What is STX token? Why does Stacks need a token?

Stacks (STX) tokens are the native tokens on the Stacks layer. STX tokens enable smart contracts and apps for Bitcoin and allow holders to earn BTC by 'Stacking' (see more below). Stacks are used as fuel for smart contract execution, transaction processing, and digital asset registrations on the Stacks layer. STX was the first cryptocurrency to receive SEC qualification for a sale in the United States. The Stacks cryptocurrency has a predefined future supply that reaches approx. by year 1,818M STX 2050.

The Stacks token (STX) is primarily meant to be used for two things (details in Stacks paper):

  1. Incentives for Stacks L2 miners
  2. Incentives for peg-out signers

The only way to remove the token is to build Stacks as a federated network like Liquid. In a federation, a pre-selected group of companies controls mining and block production, and a pre-selected group of companies needs to be trusted for peg-out transactions. Stacks developers wanted to design an open and permissionless system. The only way to have a decentralized mining process is through incentives. This is how Bitcoin works as well, where newly minted BTC are used as incentives to mine new blocks, and anyone in the world can decide to become a miner. Anyone with BTC can mine the Stacks L2 chain; it is open and permissionless.

Github: Why does Stacks need a token?

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