STX Mining: The First 1000 Blocks of Stacks 2.0
On January 14th, 2021 the Stacks 2.0 network launched after over a year and a half in development. The network launch was independently triggered by the first 20 individuals who purchased and registered names, or digital identities, in a namespace called ".Miner".
As of this writing, the Stacks 2.0 chain has been live for over two weeks, and passed a height of 1600 blocks. In this report, Daemon Technologies takes a look back and provides an overview and brief analysis of the mining market for Stacks over the first 1000 blocks of the new network.
First, some high level numbers. Over the first 1000 Stacks Blocks:
- STX Miners burned an aggregate amount of 1,193,823,972 Satoshis, or 11.94 Bitcoins, in order to mint 2 million new STX tokens.
- On average 1,193,824 Satoshis, or 0.012 BTC, were burned per block.
- 59 unique miners participated. Of those, 26 successfully mined at least 1 block
For those who want to look at the mining data for themselves, we have put it in a spreadsheet here.
59 miners participated over the course of the first 1000 Stacks blocks, with an average of 8.4 miners competing for any given block. The maximum number of STX Miners observed in a single block was 20.
Of the 59 miners that participated over the course of the first 1,000 blocks, 26 (44%) successfully mined at least 1 block. The chart below shows the distribution of wins among those 26:
The top 6 miners accounted for over 80% of the blocks won, with the top miner winning a total of 220 out of 1000 blocks.
Turning our attention to profitability, it is important to note that there is an additional 1,000 STX bonus reward per block for miners for the first 10,000 Stacks 2.0 blocks. This means every block analyzed here is worth a total of 2,000 STX. This has the obvious effect of inflating miner profitability during the early days of the network. Even with this, STX Mining has proven to be more profitable than Daemon originally expected.
Over the course of the first 1,000 blocks, STX Miners burned a total of 1,193,823,972 Satoshis, or 11.94 Bitcoins, in order to mint 2 million new STX tokens. On a per block basis, STX Miners burned an average of 1,193,824 Satoshis, or 0.012 BTC, in order to mine 2,000 new STX tokens.
The below chart shows the number of Satoshis burned for each of the first 1,000 blocks:
Over the course of all 1000 blocks, 11.94 BTC were burned to mint 2 million STX tokens. This gives a conversion of 0.00000597 BTC/STX. This can be compared to a secondary market conversion at the time of this writing of 0.00001459 (1) BTC/STX, which implies overall profitability of 144.4% for the first 1000 blocks.
On a per block basis, profitability fluctuated greatly, as seen in the chart below:
We expect the volatility in profitability to stabilize over time, as the number of miners and the BTC burned per block also stabilize. A different view is to look at the average profitability of the top 6 STX Miners by blocks won below:
This highlights the variability of the early STX Mining market, given there is an excess of profitability to go around. We believe this will stabilize as (1) more miners enter the market due to the existence of profit to be made and (2) tools that make it easier for miners to deal with the complexities of strategy, such as the BTC fee market, come online.
A Look Ahead
While it's still very early days for STX mining, the early market shows promise. While Daemon would like to see the average of 8.4 miners per block increase over time, that current distribution is orders of magnitude better than a market controlled by 2-3 participants. We are hopeful new entrants will continue to enter the market as STX Mining becomes easier and excess profit remains.
On the subject of profit, Daemon will be monitoring closely how the end of the early bonus reward for miners at block 10,000 affects the market. At that point, the reward per block will be reduced from 2000 to 1000 STX. While this will dramatically cut miner profitability, it may be more than balanced by Stacking coming online. STX Miners who hold enough STX tokens will be able to significantly improve their economics by Stacking them, and earning back a portion of the BTC they spend on mining.
The exact return from Stacking is yet to be seen, as the first cycle is about to begin. We can, however, now plug real life numbers into the Stacking Earning's Model that was previously published. A viewable copy is here. With 25% participation in Stacking, the yield could be up to 30% for the first 10,000 blocks, while the block reward is at 2000 STX, and up to 15% once the block reward is reduced to 1000 STX.
This is great news both for STX holders looking to earn yield on their tokens and for STX miners looking to further improve their economics.