A practical guide to what it is, why it exists, and how it expands the staking model.
Tezos has always treated staking as a first-class citizen, simple for users, self-custodial by default, and tightly integrated into the protocol. But as the ecosystem grows and more activity moves through smart contracts, wallets, and now Etherlink, one practical limitation stands out:
You can only stake your tez when it stays inside your wallet.
That’s where liquid staking enters the picture, a model already proven on other chains like Ethereum with tokens such as stETH and rETH. On Tezos, the version of that idea is stXTZ.
I’ll keep things straightforward: this article isn’t about replacing the native staking model, it’s about understanding an optional tool that lets tez keep earning in places where it normally couldn’t.
Let’s start with the basics: what stXTZ actually is.
What is stXTZ
stXTZ is built by stacy.fi, a liquid-staking project developed by contributors from Ubinetic and governed through the youves DAO. It’s not a protocol-level feature, it’s an independent product that sits on top of Tezos, similar in spirit to how stETH sits on top of Ethereum. The goal is simple: give tez the flexibility that smart contracts and DeFi tools currently can’t.
At its core, stXTZ is a liquid representation of staked tez. Instead of rewards appearing as new tokens, the value of each stXTZ slowly increases over time, because it represents a share of a staking pool that grows as rewards come in. It’s a straightforward “one token = one share” model, where the share itself becomes more valuable as the pool earns.
Under the hood, the system is automated but not as complicated as you might think. A dedicated pool contract keeps track of the tez deposited into this pool and the amount of stXTZ minted against it. A cluster of Acurast-operated signers handles the day-to-day operations like staking, unstaking, and updating the pool, so everything runs without manual intervention.
The actual baking is done by a Tezos baker, currently Ubinetic, though the long-term goal is to expand this into a more decentralized, multi-baker architecture. As rewards come in, they are reflected back into the pool, which is what ultimately increases the value of each stXTZ.
In short, stXTZ is a share of a real staking pool backed by actual tez, supported by an automated infrastructure, and governed by the youves DAO.
Why We Need Something Like stXTZ
The real value of stXTZ shows up the moment your tez leaves your wallet. Native staking only works when the tez stays under your direct control, which means anything that relies on smart contracts like lending, AMMs, vaults, rollups, and automated strategies, simply can’t participate in staking rewards. stXTZ fills that gap.
Because it’s a regular FA2 token, it can move through the ecosystem without losing its connection to the staking pool. If a contract can handle any other token, it can handle stXTZ. And that unlocks a long list of practical use cases.
For one, it lets DeFi protocols on Tezos and Etherlink finally hold a yield-bearing version of tez. Lending markets can use it as collateral. AMMs can pair it with other assets. Strategies can loop it, hedge it, or structure around it. Every time stXTZ moves through these systems, it keeps earning staking rewards in the background, which is something plain tez simply cannot do once deposited into a contract.
Then there’s the NFT angle, which is honestly another really interesting one. Artists usually delegate instead of staking because they need liquidity to manage listings, bids, auctions, and collect. Marketplaces like objkt could integrate stXTZ directly, letting artists and collectors keep earning while staying fully liquid. Imagine placing a bid or an offer in stXTZ and watching its underlying value slowly grow while it sits there. It’s a small change, but it completely flips the idea of “idle funds” in marketplaces.
And the cumulative effect of all this is meaningful for Tezos itself. Every time someone chooses stXTZ instead of letting their tez sit inactive inside a contract or marketplace, a bit more tez ends up staked behind the scenes. Over time, that naturally pushes the global staking ratio higher, not by asking users to lock more, but simply by letting everyday activity contribute to staking in ways it couldn’t before.
How Do You Get stXTZ?
So, after all that, the obvious question is: how do you actually get stXTZ?Thankfully, the process is simple, and you’ve got two clean paths depending on what you prefer.
The most straightforward way is through stacy.fi itself. You connect your Tezos wallet, choose how much tez you want to convert, and the platform mints stXTZ for you on the spot. Your tez is added to the staking pool behind the scenes, but from your perspective, it’s a quick swap, tez goes in, stXTZ comes out, with no waiting period and no extra steps.
The other option is to pick some up directly on a DEX. Because stXTZ is just a normal FA2 token, you can trade on places like 3route or on the Etherlink DEXs if you’re already operating there. This route is especially convenient if you’re not swapping big amounts that will have a lot of slippage or if you want to avoid extra steps like bridging them to Etherlink.
Returning to tez is equally flexible. You can burn your stXTZ on stacy.fi and wait through Tezos’ normal unstaking period, or you can swap back instantly on a DEX if liquidity is available and you prefer speed over waiting. Either way, you keep full control of the asset at every step.
Risks and Looking Ahead
Besides the usual smart-contract risks that come with any on-chain project, the main thing to understand with stXTZ is slashing. Since stXTZ is backed by a real baker, a slashing event on the baker would reduce the pool’s balance, and that loss would be reflected in the value of each stXTZ. It’s rare on Tezos, but it’s the core risk behind every liquid-staking model.
That said, this is also the area where most of the future thinking is happening. The team has already talked about moving toward a multi-baker setup, where multiple bakers participate and bring their own stake as insurance. This spreads responsibility, reduces concentration, and weakens the impact a single baker can have on the pool.
Another idea the team has been exploring is an insurance-style buffer, a small reserve funded by redirecting a tiny portion of staking rewards into a separate pool. Over time, that reserve could build up enough to absorb part of a slashing event, or in some cases even cover the whole loss before it reaches stXTZ holders. It doesn’t remove the risk entirely, but it can meaningfully soften it.
The team also intends to introduce governance participation in the future. Because stXTZ represents real staked tez, the long-term idea is for the baking setup behind stXTZ to take part in protocol voting as well. The exact mechanics will depend on how the multi-baker architecture evolves, but the intention is clear: stXTZ shouldn’t only earn rewards, it should eventually be able to vote too.
At the end of the day, stXTZ isn’t trying to replace native staking. It simply adds a missing layer of flexibility, letting tez stay productive even when it’s being used. As Tezos continues to grow across L1 and Etherlink, that kind of optionality becomes more and more valuable.
If you haven’t looked at stacy.fi yet, it’s worth keeping on your radar. Tools like this tend to start quietly, and then, before you know it, they’re everywhere.
The Case for stXTZ was originally published in Tezos Commons on Medium, where people are continuing the conversation by highlighting and responding to this story.
