How Stacks Is Looking to Power A Second Wave of Bitcoin DeFi

While the crypto world continues to watch publicly traded companies build their own Bitcoin treasuries, builders in the Stacks ecosystem are quietly preparing to scale ways for more people to earn yield on their Bitcoin via their Layer-2.

A new draft proposal — SIP-031, titled Fueling Stacks Builders & Growth — marks the next step in a long-term plan to turn Bitcoin into more than just digital gold, according to co-founder Muneeb Ali.

"I think the analogy would be that if Bitcoin is sort of like a highway and it's congested, Stacks is like a more modern highway right next to it where you can pay a small toll and use it," Ali said about the ecosystem's efforts to expand Bitcoin's usage. "And I feel like now, projects are reaching that level of maturity — that it's not just initial experimentation, it's not just building the thing, but it's actually maturing to real usage and then generating protocol revenue and then figuring out what happens with the protocol revenue."

The new Stacks proposal seeks to answer that, by establishing a Stacks Endowment that will be fueled in-part by higher emissions over the next five years, raising from 3.52% to an average of 5.75% per year. As the proposal highlights, Stacks is somewhat unique in how it has operated with less firepower than other top-50 projects in crypto after raising about $80 million six years ago. It's also unique in that Stacks was born out of one of the few SEC-qualified offerings in the space. (Despite that, the SEC still opened a probe into Stacks and later closed it in 2024.) Now, Ali says Stacks is looking to accelerate its unique positioning under new leadership at the SEC.

"Stacks is all about making Bitcoin productive, so people are bringing their Bitcoin into the into the L2 and they're using it either for payments or in DeFi or lending, whatever they want to do. But as more Bitcoin capital comes in and gets used on the network, there are very clear value accrual models where value accrues back to STX," he said. "And I think we can be much more explicit about it now ... we feel more comfortable because the ecosystem is so decentralized. The SEC already looked into the project for three years and gave a letter saying, you know, you guys are all clear."

One of the clearest use cases to come from Stacks' early efforts has been the advent of their challenger to centralized custodians expanding Bitcoin to other blockchains. Rather than offering wrapped Bitcoin that may be operated by centralized players like BitGo or others, Stacks' sBTC has sought to offer a more decentralized alternative by tokenizing Bitcoin and bringing it to other blockchains like Solana and Sui.

After launching in December with a 1,000 sBTC cap, the project expanded a few months later to a 3,000 sBTC cap — which it hit just 24 hours later. After raising the cap again this month, total sBTC surpassed 5,000 may soon be showing up in more places.

“We want to take Bitcoin to where the users are ... and open almost like this two-way street. That helps them discover Stacks. That helps them discover Bitcoin DeFi," Ali said.

Behind it all is a simple yet powerful bet: Bitcoin can do more. And with regulatory attitudes shifting and protocol maturity setting in, Ali believes Stacks is finally in a position to show how.

“We want to be the most trust-minimized way for people to keep their Bitcoin in a programable environment where they can actually earn yields ... [and] deploy easily in applications and so on,” he said.

After a community comment period, SIP-031 will be voted on by the Stacks community and could very well help to accelerate progress.

Coinage members can watch our full episode above ad-free, or later on our YouTube channel to burn $PLYBTN automatically. To support our community-owned outlet, own it with us, and unlock other exclusive benefits, mint one of our Membership Passes today or Stack STX with us today!