sBTC is a Bitcoin-backed asset on the Stacks blockchain that represents Bitcoin (BTC) at a fixed 1:1 ratio. It functions as a decentralized, trust-minimized two-way peg, enabling BTC to be locked on the Bitcoin base layer and utilized within smart contracts on Stacks. The system allows for the conversion of BTC to sBTC and back, with the goal of making Bitcoin a programmable and productive asset for decentralized finance (DeFi) without relying on centralized intermediaries. ^[1]

Overview

sBTC is a SIP-010 fungible token on the Stacks blockchain that represents Bitcoin at a fixed 1:1 ratio and can be converted back to BTC on the Bitcoin blockchain. It functions as a two-way peg that allows Bitcoin to be used within Stacks smart contracts while remaining backed by BTC held in a single Bitcoin UTXO secured by a multi-signature Taproot address. This UTXO is managed by a decentralized set of sBTC signers, who are responsible for signing peg operations, maintaining custody of the locked BTC, and interacting with sBTC smart contracts, with signer membership and key rotation governed collectively. Deposits and withdrawals between BTC and sBTC occur within a defined number of Bitcoin blocks. An external service, the Emily API, coordinates communication between users, signers, and contracts to facilitate bridge operations. Through this structure, sBTC enables Bitcoin to interact with smart contract applications on Stacks without requiring BTC to be sold or custodied by a centralized intermediary. ^{[2] [3]}

Features

Decentralized Two-Way Peg

The sBTC two-way peg is a decentralized mechanism that allows Bitcoin to be locked on the Bitcoin base layer and represented as sBTC on the Stacks layer at a fixed 1:1 ratio, enabling Bitcoin to be used within smart contracts without modifying Bitcoin’s base-layer design. BTC is deposited into a Bitcoin script, sBTC is issued on Stacks, and the process can be reversed by destroying sBTC, which automatically releases the equivalent BTC back to Bitcoin, allowing contracts on Stacks to initiate Bitcoin transactions trustlessly. The system relies on Stacks’ Proof of Transfer consensus, where participants known as Stackers act as threshold signers for peg-out transactions and are economically incentivized through BTC rewards distributed by the protocol, rather than user-paid wrapping fees. Because Stacks forks in alignment with Bitcoin, the peg state remains consistent during Bitcoin reorganizations, avoiding inconsistencies that affect wrapped BTC on chains that do not follow Bitcoin’s fork history. Signer membership is open and elected via Bitcoin transactions, peg-out requests are broadcast on Bitcoin, and liveness is reinforced through mechanisms that can redirect protocol rewards to fulfill withdrawals if signers fail to act. The peg maintains transparent, on-chain verification of the 1:1 backing at all times, requires BTC collateralization by signers exceeding the value of BTC issued, and avoids custodians or fixed federations, distinguishing it from custodial or federated Bitcoin pegs while allowing Bitcoin to be used in contract-based applications on Stacks. ^{[4] [5]}

sBTC Design

The sBTC design aligns economic incentives so that maintaining the peg is the most rational outcome for participants and remains compatible with mining on the canonical Stacks fork. The system operates in two modes: a Normal Mode, where BTC is locked in a Bitcoin script controlled by a threshold of Stackers and an equal amount of sBTC is minted or destroyed to preserve a 1:1 peg during peg-in and peg-out operations, and a Recovery Mode, which activates if signers fail to process withdrawals. In Recovery Mode, a portion of Proof of Transfer rewards that would otherwise be paid to Stackers is redirected to fulfill outstanding peg-out requests, ensuring BTC can eventually be redeemed even if signers go offline, while penalizing delays through lost rewards. 

Security relies on the assumption that acting honestly is economically preferable, reinforced by a high signature threshold and collateral exposure that makes collusion or attack costly. All stacking and peg-related actions are broadcast as Bitcoin transactions, so they appear consistently across all Stacks forks, preventing miner censorship and ensuring the peg state remains synchronized with Bitcoin. The design also ties Stacks' transaction finality to Bitcoin's finality, limiting fork risk and enabling recovery mechanisms to function correctly. Additional protocol features, including miner block pre-commitments and quorum-based fast block production, further support predictable participation, faster execution between Bitcoin settlements, and consistent enforcement of peg operations. ^{[4] [5]}

Threshold Signature Wallet

The sBTC threshold signature wallet is a non-custodial Bitcoin script on the Bitcoin main chain that secures funds backing sBTC through a high-threshold, economically enforced signing process. Control of the wallet is distributed among Stackers who have locked STX to participate in Proof of Transfer consensus during a given stacking cycle, with signing power proportional to the amount of STX locked. Peg-out transactions require signatures representing at least 70% of total signing power, making unauthorized fund movement economically and practically infeasible unless a large majority colludes. A new wallet is generated for each stacking cycle using signatory public keys registered on Bitcoin and announced through the PoX reward set, and remaining BTC must be transferred to the next cycle’s wallet to maintain liveness. Stackers typically lock collateral exceeding the value of BTC held in the wallet, risking the forfeiture of rewards or continued capital lockup if peg obligations are not met. To address extended signer unavailability, backup mechanisms are encoded in the wallet script, including threshold reductions or fallback to prior-cycle signers after defined timeouts. These rules ensure continued redemption capability while preserving decentralized control and economic security. ^{[4] [5]}