HashKey Cloud said on September 7 it joined Stacks as a launch partner for Bitcoin staking. The agreement gives it roles in the Genesis Bond and sBTC signer network. Initial launch is expected around September 10.
HashKey Cloud operates under HashKey Holding Limited. The company says its node and staking infrastructure supports more than 40 blockchain networks. Stacks said HashKey Cloud manages about HK$29 billion in staked assets.
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What Is Stacks’ Genesis Bond, and How Will It Work?
Stacks founder Muneeb Ali presented the collaboration during the HashKey Cloud and Cactus Custody “Yield on Trust” event in Hong Kong. The partnership was disclosed during the event.
HashKey Cloud would become the first institutional cohort to make use of Stacks’ new Protocol Bond system. According to Stacks’ official announcement, the Genesis Bond was scheduled to start on September 10. However, an exact time has not been announced by the project.
The date is tentative, and Stacks has not revealed any details on capacity and allocations for the participants yet. Other circumstances related to technology and operations may influence the timing as well.
The first cohort consists of the digital asset manager 21Shares. Also part of it is UTXO Management, which is a subsidiary of Nakamoto Inc., a Bitcoin treasury firm. This cohort would test the use of the Genesis Bond by institutions.
This product would allow getting BTC-based rewards without transferring Bitcoin to a custodian. The amount of Bitcoin dedicated to the product is visible on its blockchain.
The term “Bitcoin staking” needs context. Bitcoin uses proof-of-work and does not support staking through its native consensus system. The Genesis Bond does not alter Bitcoin’s consensus rules.
How Does Stacks’ PoX-5 Protocol Bond Work?
However, Stacks relies on Proof of Transfer, or PoX. Miners stake BTC in competition to mine new blocks. As a result, the system rewards some of those funds to users who satisfy the conditions for participation in the program.
In PoX-5, the Protocol Bond binds two commitments. Users time-lock BTC to the base layer of Bitcoin and STX on Stacks. Both commitments operate simultaneously during the bond period.
The technical documentation of Stacks mentions that a bond takes 12 reward cycles. This means that the bond period takes six months. The BTC stays in the user’s wallet under the control of the holder’s keys.
At the same time, users have to lock STX with the help of signer-manager contracts. The two positions are cryptographically connected, supporting the self-custodial Bitcoin staking system mentioned by Stacks.
Only one active staking position can be opened for each Stacks principal. In other words, the user cannot open an STX-only position and a Protocol Bond using the same principal at the same time. It is impossible to create two bonds concurrently.
It is possible to withdraw from the bond at any time according to the documentation. However, the user will lose their remaining rewards for the current cycle. Unlocking of the BTC principal will require a signature from the holder.
Initially, the rewards will accrue in sBTC. Participants can get the native BTC if the signer manager used supports the base-layer withdrawal functionality and a Bitcoin payout address.
Why Is HashKey Cloud Joining the sBTC Signer Set?
If a withdrawal cannot be processed within the participant’s maximum transaction-fee setting, payment falls back to sBTC. As reported earlier, Stacks is targeting an annualized Bitcoin staking yield near 3% during the initial phase.
Actual rewards may vary with miner commitments, available capacity, and network conditions. The initial cohort will provide operating data from the Protocol Bond system. Its performance will show how rewards operate under real network conditions.
HashKey Cloud will also serve as a signer for sBTC. Stacks previously confirmed that HashKey Cloud, Ankr, and The Tie had joined the signer set. The group helps authorize Bitcoin deposits and withdrawals.
sBTC was developed to be the representation of BTC on the Stacks blockchain in a one-to-one manner. sBTC may be used in stack-based applications. The underlying Bitcoin remains controlled by the signer system of the network.
Each signer alone is unable to transfer the BTC that backs the sBTC. As per Stacks, the system retains a minimum of 70% consensus during the most recent signer rotation. Any withdrawal needs 70% approval.
Adding HashKey Cloud, Stacks has added an Asia-based infrastructure company to its signer group. According to Stacks, such inclusion enhances access for institutions while spreading the operational responsibilities to firms and different regions. This inclusion also expands the sBTC infrastructure.
Who Can Access Bitcoin Staking During the First Phase?
Stacks will introduce the Protocol Bonds in phases. Phase one will give limited access to Bitcoin staking for institutions. It does not include full access for retail users.
The project’s staking guidance says that the capacity is going to be allocated to the approved partners in the bootstrap period. Some capacity is going to become available from selected pooling providers later on. However, Stacks has not yet announced the capacity allocation.
Wallet compatibility is one more criterion for the participants. Both leather and Xverse are compatible with PoX-5 operations.
Users of Ledger wallets are supposed to install version 0.26.15 of the Stacks application or any higher version in order to make transactions that involve new spending conditions.
Participants have to take into account the preparation phase at the end of each reward period as well. For the last 100 Bitcoin blocks in the period, the protocol is going to reject new staking transactions, position updates, and withdrawals.
At the moment, HashKey Cloud has not yet released information about the amount of BTC and STX to commit, participation costs, client eligibility, and jurisdictions that are supported.
One more important event to look forward to is the Genesis Bond’s launch. Confirmation of activation, committed Bitcoin, participating organizations, and available capacity are going to confirm the demand.
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