

Once BTC is deposited, sBTC is minted on Stacks, enabling users to interact with DeFi decentralized applications.

Thanks to this design, users can participate in Bitcoin DeFi without even knowing they are on Stacks. For example, the Zest protocol will support Bitcoin mainnet deposits and automatically convert them to sBTC. As sBTC may become the fee Gas token on Stacks in the future, the user experience will be further improved.

Will there be an upper limit on sBTC?

A deposit limit of 1,000 BTC will be implemented at this stage to allow for controlled testing. The protocol will expand as ongoing security measures continue to strengthen it.

In the early stages, only deposit functionality will be enabled and withdrawal functionality will be temporarily unavailable.

Will sBTC be profitable?

Imagine earning Bitcoin gains just by holding BTC. No staking, no points, no complexity – just get your Bitcoin rewards into your wallet. Early users of sBTC will receive 5% annualized returns when they connect their wallets to https://bitcoinismore.org/ (online at 11 a.m. ET on December 17th, 00:00 Beijing time on December 18th) Rate (APY).

This is now possible through the sBTC rewards program. Early users can receive Bitcoin rewards as long as they hold sBTC - issued in the form of sBTC.

The sBTC rewards program is powered by a group of participants “Stacking” STX (Stacks’ native token).

When doing STX Stacking, participants receive Bitcoin through Stacks’ consensus mechanism. In order to enable the sBTC reward program, these participants contribute corresponding Proof of Transfer Bitcoin rewards to the sBTC reward pool.

BTC from the reward pool is deposited directly into a smart contract, which converts Bitcoin to sBTC and distributes rewards proportionally to sBTC holders. The protocol takes a daily snapshot of sBTC held by users, and rewards are distributed every two weeks (i.e., the length of a PoX cycle).

The current estimated annualized Bitcoin reward is 5% and will be distributed every two weeks.

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 more than 5% additional income 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 transaction fees.

Yield Farming: Liquidity providers can stake their LP tokens in a yield farming program to earn additional rewards, usually from trading activities or platform incentives.

In the early stage, it is expected that deploying sBTC can obtain an additional annualized return of 10-30%.

Bitflow Runes AMM:

Bitflow has launched a Stacks second-tier network rune automatic market maker, and you can bring runes to the second-tier network for a better user experience.

2. Zest——Loan market

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

The Zest protocol will run a yield-boosting 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:

• Deposit sBTC and get up to 10% annualized Bitcoin rate of return

• Use Bitcoin (or other stablecoins and exchange them for the US dollar stablecoin USDh) to borrow USDh stablecoins.

• Staking USDh on Hermetica can earn up to 25% of the annualized rate of return on stablecoins. USDh is a Bitcoin-backed income-based stablecoin on Stacks with a rate of return of 25%.

Reminder: Hermetica’s DeFi protocol offers USDh, the first yield-generating stablecoin backed by Bitcoin. Its income is generated sustainably through the perpetual contract funding rate payment on the centralized exchange and is distributed on a daily basis.

stSTXbtc is a new liquid staking token that users can use in Stacks’ DeFi. By holding the token, users will receive up to 10% of staking rewards paid in sBTC directly in their wallet.

3. Velar, DEX

Liquidity provision: Users can supply sBTC to Velar’s ​​liquidity pool, facilitate transactions and earn a share of transaction fees generated by the platform.

Yield Farming: By participating in the Yield Farming Program, users can stake the LP tokens obtained for providing sBTC liquidity to earn additional rewards in the form of Velar native tokens or other incentives.

Staking: If Velar launches a staking option for sBTC, users can lock their sBTC in a staking contract and earn rewards, such as additional tokens or a percentage of revenue, by supporting network operations.

Velar will have its own incentive program that allows you to earn its native token called VELAR by deploying sBTC in a pool on its decentralized exchange.

4. Arkadiko—— USDA stable currency

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

5. ALEX DEX

Users can deposit sBTC into ALEX's liquidity pool and pair it with another asset such as STX or a stablecoin. Doing so facilitates transactions on the platform and earns a share of the transaction fees generated by the pool.

ALEX will provide additional revenue in the form of its native token ALEX through the "Surge Campaign". This means that in addition to the 5% annualized rate of return of the sBTC reward program, you can also earn income by joining the sBTC pool and receive additional ALEX token rewards.

6. Granite (not yet online) - lending agreement

Borrowers can obtain stablecoin loans by pledging their Bitcoin, while liquidity providers earn revenue by supplying stablecoins to the protocol.

Borrowing: Users can borrow stablecoins using sBTC as collateral, which can then be used in various DeFi strategies to earn income.

Liquidation participation: Users can act as liquidators and repay part of the under-collateralized loans in exchange for collateral and rewards, thereby earning income through the liquidation process.

Granite currently has a waiting list , allowing early access to those who sign up in advance. Eventually, a points system will provide additional benefits, with users who sign up early given a significant advantage.

How is sBTC different from other Bitcoin assets such as wBTC, cbBTC, ecc, etc.?

These Bitcoin assets typically require the Bitcoins to be sent to an intermediary, or rely on a coalition of trusted signers or a small multi- signature mechanism.

sBTC will initially rely on 15 signers, including enterprise-level institutions such as BlockDaemon, Figment, Luganodes, and Kiln, to handle peg- ins and peg-outs operations. Over time, this responsibility will be transferred to all Stacks signers, allowing anyone to participate in securing the network and making it decentralized. BitGo, Aptos Foundation, and others are also expected to join the effort.

Additionally, 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 verifying and approving each block produced; anyone can become a signer as long as they accumulate enough STX to become an independent signer - this is similar to the concept of a validator.

sBTC supplementary 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) Satoshi Nakamoto upgrade information:

• Satoshi Nakamoto upgrade website: https://www.nakamoto.run/

• Documentation: https://docs.stacks.co/nakamoto-upgrade/nakamoto-upgrade-start-here

The Satoshi upgrade is critical because it brings the following results:

• Quick block generation (currently shortened from 10 minutes to less than 1 minute after optimization)

• 100% Bitcoin finality

Fast block generation: Fast block generation brings a Solana-like experience to transactions and Bitcoin DeFi interactions, greatly improving the overall user experience of interacting with the Stacks second-layer network.

Stacks’ DeFi ecosystem has grown rapidly this year, and applying DeFi strategies now takes just seconds, making it easier for new users to join and retain.

Before the Satoshi hard fork, Stacks blocks settled simultaneously with Bitcoin blocks (10 minutes on average), which made the chain slow and insufficient for DeFi activities. This limitation no longer exists. Instead, Stacks blocks now take just seconds to generate, and performance continues to improve. At the same time, the security of Bitcoin can still be utilized after the Bitcoin block is settled.

100% Bitcoin finality: Through the Satoshi Nakamoto upgrade, transactions occurring on the Stacks second-layer network can utilize 100% of the Bitcoin security budget, which means that once subsequent Bitcoin blocks are settled, Stacks transactions will become Just like Bitcoin transactions, they are irreversible.

Instead of a single Stacks block being tied to a single Bitcoin block, a Bitcoin block is now tied to a miner’s tenure, during which they can mine multiple Stacks blocks that settle within seconds.

There are currently 50 signers, including enterprise-level institutions such as BitGo, Aptos, Luganodes, Kiln, etc., responsible for verifying and approving every block produced during the miner's term.

Fast block times combined with Bitcoin finality make Stacks the most secure and scalable Bitcoin second-layer network, running through a decentralized signer network, which will allow for future Bitcoin implementations through the upcoming sBTC upgrade The move to decentralization in layer 2 networks.

3) Stacks analysis platform:

• Signal 21: https://signal21.io/

• DefiLlama: https://defillama.com/chain/Stacks

-Stacks browser: https://explorer.hiro.so/