On the 5th of December 2022, Alex B shared his thoughts about Stacks and how it is effectively a Ponzi scheme that could evaporate as fast as LUNA.
If you've been wondering what's the yield with @Stacks, I took a minute to write down a couple of lines about it.
— Alex B (@bergealex4) December 5, 2022
Stacks is a decentralized merged-mine blockchain that works well with the Bitcoin blockchain, allowing BTC holders access to smart contracts and decentralized applications.
According to Alex B, the summary of the multiple failed crypto projects of 2022 is “yield”. Participants in the crypto industry have gotten the habit of chasing projects that promise large yield benefits. But the yield is simply inflated, miscalculated risks.
He alleges that Stacks is a Ponzi scheme because of how it works.
The project is based on the technicalities of its consensus protocol. In order to operate, the STX miners would have to put in BTC and compete in the form of an auction for who the leader is.
This BTC is then used as an incentive to pay off STX holders and create a market for the token. But similar to a lot of failed coins, it is neither a store of value nor a monetary asset. It’s simply advertised as an STX bond staked on the Stacks blockchain in exchange for BTC incentives.
This means that, inherently, STX has zero value and can only maintain its value in two ways. One, market speculations, which can carry it so far, and two, constantly maintaining activities on the platform.
This is a weak link because if all BTC holders and miners decide they are not paying anything anymore, the price of STX will drop, possibly crashing. It also means that the winner or prospective can simply exclude his competitor’s bids because of the blockchain design.
Another tweeter user, Jude Nelson, an employee of Stacks, came out to agree with him and to clarify some things.
But if the Bitcoin miner is the only Stacks miner in their block, then ofc they don't need to pay anymore than the dust amount of BTC in their PoX outputs. Hence the reduction in PoX yield.
— jude.btc (@firstname.lastname@example.org) (@JudeCNelson) August 11, 2022
The act of mining BTC and excluding other miners from the block requires the same ash power needed to secure the whole network completely. Moreover, if that’s the only miner in the blockchain, they wouldn’t need to pay anything, and the POX yield would drop.
In extreme cases, since Stacks rides on Bitcoin, BTC miners can also earn STK tokens. Therefore, this assures STK holders that Stacks is secure because their roots are on BTC. In exchange, the yield would drop down to nothing.
Invariably, the BTC miners are securing the Stacks network, and new entrees would be left to carry the bag should the project fail.