SIP-029: Preserving Economic Incentives During Stacks Network Upgrades

[will-corcoran]

Description:

This pull request introduces SIP-029, which proposes modifications to the Stacks token emission schedule to address critical network incentives during two major protocol developments: the launch of sBTC and the continued operation of Nakamoto signers.

Key points of SIP-029:

1. Extends the current emission rate of 1000 STX per block until April 2026
2. Implements a modified reduction schedule following the extension
3. Aligns better with Bitcoin's halving cycle
4. Results in a final 2050 supply 0.77% below the originally proposed 1.818B STX cap

The SIP aims to:

• Bootstrap sBTC liquidity by maintaining adequate PoX rewards
• Ensure continued participation of high-quality Nakamoto signers
• Balance short-term incentives with long-term supply management

This PR includes:

• Full SIP text in markdown format
• Detailed specification of the proposed STX coinbase reduction schedule
• Comparison with the existing baseline schedule
• Activation and voting process details

Please review the SIP thoroughly and provide any feedback or suggestions for improvement.

[will-corcoran]

@mattyTokenomics @whoabuddy @obycode @radicleart @jcnelson @Hero-Gamer

Hi All -

I just wanted to bring this time sensitive SIP proposal to your attention. Please note that the dates noted in the Voting Timeline section is tentative - and subject to your review. We are hoping to conclude a vote by early December if possible, so that date could adjust a little, but not by much.

Thanks in advance for your review. Happy to answer any questions that you might have.

Best,
Will

[jiga]

initial SIP editor review

[jiga]

reminder to add PR or Issue link

[wileyj]

@will-corcoran

[will-corcoran]

noted - thanks

[xyzerobtc]

Can someone describe the block reward economics pros and cons?
What are the STX miner incentives to keep the block rewards as is for now?
Do we know if keeping block rewards the same is the right decision?
What are STX miners saying about this?

6. STX Miner Fees as % of Total Rewards Just like BTC miners, STX miners earn both a) a fixed block reward and b) a variable amount of fee revenue from the gas fees users of the network pay. While gas fees are not inflationary, issuing block rewards to miners is inflationary. Miners need an incentive to mine - so if a blockchain is to become sustainable in the long run, with a near-zero rate of inflation, miner compensation must increasingly come from gas fees compared to block rewards. For example, BTC plans to fade out block rewards entirely (in about 2140), though the necessity of "tail emissions" is still a topic of debate, and at least some (albeit theoretical) evidence that fees can never fully replace the need for block rewards. Regardless, the more revenues miners earn from fees as opposed to from block rewards, the more sustainable the chain is without requiring higher levels of inflation from block rewards. In BLUE, the percent of total miner rewards earned from gas fees. A value of 50% would represent miners earning just as much in gas fees as they earn in inflationary block rewards. 

https://app.sigle.io/mattystx.id.stx/QUM0Eo8oL8d6eI6B11E91

[wileyj]

Can someone describe the block reward economics pros and cons? What are the STX miner incentives to keep the block rewards as is for now? Do we know if keeping block rewards the same is the right decision? What are STX miners saying about this?

6. STX Miner Fees as % of Total Rewards Just like BTC miners, STX miners earn both a) a fixed block reward and b) a variable amount of fee revenue from the gas fees users of the network pay. While gas fees are not inflationary, issuing block rewards to miners is inflationary. Miners need an incentive to mine - so if a blockchain is to become sustainable in the long run, with a near-zero rate of inflation, miner compensation must increasingly come from gas fees compared to block rewards. For example, BTC plans to fade out block rewards entirely (in about 2140), though the necessity of "tail emissions" is still a topic of debate, and at least some (albeit theoretical) evidence that fees can never fully replace the need for block rewards. Regardless, the more revenues miners earn from fees as opposed to from block rewards, the more sustainable the chain is without requiring higher levels of inflation from block rewards. In BLUE, the percent of total miner rewards earned from gas fees. A value of 50% would represent miners earning just as much in gas fees as they earn in inflationary block rewards. 

https://app.sigle.io/mattystx.id.stx/QUM0Eo8oL8d6eI6B11E91

@will-corcoran @blocks8

[friedger]

What if 100 million STX voted "no"?

[wileyj]

then the sip isn't approved.
here, the floor requirement is that 80 million stacked stx must vote. if there is more, even better. of those that vote (assuming the threshold of 80 million is reached), at least 80% must vote yes.

if 100 million vote no in your scenario, then it would take another 400 million voting yes (at a minimum)

[friedger]

The SIP could reference https://forum.stacks.org/t/aligning-with-bitcoin-halving-and-incentives-after-nakamoto/17668 that would also answer @xyzerobtc questions

[xyzerobtc]

The SIP could reference https://forum.stacks.org/t/aligning-with-bitcoin-halving-and-incentives-after-nakamoto/17668 that would also answer @xyzerobtc questions

Thank you @friedger

[wileyj]

The SIP could reference https://forum.stacks.org/t/aligning-with-bitcoin-halving-and-incentives-after-nakamoto/17668 that would also answer @xyzerobtc questions

Thank you @friedger

I don't know if the forum post alone would help answer them. I think @will-corcoran and @blocks8 may have a better sense of where this data may be if it exists, or the best people to try and retrieve it.
i think the cited report from seventh ave does go into some of the questsions, so maybe it can be cited in the SIP to answer them better.

[will-corcoran]

Hey @xyzerobtc I am not really able to provide much insight beyond what is documented in the linked reference from 7th Ave (reference 1 in the SIP). That said, I asked @signal21j to take a look at your question and consider responding as he just completed a mining analytics dashboard and has done some mining in the past. I will keep an eye on this comment and see if you get the feedback you desire.

Can someone describe the block reward economics pros and cons? What are the STX miner incentives to keep the block rewards as is for now? Do we know if keeping block rewards the same is the right decision? What are STX miners saying about this?

6. STX Miner Fees as % of Total Rewards Just like BTC miners, STX miners earn both a) a fixed block reward and b) a variable amount of fee revenue from the gas fees users of the network pay. While gas fees are not inflationary, issuing block rewards to miners is inflationary. Miners need an incentive to mine - so if a blockchain is to become sustainable in the long run, with a near-zero rate of inflation, miner compensation must increasingly come from gas fees compared to block rewards. For example, BTC plans to fade out block rewards entirely (in about 2140), though the necessity of "tail emissions" is still a topic of debate, and at least some (albeit theoretical) evidence that fees can never fully replace the need for block rewards. Regardless, the more revenues miners earn from fees as opposed to from block rewards, the more sustainable the chain is without requiring higher levels of inflation from block rewards. In BLUE, the percent of total miner rewards earned from gas fees. A value of 50% would represent miners earning just as much in gas fees as they earn in inflationary block rewards. 

https://app.sigle.io/mattystx.id.stx/QUM0Eo8oL8d6eI6B11E91

[signal21j]

Hey @xyzerobtc, I thought the notes from @wileyj were valuable, but I'll add my take:

If block rewards drop from 1000 to 500 STX per block, miners will spend less BTC, and Stacking yields would probably decrease proportionally (transaction fees alone wouldn’t offset the reduction and some miners might choose to leave). Currently, there are around 5 active miners (and I’d love to see more), most of whom stay profitable under current conditions (except when BTC outpaces STX). With Stacks at a pivotal stage, maintaining the current emission rate can support stability, keep incentives positive and even entice other miners to join and strengthen the network.

For more data, check out the Stacks mining dashboard: https://app.signal21.io/stacks/mining

[xyzerobtc]

Hey @xyzerobtc, I thought the notes from @wileyj were valuable, but I'll add my take:

If block rewards drop from 1000 to 500 STX per block, miners will spend less BTC, and Stacking yields would probably decrease proportionally (transaction fees alone wouldn’t offset the reduction and some miners might choose to leave). Currently, there are around 5 active miners (and I’d love to see more), most of whom stay profitable under current conditions (except when BTC outpaces STX). With Stacks at a pivotal stage, maintaining the current emission rate can support stability, keep incentives positive and even entice other miners to join and strengthen the network.

For more data, check out the Stacks mining dashboard: https://app.signal21.io/stacks/mining

@signal21j thank you for sharing your perspective, very helpful

[jcnelson]

When does this new schedule activate? Can we get a target activation height?

I'd propose 875,000, which is about 15 days after voting closes, and is in the middle of a reward cycle.