Some 98.5% of Bitcoin sits idle on the Bitcoin network. This represents USD$ 2 trillion worth of value that is unutilized and locked away. It is no surprise then that an increasing number of projects are trying to unlock this value. In the world of DeFi, for example, Bitcoin value could drive deeper liquidity, more efficient markets and serve to unlock entire ecosystems and use cases.
Value is equally important in the world of decentralization and distributed consensus. For Proof-of-Stake networks, like Ethereum and Starknet, the security of the network is directly correlated to the value staked. Enabling Bitcoin to stake and secure Starknet is a major milestone for both Starknet and Bitcoin.
How Starknet Immediately Benefits
Starknet’s Bitcoin staking will immediately increase the value of the assets that are staked to secure Starknet. Today, there are 65,000+ delegators and 550 million+ STRK staked. The launch of Bitcoin staking will increase this number and thereby enhance the security characteristics of Starknet. Simply on those merits, Bitcoin staking is a significant development.
Remember, Bitcoin is generally regarded as lower risk and a very attractive relative to other cryptocurrencies. As a result, Bitcoin holders require lower rewards than other cryptocurrencies to participate in similar programs. This means that in the long-term, Bitcoin staking is cheaper than STRK staking for an equivalent level of cryptoeconomic security.
Starknet is uniquely positioned to rollout a successful Bitcoin staking protocol. Most networks, especially L2s, do not have a sufficiently adopted and decentralized staking program for their native token. If a network ends up with only Bitcoin stakers, it dilutes the role of its native token and its governance processes. The large adoption of STRK staking on Starknet enables the rollout of a successful Bitcoin staking program. The governance proposal that was approved is very detailed on how STRK and Bitcoin support each other. The consensus power of staked Bitcoin is limited to 25% of the network. STRK will hold the remaining consensus power, ensuring STRK staking maintains its centrality in securing starknet.
The Bitcoin Flywheel
But it gets better: Bitcoin staking on Starknet kicks off a significant flywheel for the entire Starknet ecosystem. Here’s how:
Bitcoin staking on Starknet will bring significant amounts of Bitcoin to the Starknet ecosystem, sustainably and perpetually. This will enhance the security characteristics of the network and the liquid TVL on Starknet. Enhanced security and increased liquidity in turn will attract more builders and assets to the entire Starknet ecosystem, further increasing the amount of STRK staked. By the mechanism designed and approved for Bitcoin staking, this increase in STRK staking will result in an increase in the rewards distributed to Bitcoin stakers, further incentivizing Bitcoiners to stake their Bitcoin, starting what is a powerful, reinforcing flywheel on Starknet.
Let’s break down these components into more detail:
Starknet’s Proof-of-Stake, like all PoS systems, rewards participants for securing the network by giving them newly created tokens, in this case STRK. These emissions are a naturally occurring part of PoS networks (and PoW networks too). They do not require special incentives. They are not one time programs. They do not depend on activity farming or other short-term behaviours. These rewards are part of a long-term, sustainable program.
As already discussed, the more assets that are staked on a network, the more secure the network is. Enhanced security drives adoption. More Bitcoin staked also drives adoption in another meaningful way: liquid-staked tokens. Bitcoin stakers have the possibility to participate in liquid-staking programs, where they receive a derivative token representing their staked positions. Just like on other PoS networks, these liquid stake tokens themselves can be used to drive usage in DeFi.
This in turn boosts STRK’s utility, as it is Starknet’s core asset:
- Default token for gas and staking
- Governance token
- Main DeFi collateral
- Next up: a fee-burn (ETA TBD) aimed at reducing supply as usage scales.
The amount of STRK staked is what determines emissions for both STRK staking and Bitcoin staking. This was implemented to make sure that STRK maintains its dominant position in securing Starknet. The mechanism for determining emissions increases emissions for both STRK and Bitcoin when more STRK is staked. This positive relationship is critical for securing Starknet with both BTC and STRK.
Why Should Bitcoiners Care?
Bitcoin Staking (and the broader BTCFi rollout) is another step on Starknet’s journey of decentralization, innovation and security.
Earlier this year, Starknet announced it became a Bitcoin and Ethereum L2. Starknet wants to leverage the security of both layers, and use its STARK-based zk-L2 to provide scale, security and low-cost transactions to both Ethereum and Bitcoin, without sacrificing decentralization. Last month, Starknet’s Grinta upgrade was yet another big step. Starkware has also released significant research and software on Bitcoin and zero-knowledge cryptography, including research on ColiderVM, providing a toy implementation of ColiderVM, setting up a $1m research fund on OP_CAT and setting a world record for proving Bitcoin mainnet with ZK proofs. And the roadmap is accelerating.
Bitcoin staking presents an opportunity for Bitcoin holders to support a leading project promoting decentralization, cryptography, privacy and security, while also earning sustainable rewards.
For the first time, Bitcoin holders can stake their Bitcoin to secure a Layer 2 and earn sustainable rewards.
To learn how to stake your tokens, see the Bitcoin User Guide here.
