Proof of Growth: Unlocking Bitcoin DeFi - stSTX Hits 52% Utilization

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As pioneers in the Stacks ecosystem, we’re thrilled to bring you exclusive insights, the latest updates, and expert analysis straight from the frontier of decentralized finance.

Whether you’re a seasoned stacker or just starting your journey, this newsletter is packed with everything you need to stay ahead in the world of crypto. Get ready to unlock new opportunities and elevate your DeFi game! 

Stacking DAO is the leading liquid staking protocol on Stacks, allowing users to earn consensus rewards from stacking STX tokens while retaining liquidity by minting stSTX or stSTXbtc.

This enables users to participate in Stacks DeFi activities like trading, lending or providing liquidity, maximizing yield opportunities while still securing the network.

Over the last two cycles, the yield for holding stSTX or stSTXbtc has averaged ~9.94% APY, paid in additional STX or sBTC tokens. Stack today here.

Unlocking Bitcoin DeFi: stSTX Hits 52% Utilization

Liquid stacking tokens, like stSTX, support the growth of DeFi by solving the trade-off between staking and liquidity.

On Stacks, "stacking" locks STX to secure the network and earn rewards, but LSTs provide a liquid version of those staked assets. With stSTX, users enjoy an 8-10% annual percentage yield (APY) in STX rewards while retaining the flexibility to pursue DeFi strategies.

This liquidity unlocks a range of opportunities:

- Lending: Users can lend stSTX on platforms like Zest to earn additional yield atop stacking rewards.

- Borrowing: stSTX serves as collateral for borrowing other assets, providing liquidity without selling.

- Liquidity Provision: Depositing stSTX into decentralized exchanges (DEXs) like Bitflow or Velar earns liquidity provider (LP) rewards from trading fees, compounding returns.

By blending consensus rewards with DeFi flexibility, stSTX empowers users to maximize their capital efficiency in the Stacks ecosystem.

stSTX Utilization in Stacks DeFi

Currently, 52% of stSTX is deployed across Stacks DeFi, reflecting robust adoption in key dApps:

- Zest Protocol: A lending platform leveraging stSTX for borrowing and lending.

- Bitflow: A DEX where stSTX fuels liquidity pools and LP rewards.

- Velar: Another DEX integrating stSTX for trading and liquidity.

- Arkadiko: A lending protocol using stSTX as collateral.

- Hermetica: A yield-generating platform with stSTX support.

With over half of all stSTX in circulation actively utilized, it’s clear that Stacking DAO’s token is a linchpin of Stacks DeFi liquidity.

Comparing LST Utilization: Stacks vs. Ethereum and Solana

To contextualize stSTX’s 52% utilization, let’s benchmark it against the leading LSTs on Ethereum and Solana.

Ethereum: stETH and 35% Utilization

On Ethereum, Lido’s stETH reigns as the top LST, representing staked ETH. With ETH priced at $1,900, stETH’s total value locked (TVL) exceeds $36 billion, assuming over 19 million ETH staked (a plausible figure given historical trends). About 35% of stETH is utilized in Ethereum’s DeFi ecosystem, driving activity in dApps like:

- Aave: A premier lending and borrowing platform.

- Eigenlayer: A restaking protocol enhancing Ethereum security.

- Spark, Symbiotic, Maker, Compound, Morpho: Diverse platforms for lending, borrowing, and yield.

Ethereum’s DeFi ecosystem remains the largest, with a TVL in the tens of billions, yet stETH’s 35% utilization indicates that most of it is held idle for staking rewards (currently around 3-4% APY) rather than fully leveraged in DeFi.

Solana: JitoSOL and mSOL

Solana’s DeFi ecosystem thrives, supporting two prominent LSTs: Jito’s JitoSOL and Marinade’s mSOL. Their utilization rates, however, trail stSTX:

- JitoSOL: With a TVL of over $1.8 billion (approximately 15 million SOL staked at $120), only 16% is utilized in Solana DeFi. Key dApps include Kamino (automated liquidity), Drift (derivatives), MarginFi (lending), and Solend (lending).

- mSOL: Marinade’s mSOL, with a higher 30% utilization rate, supports similar platforms, reflecting a TVL of roughly $1 billion (around 8.3 million SOL).

Solana’s low fees and high throughput fuel a growing DeFi scene, but LST utilization remains modest. Staking yields (typically 6-8% APY) may incentivize holding over DeFi engagement, contributing to lower rates than Stacks.

Stacks: stSTX Leads the Pack

At 52%, stSTX’s utilization dwarfs stETH (35%), JitoSOL (16%), and mSOL (30%). While Stacks’ smaller TVL—around $188 million as of mid-2024—pales in comparison to Ethereum ($36B+) and Solana ($2.8B combined for JitoSOL and mSOL), its LST engagement is proportionally far higher. Why does Stacks outperform?

Why Stacks Excels in LST Utilization

Several factors may explain stSTX’s standout 52% utilization:

Smaller, Focused Ecosystem: Stacks DeFi, though growing, is less mature than Ethereum or Solana, with fewer protocols vying for liquidity. This concentration means stSTX is a core asset for nearly every major dApp—Zest, Bitflow, Velar—driving its high utilization.

Yield-Hungry Users: Stacks’ community, tied to the Bitcoin L2 vision, may be more risk-seeking. With stSTX offering 8-10% APY—higher than Ethereum’s 3-4% or Solana’s 6-8%—users are motivated to compound returns via DeFi, rather than letting assets sit idle as they might with stETH or JitoSOL.

Seamless dApp Integration: Since its December 2023 launch, Stacking DAO has integrated stSTX into virtually all major Stacks DeFi platforms, reducing friction and boosting usage. Ethereum and Solana, with larger ecosystems, see more competition among LSTs and native tokens, diluting utilization.

Bitcoin Yield Appeal: Stacks’ unique Bitcoin-linked rewards (paid in STX or sBTC) add a compelling narrative. Users may see stSTX as a gateway to amplify BTC exposure, pushing them to leverage DeFi strategies over simply holding, unlike the more established ETH or SOL markets.

Looking Ahead

Stacking DAO’s stSTX is a powerhouse in Stacks DeFi, with 52% utilization outshining Ethereum’s stETH (35%) and Solana’s JitoSOL (16%) and mSOL (30%).

Compared to Ethereum and Solana, Stacks’ smaller but dynamic ecosystem and yield-focused community propel stSTX to the forefront of LST adoption. This milestone signals the immense potential of liquid stacking in Bitcoin DeFi.

As Stacks matures, we anticipate stSTX’s role will only grow, driven by innovative dApps and a community eager to maximize returns.

The Stacks DeFi Show #57

On the latest episode of the Stacks DeFi Show, Stacking DAO core contributors Tycho and Leeor discuss the latest trends in Stacks DeFi with ALEX, Hermetica and Granite. Click the link here to listen to the episode!

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