Liquid Staking: A New Era of Asset Management

Liquid staking is fundamentally changing the way asset management works in PoS networks. Traditional staking requires locking up cryptocurrency to support blockchain operations, but liquid staking allows users to continue using these assets during the staking period by issuing tokens (LST) that represent the staked assets.

The EigenLayer protocol on the Ethereum network further develops this concept, allowing users to re-stake LST to earn additional rewards. This innovation provides users with greater flexibility and higher yield potential.

The total locked value (TVL) of liquid staking has grown from $30 million to over $57 billion in just a few years, demonstrating huge market demand. However, there are still differences in staking ratios between different networks. For example, the staking ratio of Solana exceeds 70%, which is much higher than Ethereum's 27%. However, LST on Solana accounts for only 6% of its staking supply, while on Ethereum it exceeds 40%.

This difference has created huge opportunities for projects like Sanctum in the Solana ecosystem. By introducing innovative re-staking options and fostering a competitive environment, Sanctum is expected to provide more flexibility, liquidity, and yield opportunities for Solana stakers. This not only meets the growing demand in the DeFi space but also caters to the market's desire for more efficient and diverse staking solutions.

Sanctum's Innovative Solutions

Infinity Liquidity Pool

Sanctum Infinity is an innovative liquidity pool designed to simplify the trading and staking process of LST on Solana. It can be seen as a large flexible pool that allows seamless exchanges between various LST.

Infinity uses Solana's stake pool data for accurate pricing, overcoming the efficiency issues that traditional AMMs may face in low liquidity or large transactions. When users deposit LST into the Infinity pool, they receive INF tokens in return, which not only earn staking rewards from all LST in the pool but also generate additional income from transaction fees.

Infinity maintains the balance of the pool by dynamically adjusting exchange fees, encouraging trades that help maintain a good mix of different LSTs. Its allocation strategy also encourages the creation of new LSTs, reserving 20% of the pool space for newly approved LSTs while using 80% for a mix of existing LSTs and trading rewards.

Validator LST

Validator LST represents users' stake with specific validators, appreciating in value as staking rewards accumulate. This method simplifies the staking process, offers instant exchange, and avoids the long waiting periods associated with unstaking in traditional methods.

The advantages of validator LST include:

• Help validators stand out by issuing their own tokens and providing unique rewards.
• Allow stakers to participate in a broader range of DeFi activities
• Reduce the demand for creating liquidity pools, allowing small validators to compete better.
• Simplify the staking process and provide greater flexibility

Reserve Pool

The Sanctum reserve pool provides deep liquidity for all LSTs on Solana, addressing key challenges in the staking ecosystem. It allows users to instantly exchange LSTs back to SOL, simplifying the redemption process. The reserve pool also supports various DeFi protocols accepting any LST as collateral, enhancing the usability and adoption of LSTs.

Moreover, the reserve pool helps small validators compete more easily with large validators by providing a shared source of liquidity, promoting decentralization of the network. This democratizes staking, offering users more choices and higher returns.

Router

Sanctum's router makes exchanges between different LSTs on Solana simple and efficient. It achieves seamless exchanges between any LSTs by moving stake accounts between pools, unifying the liquidity of all LSTs. This innovation unlocks the full potential of liquid staking on Solana, enhancing the usability of LSTs in the DeFi ecosystem.

Sanctum vs Competitors

Unlike certain staking protocols that dominate on Ethereum, Sanctum takes a different approach on Solana. They recognize that LSTs are essentially interchangeable, so they focus on fostering a multi-LST environment rather than directly competing with other staking pools.

The philosophy of Sanctum is collaboration rather than competition. They aim to create infrastructure that supports various LSTs, expanding the overall stake market instead of pursuing market dominance. By supporting multiple LSTs and fostering collaboration, Sanctum hopes to establish a more decentralized and inclusive staking ecosystem on Solana.

Compared to a leading LST project on Solana, Sanctum focuses on providing robust infrastructure support to ensure the stability and security of the ecosystem. Its Infinity multi-LST liquidity pool, reserve pool, and routing features facilitate instant unstaking services and efficient LST exchanges, supporting overall liquidity and stability.

The Development Prospects of Sanctum

Bullish Factors:

1. The unique reserve and router approach provides capital-efficient LST redemption and exchange.
2. The reserve pool has a large amount of Liquidity, ensuring instant redemption and reducing slippage.
3. Lower the threshold for LST creation to promote network decentralization.
4. Rapid growth in TVL indicates high market acceptance.

Bearish factors:

1. Facing fierce competition from established players
2. Success is closely related to the growth of the Solana ecosystem.
3. The reduction mechanisms that may be introduced in the future could affect the attractiveness of stake.
4. Innovative mechanisms may face challenges in user understanding and adoption.
5. Changes in the regulatory environment may affect operations.

Sanctum is carving out a unique path in the Solana ecosystem, and its innovative approach has the potential to reshape the liquid staking landscape. However, its success will depend on market acceptance, the effectiveness of technical implementation, and the broader development of the cryptocurrency environment.