Lock your Stacks (STX) to earn Bitcoin through the proof-of-transfer (PoX) consensus mechanism.
TL;DR: 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.
Just like how 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.
If you are a STX holder and have 70,000 STX or more, you are able to stack independently via the Stacks Wallet by Hiro PBC.
If have less than 70,000 STX, you are able to stack collectively via services that allow for group stacking (stacking pools). Currently OkCoin is the only provider of collective stacking. Boom Wallet and Xverse Wallet are currently building out stacking pool functionality.
Proof-of-transfer (PoX) is a new consensus mechanism designed for the Stacks blockchain. It uses the security of the Bitcoin blockchain's proof-of-work system, by requiring miners to spend BTC in order to win the block reward for a Stacks block.
The winning miner is selected randomly, with their chance of winning the block being proportional to the amount of BTC that they spend.
The following visual demonstrates how the winning miner is selected. The chance of each miner winning the block is proportional to the amount of BTC they have spent, compared to the other miners.
You might be asking yourself, "where does the Bitcoin go"? This is where stacking comes in. Stackers are holders of the STX token who lock their tokens up for a period of time.
Stackers lock their tokens up for a number of "cycles". Each cycle lasts for 2100 blocks, which is equivalent to 2100 Bitcoin blocks. Each cycle lasts for around two weeks.
The previous reward cycle (Cycle #2) lasted for NaN days.
Minimum threshold for Stacking
To ensure that miners don't become unprofitable by spending too much on Bitcoin fees, only two Stackers receive BTC rewards per block.
During each cycle, 2000 blocks are during the "reward" phase. Since two Stackers receive BTC rewards every block, that means there can only be 4000 Stackers per reward cycle.
To account for the fact that there are only 4000 reward slots, there must be a "minimum threshold" that determines the amount of STX you must lock in order to occupy a reward slot. The algorithm for determining the minimum is:
If less than 25% of the liquid supply of STX are participating in Stacking, then the minimum amount required per reward slot is 1 / 16,000th of the total liquid amount of STX.If more than 25% of the liquid supply of STX are participating in Stacking, the minimum amount required for a reward slot is 1 / 4,000th of the amount of STX participating in Stacking.
After making these calculations, the minimum threshold is rounded up to the nearest interval of 10,000.
The current liquid supply is 1,051,412,052 STX.
Here are some examples of what the minimum threshold is, depending on the amount of STX participating in Stacking:
If 100 million STX are participating, that's less than 25% of the liquid supply. The minimum amount is 70,000 STX.If 300 million STX are participating, that's more than 25% of the liquid supply. The minimum amount is 80,000 STX.
The following chart shows the relation between participation rate (x-axis) and minimum threshold (y-axis).