Immediate and Continuous Yield with Stacking DAO
Last updated
Last updated
With Stacking DAO's unique architecture, users can capture yield immediately when stacking STX to mint stSTX and stSTXbtc with zero wait times.
On top of that, users no longer have to wait 14 days (1 Stacking Cycle) for rewards. Yield is earned daily, boosting the utility of stSTX and stSTXbtc.
Let's dive into how this works.
Stacks' consensus mechanism, Proof of Transfer (PoX), allows Bitcoin miners to bid BTC to win Stacks blocks and earn newly minted STX and transaction fees. The BTC committed by miners is then distributed to STX stackers as a reward for their participation in securing the network.
Based on the Stacking DAO product chosen, the yield will be converted into STX, sBTC (or kept in BTC), and distributed to users. Check the FAQ section for more info on rewards distribution.
To understand how Stacking DAO’s liquid staking tokens work, there are three key components to grasp:
Who generates the Stacking rewards
The common rewards pool
Who is entitled to the rewards
1. Who generates Stacking rewards As shown in the image, during Cycle X, the rewards are generated by the STX already deposited and actively stacked through Stacking DAO.
Even if a user chooses to unstack during Cycle X, their STX will remain stacked and continue generating yield throughout the cycle. The Stacked STX will be unlocked only at the start of Cycle X+1.
On the other hand, STX deposited by new users during Cycle X will be idle for the whole Cycle and begin stacking and generating rewards starting in Cycle X+1.
2. The common rewards pool All rewards generated by the actively stacked STX during Cycle X are treated as part of a single, shared Stacking rewards pool—represented in the diagram as a unified "common pile."
3. Who receives the rewards The rewards generated in Cycle X are distributed daily over Cycle X+1. They are shared between:
- Ongoing stackers
- New depositors on Stacking DAO - even if their STX will be actively stacked in the next cycle
Instead, stackers who unstack donate their final cycle rewards back to the common pile.
Conclusion:
With this design, the timing of when users earn rewards is essentially shifted. New depositors start earning yield immediately upon depositing into Stacking DAO.
In return, when users choose to unstack, any rewards generated during that cycle are returned to the common rewards pool.
Other stacking solutions make users wait for their yield:
1) When depositing STX in a pool, users will start earning yield only once the following cycle starts, losing 2 weeks of yield, as their tokens can't be added to a Stacking Cycle that is already ongoing.
2) Stacking cycles last 2 weeks, meaning that users will receive the yield only once the cycle is over, and in the meantime, they can't move around locked STX in the meantime.
Instead, Stacking DAO users earn yield every day as soon as they deposit STX.
Stacking DAO is the only stacking service that offers immediate and continuous yield.
1) Immediate: This is possible because when a user deposits STX during a Cycle, he will earn the yield for that cycle, even if his tokens aren't actively used in the Stacking process.
Instead, when a user begins withdrawing during a cycle, their deposited STX still generates yield, but it’s distributed to those who remain stacked. The user can withdraw their STX at the start of the next cycle.
2) Continuous: This works because Stacking rewards from one cycle (Cycle X) are distributed gradually over the 14 days of the next cycle (Cycle X + 1).
This unique design is an advantage over other pools, where people's deposits start earning yields only in the cycle following the deposit.
