# sBTC > sBTC is a decentralized, Bitcoin-backed asset on the Stacks blockchain, pegged 1:1 to Bitcoin (BTC). It allows BTC to be used in smart contracts and DeFi applic... - Canonical URL: https://iq.wiki/wiki/sbtc - Categories: Cryptoassets - Tags: Developer, Infrastructure - Created: 2025-12-16T19:54:09.782Z - Last updated: 2025-12-16T20:20:05.605Z - Source: IQ.wiki — the world's largest blockchain and crypto encyclopedia (https://iq.wiki) --- **sBTC** is a [Bitcoin](https://iq.wiki/wiki/bitcoin)-backed asset on the [Stacks](https://iq.wiki/wiki/stacks) [blockchain](https://iq.wiki/wiki/blockchain) that represents [Bitcoin (BTC)](https://iq.wiki/wiki/bitcoin-btc) at a fixed 1:1 ratio. It functions as a decentralized, trust-minimized two-way peg, enabling [BTC](https://iq.wiki/wiki/bitcoin-btc) to be locked on the [Bitcoin](https://iq.wiki/wiki/bitcoin) base layer and utilized within [smart contracts](https://iq.wiki/wiki/smart-contract) on [Stacks](https://iq.wiki/wiki/stacks). The system allows for the conversion of [BTC](https://iq.wiki/wiki/bitcoin-btc) to sBTC and back, with the goal of making [Bitcoin](https://iq.wiki/wiki/bitcoin) a programmable and productive asset for [decentralized finance (DeFi)](https://iq.wiki/wiki/defi) without relying on centralized intermediaries. [\[1\]](#cite-id-5peU07elRW3xt1E1) ## Overview sBTC is a SIP-010 fungible token on the [Stacks](https://iq.wiki/wiki/stacks) [blockchain](https://iq.wiki/wiki/blockchain) that represents [Bitcoin](https://iq.wiki/wiki/bitcoin) at a fixed 1:1 ratio and can be converted back to [BTC](https://iq.wiki/wiki/bitcoin-btc) on the [Bitcoin](https://iq.wiki/wiki/bitcoin) [blockchain](https://iq.wiki/wiki/blockchain). It functions as a two-way peg that allows [Bitcoin](https://iq.wiki/wiki/bitcoin) to be used within [Stacks](https://iq.wiki/wiki/stacks) [smart contracts](https://iq.wiki/wiki/smart-contract) while remaining backed by [BTC](https://iq.wiki/wiki/bitcoin-btc) held in a single [Bitcoin](https://iq.wiki/wiki/bitcoin) [UTXO](https://iq.wiki/wiki/unspent-transaction-output-utxo) secured by a multi-signature Taproot address. This [UTXO](https://iq.wiki/wiki/unspent-transaction-output-utxo) is managed by a decentralized set of sBTC signers, who are responsible for signing peg operations, maintaining custody of the locked [BTC](https://iq.wiki/wiki/bitcoin-btc), and interacting with sBTC [smart contracts](https://iq.wiki/wiki/smart-contract), with signer membership and key rotation governed collectively. Deposits and withdrawals between [BTC](https://iq.wiki/wiki/bitcoin-btc) and sBTC occur within a defined number of [Bitcoin](https://iq.wiki/wiki/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](https://iq.wiki/wiki/bitcoin) to interact with [smart contract](https://iq.wiki/wiki/smart-contract) applications on [Stacks](https://iq.wiki/wiki/stacks) without requiring [BTC](https://iq.wiki/wiki/bitcoin-btc) to be sold or custodied by a centralized intermediary. [\[2\]](#cite-id-dAzJ4qKTauL6499g) [\[3\]](#cite-id-WeiFJ3KG9EwomNZs) ![](https://ipfs.everipedia.org/ipfs/QmSXJtXH7JMxZgwcj3XnsStuYJA53JNRAUdqiZtVitaLoR) ## Features ### Decentralized Two-Way Peg The sBTC two-way [peg](https://iq.wiki/wiki/currency-peg) is a decentralized mechanism that allows [Bitcoin](https://iq.wiki/wiki/bitcoin) to be locked on the [Bitcoin](https://iq.wiki/wiki/bitcoin-btc) base layer and represented as sBTC on the [Stacks](https://iq.wiki/wiki/stacks) layer at a fixed 1:1 ratio, enabling [Bitcoin](https://iq.wiki/wiki/bitcoin-btc) to be used within [smart contracts](https://iq.wiki/wiki/smart-contract) without modifying [Bitcoin’s](https://iq.wiki/wiki/bitcoin-btc) base-layer design. [BTC](https://iq.wiki/wiki/bitcoin-btc) is deposited into a [Bitcoin](https://iq.wiki/wiki/bitcoin) script, sBTC is issued on [Stacks](https://iq.wiki/wiki/stacks), and the process can be reversed by destroying sBTC, which automatically releases the equivalent [BTC](https://iq.wiki/wiki/bitcoin-btc) back to [Bitcoin](https://iq.wiki/wiki/bitcoin), allowing contracts on [Stacks](https://iq.wiki/wiki/stacks) to initiate [Bitcoin](https://iq.wiki/wiki/bitcoin-btc) transactions trustlessly. The system relies on [Stacks](https://iq.wiki/wiki/stacks)’ Proof of Transfer [consensus](https://iq.wiki/wiki/consensus-mechanism), where participants known as Stackers act as threshold signers for peg-out transactions and are economically incentivized through [BTC](https://iq.wiki/wiki/bitcoin-btc) rewards distributed by the protocol, rather than user-paid wrapping fees. Because [Stacks](https://iq.wiki/wiki/stacks) [forks](https://iq.wiki/wiki/fork) in alignment with [Bitcoin](https://iq.wiki/wiki/bitcoin), the peg state remains consistent during [Bitcoin](https://iq.wiki/wiki/bitcoin) reorganizations, avoiding inconsistencies that affect wrapped [BTC](https://iq.wiki/wiki/bitcoin-btc) on chains that do not follow [Bitcoin’s](https://iq.wiki/wiki/bitcoin) [fork](https://iq.wiki/wiki/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](https://iq.wiki/wiki/bitcoin-btc) collateralization by signers exceeding the value of [BTC](https://iq.wiki/wiki/bitcoin-btc) issued, and avoids custodians or fixed federations, distinguishing it from custodial or federated [Bitcoin](https://iq.wiki/wiki/bitcoin) pegs while allowing [Bitcoin](https://iq.wiki/wiki/bitcoin) to be used in contract-based applications on [Stacks](https://iq.wiki/wiki/stacks). [\[4\]](#cite-id-PFtmWC71P5h8Rm1e) [\[5\]](#cite-id-oLXZSi8wcnoGzdOY) ### sBTC Design The sBTC design aligns economic incentives so that maintaining the [peg](https://iq.wiki/wiki/currency-peg) is the most rational outcome for participants and remains compatible with mining on the canonical [Stacks](https://iq.wiki/wiki/stacks) [fork](https://iq.wiki/wiki/fork). The system operates in two modes: a Normal Mode, where [BTC](https://iq.wiki/wiki/bitcoin-btc) is locked in a [Bitcoin](https://iq.wiki/wiki/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](https://iq.wiki/wiki/bitcoin-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](https://iq.wiki/wiki/bitcoin) transactions, so they appear consistently across all [Stacks](https://iq.wiki/wiki/stacks) [forks](https://iq.wiki/wiki/fork), preventing miner censorship and ensuring the peg state remains synchronized with [Bitcoin](https://iq.wiki/wiki/bitcoin). The design also ties [Stacks](https://iq.wiki/wiki/stacks)' transaction finality to [Bitcoin's](https://iq.wiki/wiki/bitcoin) 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](https://iq.wiki/wiki/bitcoin) settlements, and consistent enforcement of peg operations. [\[4\]](#cite-id-PFtmWC71P5h8Rm1e) [\[5\]](#cite-id-oLXZSi8wcnoGzdOY) ### Threshold Signature Wallet The sBTC threshold signature wallet is a non-custodial [Bitcoin](https://iq.wiki/wiki/bitcoin) script on the [Bitcoin](https://iq.wiki/wiki/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](https://iq.wiki/wiki/bitcoin) and announced through the PoX reward set, and remaining [BTC](https://iq.wiki/wiki/bitcoin-btc) must be transferred to the next cycle’s wallet to maintain liveness. Stackers typically lock collateral exceeding the value of [BTC](https://iq.wiki/wiki/bitcoin-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. [\[4\]](#cite-id-PFtmWC71P5h8Rm1e) [\[5\]](#cite-id-oLXZSi8wcnoGzdOY)