Stacks saw QoQ growth across several metrics, including DeFi TVL in STX (+120.8%), average total STX stacked (+6.1%), and DeFi diversity score (+1, from 4 to 5).
In contrast, several metrics declined QoQ, including STX price (–57.3%), circulating market cap (–56.9%), protocol revenue (–32.2%), DeFi TVL in USD (–5.8%), average daily transactions (–15.1%), and average daily active addresses (–34.3%).
Dual Stacking launched on October 30, introducing a BTC-native yield pilot where users pair sBTC with STX in contracts to earn BTC-denominated rewards. Dual Stacking represents Stack’s first step toward self-custodial Bitcoin staking, a research initiative published that would allow BTC holders to earn native Bitcoin yield by locking BTC on L1 while using STX as staking capacity.
Ecosystem execution accelerated through governance + infrastructure rollout, as the Stacks Endowment became operational with a $27 million 2026 budget, Stacks Labs went live as a core operating entity, and integrations like Dexscreener SIP-010 support and WalletConnect expanded distribution for apps and assets.
Clarity 4 was activated in Q4, delivering network throughput improvements that now see 95.7% of blocks arriving within 5 seconds and ~⅓ confirming in <2 seconds. The upgrade primes the Stacks network for product launches later in 2026.
Primer
Stacks (STX) is a Bitcoin Layer-2 (L2) that enables smart contracts and decentralized applications to use Bitcoin as a secure base layer. Transactions are executed on Stacks and settled on Bitcoin, leveraging Bitcoin's security and capital while offering arbitrary programmability that is not possible on its scriptable settlement layer.
Stacks has knowledge of the full Bitcoin state, thanks to its Proof-of-Transfer (PoX) consensus mechanism and Clarity programming language, allowing it to read from Bitcoin at any time. With PoX, miners commit BTC to eligible Stacks addresses that participate in consensus. This process, in which STX tokenholders participate in consensus and earn BTC from miners, is known as Stacking. PoX operates in parallel to Bitcoin’s Proof-of-Work (PoW) consensus, hashing and settling Stacks transactions on the Bitcoin blockchain. Metadata from newly mined Stacks blocks is anchored to every Bitcoin block, allowing users to verify the canonical Stacks blockchain via Bitcoin blocks.
The previous Nakamoto upgrade strengthened Stacks’ integration with Bitcoin by (i) introducing sBTC, a decentralized tokenized BTC, (ii) enabling faster block production, (iii) improving Bitcoin finality, and (iv) reducing the chances of Maximal Extractable Value (MEV) exploitation.
Relative to BTC and ETH market caps, which declined 23.1% and 28.5% QoQ, respectively, Stacks saw a materially sharper drawdown. STX’s circulating market cap fell 56.9% QoQ from $1.0 billion to $443.8 million, while STX’s price declined 57.3%, from $0.57 to $0.24. On a year-over-year basis, the decline was even more pronounced: STX’s market cap fell 80.8%, and its price fell 84.1%.
Revenue
Stacks’ revenue is measured as total transaction fees and is distributed to Miners through Stacks’ PoX mechanism (along with the coinbase reward, i.e., issuance).
Stacks' protocol revenue continued its decline in Q4, falling 32.2% QoQ from $34,956 to $23,701, and is now down 96.1% year-over-year from the Q4 2024 peak of over $604,000. This sustained contraction reflects reduced transactional demand and lower STX prices.
Usage
After rebounding in Q3, network activity cooled in Q4. Average daily transactions declined 15.1% QoQ to 25,629, down from 30,169 in Q3, but still remained well above the first half of the year. Average daily active addresses fell 34.3% QoQ to 1,150 from 1,751.
On a year-over-year basis, average daily transactions more than doubled, up 153.5% from 10,111 in Q4 2024, while active addresses dropped 64.6% from 3,252 over the same period. This divergence reflects deeper engagement from existing users despite a shrinking participant base.
Total Value Locked (TVL)
Stacks’ total value locked experienced exceptional growth in Q4, more than doubling in native STX terms and increasing modestly YoY in USD terms. TVL in STX rose 120.8% QoQ, from 221.1 million STX to 488.1 million STX, marking a 541.5% increase YoY.
However, in USD terms, TVL declined slightly by 5.8% QoQ, from $126.4 million to $119.0 million, reflecting the impact of broader market volatility and a weaker STX price. Overall, the sharp rise in native terms highlights growing user confidence, deeper DeFi participation, and a strengthening Bitcoin-native capital base on Stacks.
Stacking
Stacking, similar to mining on Bitcoin, is largely dominated by pools. In the post-Nakamoto era, nearly everyone must delegate to a pool. Thus, it is impossible to know how many participants are in the custodial pools as the data is not directly onchain.
The system operates as a feedback loop driven by the interaction between miners and Stackers through the Proof-of-Transfer (PoX) mechanism. Miners transfer BTC to produce blocks, while Stackers lock STX to support consensus, network security, and receive BTC rewards. Specifically, the more miners participating in the network, the fewer BTC rewards can be distributed among Stackers. Additionally, assuming the number of miners stays constant, an increase in Stacker participation reduces rewards for Stackers overall.
Stackers, Miners, and Stacking
Stacking pool dominance persisted through Q4, continuing to obscure visibility into unique user participation. However, capital commitment trends remained more measurable. Average total STX locked in stacking rose 6.1% QoQ to 599.6 million STX in Q4, extending its growth streak for a fourth consecutive quarter. This marks a 32.4% increase YoY, up from 452.8 million STX in Q4 2024, demonstrating sustained institutional or high-net-worth participation despite macro uncertainty. In contrast, average daily Stackers declined 2.5% QoQ to 33, representing an 11.9% drop YoY and reaching its lowest level since the Nakamoto upgrade. This divergence suggests increasing capital concentration, with fewer participants locking more capital. Meanwhile, average daily miners fell 19.6% QoQ to 6.8, also down 19.6% YoY, ending the year at its lowest level since early 2024.
Net Burn and Net Stack
Stacking incentives deteriorated further in Q4. Average daily net burn in USD, fell 42.0% QoQ to $74,705, continuing the multi-quarter downtrend that began after Q4 2024. On a YoY basis, net burn declined 78.2%. Average daily net stack also dropped 34.7% QoQ to 0.73 BTC/day, down 82.1% YoY from 4.07 BTC/day in Q4 2024.
Net Rewards and Expense Fees
Reward compression deepened in Q4. Average daily net rewards in USD dropped 38.5% QoQ to $792,655, while BTC-denominated rewards fell 30.5% to 8 BTC/day. These represent YoY declines of 76.1% (USD) and 80.1% (BTC), respectively. Expense fees, another indicator of economic activity, followed suit. In USD terms, average daily fees declined 68.6% QoQ to $9,835/day, and in BTC terms, dropped 64.9% to 0.1 BTC/day, representing YoY declines of 87.0% (USD) and 89.8% (BTC), respectively. Together, these metrics reinforce the trend of reward compression and further concentration among large-scale participants.
Miner Revenue
Average daily miner revenue continued its downward trajectory in Q4 2025. In USD terms, revenue fell 37.8% QoQ, from $1.3 million/day to $782,819/day. BTC-denominated earnings dropped 29.7%, from 10.9 BTC/day to 7.6 BTC/day. On a YoY basis, miner rewards declined 75.8% in USD (from $3.2 million) and 79.6% in BTC (from 39 BTC). This reflects both decreased network activity and persistent incentive misalignment, where the opportunity cost of stacking or mining grows as BTC appreciates and STX underperforms.
Despite the rising total STX stacked, overparticipation remains in structural decline. The drop in active Stackers to just 33/day, combined with a nearly 80% YoY decline in BTC-denominated rewards, underscores worsening incentive alignment. The continued compression in net burn, stack, and miner revenues reflects both macro headwinds and persistent mispricing between BTC and STX. With BTC appreciating and STX underperforming, the opportunity cost of locking STX or mining grows, further concentrating participation among larger actors.
Qualitative Analysis
Stacks Improvement Proposals (SIP)
From October to December 2025, two new SIPs were introduced to enhance Stacks’ smart contract functionality, while foundational governance and funding infrastructure from prior quarters continued to shape the ecosystem’s evolution.
SIP-033: Clarity 4 - High Demand New Builtins
Activated in November 2025 at Bitcoin block 923222, SIP-033 introduced a major upgrade to the Clarity smart contract language. The upgrade enhances security, developer experience, and protocol composability by introducing key features, including onchain contract verification, asset-protecting post-conditions, block timestamp access for time-based logic, ASCII string conversion, and native support for secp256r1 passkeys. These functions directly address developer requests and are foundational for building more robust DeFi protocols, cross-chain bridges, and smart wallets on Bitcoin.
SIP-034: Dimension-Specific Tenure Extensions
Passed alongside SIP-033 as a technical rider, SIP-034 introduced more granular control over Clarity’s resource budget system, allowing resets in specific dimensions (e.g., read-count) without resetting the entire block budget. This enhancement improves developer flexibility and enables high-throughput workloads, particularly for DeFi and marketplace contracts.
Together, SIP-033 and SIP-034 strengthen Stacks’ position as the most advanced smart contract layer secured by Bitcoin and open new pathways for complex Bitcoin-native app development.
sBTC Growth & Bitcoin Staking Roadmap
The Nakamoto upgrade was successfully activated in Q4 2024, following Stacks’ proposed rollout plan. This upgrade laid the foundation for sBTC, the first decentralized Bitcoin (BTC) peg that allows smart contracts to write back to the Bitcoin blockchain. A major milestone in Q4 2025 was the uncapping of the sBTC peg, which removed limits on how much BTC could be minted into sBTC. This change was crucial for ecosystem scaling, allowing deeper capital inflows and improving utility across DeFi protocols. Looking ahead, the Stacks R&D update published in Q4 outlines a series of advancements collectively known as the Satoshi Upgrades. These include self-custodial Bitcoin staking for native BTC yield and unlocking fast, scalable, low-cost Bitcoin payments without Lightning's liquidity or routing constraints.
Dual Stacking Launch & Self-Custodial Bitcoin Staking Research
On October 30, 2025, Stacks Labs launched the Dual Stacking pilot, allowing BTC holders to pair sBTC with STX in specific contracts to earn BTC-denominated rewards. This aligns incentives for both BTC and STX holders and creates an early framework for Bitcoin-native yield, without introducing consensus changes. Other sBTC developments include a Tier-1 Exchange Listing on November 25, 2025, where MEXC listed sBTC, improving access and liquidity for global users.
Additionally, Stacks Labs also published research on self-custodial Bitcoin staking, which would allow BTC holders to earn native Bitcoin yield by locking BTC on L1 while using STX as staking capacity to unlock and increase that yield, with Dual Stacking serving as the first step toward this model.
General Development and Growth
Several ecosystem-wide initiatives and protocol updates occurred between October and December, reflecting continued momentum in Bitcoin DeFi, infrastructure, governance, and community development.
October
Stacks Labswent live as the core operating entity funded by the Endowment, focused on engineering, business development, and DeFi infrastructure.
Dexscreenerbegan supporting SIP-010 tokens, improving token visibility. Stacks Labs and contributors accelerated this rollout by delivering custom API support.
A critical patch was released for node operators to address a vulnerability that required no user or signer action.
Grayscale’s Stacks Trust (STCK) began trading on OTC Markets, offering the first U.S. public investment vehicle with STX exposure.
November
Circlelaunched USDCx on Stacks, bringing a 1:1-backed, tier-1 stablecoin to the ecosystem. This marked a milestone for stablecoin access in Bitcoin DeFi.
WalletConnectwas integrated, enabling seamless access to Bitcoin-native dApps for millions of users across the WalletConnect ecosystem.
A new challenge series kicked off in collaboration with Talent Protocol, featuring a 22,500 STX prize pool that incentivizes developers to ship new Bitcoin apps.
Community voting began for the annual Stackies Awards, spotlighting standout builders, projects, and contributors.
The Treasury Committee released a very disciplined 2026 budget. It’s doubling down on engineering, security, and sustainable DeFi liquidity. Full details in their latest update.
Lending and Borrowing Protocol Zest officially has over 650 sBTC flowing through their protocol.
Ecosystem Overview
Stablecoin Market Cap
The stablecoin market cap serves as a proxy for a network's liquidity and financial activity. Its expansion is closely tied to the proliferation of dollar-denominated trading pairs, DEX activity, and lending protocols. For instance, Hermetica's USDh now powers liquidations for Zest Protocol, boosting DeFi liquidity and enabling more scalable sBTC-backed loans. The growth of stablecoins is also linked to the demand for capital efficiency and composability within DeFi.
In Q4 2025, the total stablecoin market cap on Stacks contracted 25.7% QoQ, falling from $27.6 million to $20.5 million, though it still reflected a 177.5% YoY increase from $7.4 million in Q4 2024. Among the largest contributors, aeUSDC, declined 27.3% QoQ to $13.3 million, while USDh fell 16.6% to $4.5 million. sUSDT dropped 31.8% to $1.5 million, and USDA continued its slide with a 49.1% QoQ drop to $804.5K. Notably, USDCx, a fully backed tier-1 stablecoin issued by Circle, launched in Q4 and reached a market cap of $319K by year-end.
Supporting this is the improvement in Stacks' DeFi diversity score, which rose from 4 to 5 in Q4. This metric reflects the number of unique protocols that meaningfully contribute to a chain’s TVL, offering a snapshot of the ecosystem's breadth and health. An increase to 5 suggests that TVL is becoming more evenly distributed, rather than being concentrated in one or two dominant protocols.
DeFi TVL
The majority of protocols remained stable or positive in TVL when measured in native STX terms, despite USD-denominated drawdowns driven by declining STX and BTC prices. Zest retained its position as the top DeFi protocol on Stacks by TVL, ending Q4 at $73.1 million, down 14.0% QoQ from $85.0 million in USD terms, but it continued to grow in BTC terms, reflecting sustained and increasing capital inflows. ALEX, still reeling from its H1 exploit, dropped another 55.5% QoQ to $1.9 million, representing a 93.9% YoY drawdown and signaling persistent loss of user confidence. Bitflow fell 40.4% QoQ to $5.3 million, though it too remained up in STX terms. Granite held steady with a modest 5.7% decline to $21.9 million, continuing to anchor itself as a core liquidity venue. Arkadiko extended its multi-quarter decline, losing 60.4% of its Q3 TVL to finish at $1.5 million, an 83.3% YoY decline. The standout was XLink (rebranded as Brotocol), which increased from $3.6 million to $14.2 million, a 293.8% QoQ increase. Smaller protocols under the “Others” category, including StackSwap, UWU Protocol, and SatoshiDEX, grew 3.7% QoQ to a combined $1.3 million, though they continue to represent a minor share of the ecosystem’s DeFi activity.
Stacks Endowment and Grants
In late 2025, the Stacks Endowment transitioned from proposal to operational reality, guided by the Treasury Committee established via SIP‑031. The Endowment secured its governance and budget framework, approving a $27 million 2026 operating budget and 25 million STX for working capital focused on engineering, security, growth, and DeFi liquidity.
On the grants side, interim grant applications closed on September 30, 2025, with community reviewers assessing submissions, and five high-TVL teams receiving bridge funding. However, DeGrants reopened on October 10, 2025, for continued grassroots support.
Looking ahead, a rebooted grant program launching in January 2026 will feature three tracks (i.e., Necessary, Getting Started, and Community‑Selected) to fund ecosystem incentives, early proofs of concept, audits/security, and user acquisition. These funding initiatives, together with upcoming accelerator cohorts and liquidity incentives, aim to sustain developer momentum and broaden participation in the Bitcoin DeFi economy.
What We Expect Next
Team Commentary Disclaimer
The Project Team Commentary section of this report was written by the Stacks Foundation team and reflects the views, opinions, and forward-looking statements of Stacks only. This section is included to provide additional context on the project’s strategy, priorities, and outlook and does not necessarily reflect the views or opinions of Messari, Inc.
Self-custodial Bitcoin staking is expected to be the defining narrative for Stacks in 2026. The R&D update published in Q4 outlines a design where BTC holders lock Bitcoin on L1 and use STX as staking capacity to earn native BTC yield, without custodial wrappers or federated bridges. Dual Stacking, launched in Q4, serves as the initial implementation of this model. If successful, this targets the largest untapped capital base in crypto: idle BTC held by individuals, institutions, treasuries, and ETFs.
Institutional Bitcoin yield products are maturing around this infrastructure. Hermetica's Bitcoin Earn Vault, built on sBTC, offers a one-click deposit for institutional participants, with vault logic enforced by smart contracts and settlement anchored to Bitcoin. Combined with Fireblocks integration and regulated access vehicles like Grayscale's Stacks Trust, Stacks is positioning for productive Bitcoin treasuries where corporations and funds earn yield without surrendering custody.
Capital-efficient BTC/USD rails become possible with USDC live on Stacks via Circle. Onchain AMMs like Bitflow can now facilitate BTC-to-USD liquidity and settlement without reliance on centralized exchanges, addressing custody risk, opaque execution, and jurisdictional friction.
Self-custodial transfers and privacy are emerging research priorities. Stacks' R&D outlines a potential model for self-custodial sBTC transfers where Bitcoin holders retain custody while transacting on the L2, unlocking scalable payments without Lightning's routing or liquidity constraints. Paired with this is early-stage work on privacy features for Bitcoin on Stacks, potentially including shielded transactions or confidential transfers that obscure amounts and counterparties while preserving verifiability. As transparent on-chain activity becomes an operational risk for institutions managing large positions, privacy-preserving infrastructure is increasingly a prerequisite for meaningful capital deployment rather than a niche feature.
Closing Summary
Stacks ended Q4 2025 with a divergence between USD-denominated metrics and onchain fundamentals. While STX price fell 57.3% QoQ and market cap declined 56.9%, these drawdowns largely reflected broader market weakness and BTC/STX underperformance rather than ecosystem contraction. Network usage cooled, daily active addresses dropped 34.3%, and average daily transactions fell 15.1% QoQ, but activity remained more than 2.5x higher YoY. Protocol revenue declined 32.2% QoQ to $23.7K, and PoX incentive flows, including net burn, stacking rewards, and miner earnings, continued to compress across the board.
In contrast, core onchain metrics in native STX terms saw consistent growth: DeFi TVL rose 120.8% QoQ to 488 million STX, average total STX stacked increased 6.1%, and the DeFi diversity score improved from 4 to 5 – all while the stablecoin market cap remained 4x higher YoY, reflecting deepening onchain liquidity. Dual Stacking emerged as a flagship yield strategy, aligning incentives for BTC and STX holders and ranking among the top Bitcoin-native earning opportunities. On the governance side, the Endowment became fully operational, approving a $27 million budget for 2026 and formalizing new grant tracks for developers. These developments, along with the rollout of SIP-033 and SIP-034, infrastructure integrations like WalletConnect and USDCx, reflect strong execution even in a down market.
Looking ahead, 2026 marks the first step toward dual-stacking, a major research priority aimed at unlocking native BTC yield for long-term holders without custodians or federated bridges. With institutional rails forming around sBTC and Circle’s USDC now live on Stacks, the network is increasingly positioned as a home for productive Bitcoin. Despite short-term headwinds, the foundations for a robust Bitcoin DeFi ecosystem continue to strengthen.
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