A look at the Stacks ecosystem method of stacking in comparison to OKCoin’s current Earn product which taps into DeFi farming pools
We’re excited to formally announce the listing of the Stacks token (STX) with the launch of the Stacks 2.0 blockchain. Over the weekend, OKCoin opened deposits and trading for STX, following the January 14th announcement of Stacks Mainnet going live. OKCoin is the first exchange to bring STX to the US with a USD and BTC pairing for customers. Start stacking now.
With banks providing 0% APY on your bank deposits, and even financial apps offering at best 0.5%, investors are increasingly looking at crypto for better ways to put their money to work. In late 2020 we launched Earn, our new high interest tool for investors that makes decentralized finance (DeFi) easy to use. With Earn, investors can deposit their stablecoin assets into DeFi farming pools–like, Curve, YFI, and Compound–to earn up to 20%* annual percentage yield (APY).
DeFi has come a long way over the past several years, giving users clearer use cases. With the launch of the Stacks 2.0 blockchain and ecosystem on January 14, there is now a new way to earn high interest, and for the first time earn interest in bitcoin.The Stacks ecosystem offers a new form of staking, called ‘stacking,’ that allows participants to earn bitcoin for putting up their STX tokens for a set period of time to support the network.
With the launch of Stacking on OKCoin, let’s take a closer look at the difference between stacking and farming pools.
STX and the Stacks 2.0 blockchain
In December, we announced that OKCoin became a 2.0 Exchange Partner and would be the first exchange in the US to list the Stacks token, STX. This asset provides access to Stacks, an ecosystem that transforms how individuals interact with the internet, providing the world with a user-owned, better internet uniquely built on Bitcoin.
The Stacks ecosystem is building around the Stacks 2.0 blockchain, a layer-1 chain that enables developers to build decentralized applications (dApps) anchored to Bitcoin. The purpose of the Stacks 2.0 blockchain is to offer users the security and network benefits of Bitcoin, while making it possible to develop smart contracts and decentralized applications (dApps) on Bitcoin.
What is “stacking”?
Stacking provides the Stacks network with a reward system for participants to earn BTC for securing and maintaining the network. It is the Stacks ecosystem version of staking, and an improvement on current staking protocols.
Within the Stacks ecosystem, users can stake, or “stack” their STX tokens to earn a return in BTC. Individual participants of the Stacks ecosystem who want to stack are required to put up 100,000 STX tokens. However, OKCoin is pooling STX deposits together to allow users who are below the dynamic minimum to participate.
Read more about the stacking functions via Stacks’ new and unique consensus algorithm, proof-of-transfer (PoX) in our previous blog post.
What are farming pools?
Farming pools allow borrowers to use their crypto assets as collateral to obtain a fiat (ex. USD) or stablecoin loan. For borrowers, the advantage of participating in lending systems is that they can get exposure to different cryptocurrencies without having to own them, or without having to sell other assets. DeFi protocols are typically built on the Ethereum blockchain, leveraging smart contracts to define the functionalities of the service.
Stacking vs. farming pools on OKCoin
With OKCoin Earn, users have direct access to high yield generating returns, while enjoying zero gas fees. While both stacking and farming pools offer passive income, they function differently and offer investors different opportunities for yield. OKCoin Earn offers a variable rate up to 20% APY, and in the case of stacking STX, participants can receive a variable rate of up to an 8% APY return in BTC.
As mentioned, stacking leverages the Bitcoin blockchain, which Stacks is built on top of. This allows the user who stacks STX to earn bitcoin, a highly popular and valued asset. In contrast, DeFi farming pools are built on Ethereum programmable smart contracts and can offer the user their own form of token. These tokens are often in the form of stablecoins, backed by an underlying reserve asset like USD, to ensure the asset maintains a stable market value.
Both options provide investors with exciting opportunities for yield, but are best assessed based on suitability for the user.
Launch of the Stacks 2.0 blockchain
To celebrate our support for and listing of Stacks $STX, we’ll be giving the Stacks and OKCoin communities the chance to get free $STX with the biggest airdrop we’ve done yet. We’ll be airdropping up to $1 Million worth of STX to OKCoin customers, with one lucky customer receiving $10,000 worth of STX. Learn more about the airdrop.
*APY rates are variable and subject to hourly change.