Auto-compounding and DeFi Rewards: The Power of stSTX

The Challenges of Stacking

The Stacking process, which is a key component of the Stacks consensus mechanism, offers a unique perk as it enables users to earn native BTC rewards by locking their STX tokens.

But Stacking presents various challenges as 90k STX are needed (if not using a community pool), tokens are locked for 2 weeks, and it will require running a node.

Moreover, as the yield is in BTC, the procedure of compounding the BTC returns into STX is manual, complex, and inefficient.
Even community pools don’t offer the possibility of auto-compounding rewards in STX.

Stacking DAO addresses all the obstacles related to Stacking and even provides automatic compounding STX yield.

The Impact of Auto-Compounding Stacking Rewards

Considering the data provided by Fast Pool, the Stacking rate for Cycle 75 was 0,28%.
Given cycles last 2 weeks, the annual yield would be 6,72%, which can approximated to 7%.

Instead, if the bi-weekly cycle rewards are compounded each time, the annual return on Stacking would be 7,24% (obtained by applying the Compound Interest Formula).

This implies that depositing 10,000 STX in Stacking DAO and holding stSTX would yield 14,183 STX after 5 years.
This is over 650 STX higher compared to Stacking individually or via a Community pool that don’t compound rewards.

If the price of STX reaches $3 by the end of the next five years, Stackers could potentially earn $2,000 more compared to other Stacking solutions and $12,549 more than simply holding STX.

The results are similar even if the Stacking DAO 5% fee on Stacking yield is factored in. In fact, the APY in this case would be 7,18%, leading to $14148 STX after 5 years, which is close to the scenario previously described.

It’s clear that compounding substantially impacts an investor's return over the long term, making it a powerful tool for an investor to build up wealth.

But this doesn’t factor in another important characteristic of Stacking DAO.

The Impact of DeFi Rewards through stSTX

stSTX can be deployed across Stacks DeFi protocols, unlocking new yield opportunities. stSTX is already integrated with Bitflow, and other protocols will integrate it in the near future (e.g, Arkadiko).

If stSTX tokens held are deployed in DeFi since the beginning, earning an additional 2% annual yield on top of Stacking rewards, would make the reward difference even more significant.

By the end of the 5 years, a user would have 2000+ STX (the equivalent of $6000 with STX at $3) more respect to no compounding.

This scenario would also result in as additional 1500 STX compared to simply holding stSTX.

In conclusion, through auto-compounding and DeFi integrations, Stacking DAO offers a simple way for users to maximize their returns coming from the Stacking and DeFi yields.

Stacking DAO Details:

‍Mint stSTX today and earn up to 10% yield on your STX: https://app.stackingdao.com/

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