Sustainable STX Emission Plan: SIP‐029: STX Halving Schedule - zeroauthority-dao/mission GitHub Wiki
Balancing Early Incentives with Long‐Term Growth
The Stacks community is gearing up for an essential discussion on the upcoming token-emissions halving scheduled for January 2025. Token-emission halvings, a crucial aspect of Stacks' tokenomics, impact miner participation, network health, and overall token supply. Given the major upgrades in the pipeline, including Nakamoto and sBTC, it’s timely to re-examine the halving schedule and consider adjustments to support network growth.
More information: https://github.com/stacksgov/sips/pull/196#issue-2638266018
To aid the community in evaluating potential changes, we commissioned 7th Avenue Group, a renowned third-party expert in tokenomics, to conduct comprehensive research. Their two-part report reviews the current halving schedule, highlights potential risks, and suggests possible improvements that could be put forward in a SIP (Stacks Improvement Proposal). Key risks include reduced miner incentives and potential barriers to sBTC’s success.
7th Avenue’s framework presents three primary criteria for consideration:
- Maintaining the 1000 STX block reward for an extended period to foster ecosystem maturity before the initial halving.
- Sticking to the projected 2050 supply of 1.818 billion STX, ensuring stability in long-term supply projections.
- Adhering to a 50% supply reduction at each halving approximately every four years.
Given the trade-offs, the report advises optimizing for Criteria 1 and 3, which balance network maturation with gradual emissions reductions, making only a minor adjustment to the long-term supply projection. The report suggests a Schedule D halving model, with emissions adjustments continuing until 2048, which minimally increases the 2050 supply to around 1.870 billion STX.
Community members are encouraged to review the full report, consider these trade-offs, and participate in the SIP process if adjustments are deemed necessary. Further insights and a special SIP Call on December 1st will provide additional opportunities for community feedback and engagement.
https://forum.stacks.org/t/stacks-halving-schedule-reports-and-recommendations/15774
Proposed STX Emission Schedule
The following proposal details a phased reduction in the STX emission schedule to provide sustainable rewards while supporting early-stage network security and growth. Initially, a coinbase reward of 1000 STX is maintained until April 2026, incentivizing miner participation during the critical growth phase. Afterward, the reward decreases gradually, balancing the need for ongoing miner incentives with efforts to reduce inflationary pressures.
| Phase | Bitcoin Block Height | Approximate Date | STX Reward | Cumulative STX Supply (after) |
|---|---|---|---|---|
| Current | - | - | 1000 | - |
| 1st Reduction | 945,000 | ~April 2026 | 500 (50%) | 1,607,907,038 |
| 2nd Reduction | 1,050,000 | ~April 2028 | 250 (50%) | 1,652,242,188 |
| 3rd Reduction | 1,260,000 | ~April 2032 | 125 (50%) | 1,696,547,013 |
| 4th Reduction | 1,470,000 | ~April 2036 | 100 (20%) | 1,718,699,425 |
| Final Tail Emission | - | ~January 2050 | 100 (0%) | 1,779,628,415 |
The final tail emission of 100 STX begins in January 2050. At this point, the total STX supply will be around 1,783,063,600, marking a slight reduction (0.19%) from initial projections, which supports both inflation control and long-term ecosystem health.
Rationale
The emission schedule is designed to foster the long-term success of the STX ecosystem, aligning rewards with strategic growth and network maturity goals:
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Early Miner Incentives: Maintaining a high 1000 STX reward until 2026 attracts miners to secure the network during its nascent phase, which is critical for establishing a resilient security model.
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Ecosystem Maturity: By extending the initial high-reward phase, the proposal allows time for a more robust Nakamoto consensus set to form, increasing decentralization and security.
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Support for sBTC and Network Utility: Adequate miner incentives promote liquidity and adoption for sBTC, which strengthens the ecosystem's overall utility and encourages adoption during its early stages.
Potential Drawbacks
While the proposal offers significant benefits, it also presents some trade-offs:
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Inflationary Pressure: Extending the 1000 STX reward period increases the circulating supply, which may contribute to short-term inflationary effects and impact token price stability.
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Missed Opportunity for Early Appreciation: Reward reductions might typically signal a deflationary trend, potentially enhancing price appreciation. Delaying these reductions could defer these benefits.
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Transition to Lower Incentives: The shift to lower reward phases will require additional incentives, such as transaction fees or ecosystem development initiatives, to maintain miner engagement as direct rewards decline.
Conclusion
This phased reduction schedule seeks to balance short-term growth with sustainable, long-term rewards, allowing ample time for the STX ecosystem and the Nakamoto signer set to stabilize. The additional 16 months at a higher reward level are expected to support the early development of sBTC, enhance miner security, and foster ecosystem expansion. This design aims to ensure that STX can transition smoothly to a more sustainable emission model, aligning with the evolving needs of a decentralized, mature ecosystem.