Bitcoin asset management firm UTXO Management The company has been one of the first to use corporate Bitcoins for Bitcoin Staking, on the Stacks platform. This is a major change in the usage of Bitcoins by corporations.
This initiative creates a new structure which allows institutions to generate bitcoin yields without having to transfer custody of assets or move them off the Bitcoin core layer.
This model offers treasury manager’s large BTC reserve a way to preserve the Bitcoin core properties and still meet increasing demands for returns.
Bitcoin Staking Stacks Participants are required to place BTC on a Bitcoin Timelock, along with a small allocation of STX which is the native token of the Stacks blockchain, as part what the protocol calls a “protocol bond.”
The BTC stays under participant control during the whole process. STX Component determines scale of participation. Initial bonding is for six months.
The target yield for the protocol will be around 3% in annual percentage, and paid out in Bitcoin. Contrary to lending-based models the return doesn’t rely on counterparty loans. It is derived instead from Stacks’ Proof-of Transfer consensus mechanism.
Bitcoin Staking is a model where miners are paid BTC in order to have the rights to produce blocks for the Stacks system. BTCs are then distributed amongst the eligible participants.
Since 2021, Proof-of Transfer has been in operation for several years. It has given out more than 4200 BTC. Bitcoin Staking is built on top of this framework and extends its reward structure to an even broader group of participants.
The protocol should be available on the mainnet by summer’s end, following an initial phase of bootstrapping managed by Stacks Endowment.
As bitcoin grows, there are trade-offs to be made.
Model introduces tradeoffs, which institutions have to evaluate. STX must be held by participants in an amount equal to approximately 5% of BTC, creating exposure to another asset. The BTC bonded remains unliquid throughout the lockup, but there is an option to exit early for the BTC part. The yield levels are dependent on the network dynamics including miner demands and STX markets conditions. This introduces variability.
Despite this, UTXO’s involvement signals a growing institutional interest for Bitcoin strategies with a focus on self-custodianship.
This structure does not use lending desks or synthetic wrappers. Both of these require a certain amount of control to be relinquished, and can alter the underlying assets.
In recent years, corporate Bitcoin treasuries grew. In the top 100, more than 1 million BTC are held by companies. That’s about 5%.
Bitcoin Staking is seen by executives as a way to respond to this scrutiny. Tyler Evans, the Chief Investment Officer at Nakamoto and UTXO described this model as a means to increase yields while preserving Bitcoin’s settlement and custodial features.
Stacks’ founder Muneeb Ali framed this development as a move toward transforming Bitcoin idle capital into productive capital in a safe framework.
Disclaimer: Bitcoin Magazine was published by BTC Inc., a Nakamoto Inc. subsidiary. UTXO Management also is a Nakamoto Inc. subsidiary.
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Source: bitcoinmagazine.com
