Sanctum LFG: building the infinite-LST future

(Shortened for brevity. For the full post, which includes context on why liquid staking is important, see here.)

Hey JUP DAO!

We’re the Sanctum team, and we’ve been building liquid staking on Solana since February 2021. We helped Solana Labs to build the SPL stake pool program (today, all but one LST use a version of the SPL program), and launched the first SPL stake pool, Socean.

Over the years, we’ve continuously built to improve liquid staking. Our goal is to make all SOL liquid staked and unlock a key growth driver for Solana DeFi and Solana as a whole. 33% of SOL is unstaked, and of staked SOL, over 95% of staked SOL is not liquid staked, so there’s a long way to go!

Our plan to achieve this goal is to:

  1. Build a unified liquidity layer — The combination of Sanctum Reserve and Sanctum Router has allowed people to convert one LST to another even when there is normally no route between two LSTs. This unifies LST liquidity by allowing small LSTs to access the liquidity of much larger LSTs. Sanctum Router has serviced over 330M in volume on Jupiter alone, and Sanctum Reserve over 150M of instant unstakes.

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This unified liquidity has single-handedly allowed the growth of LST DeFi. And Infinity, the most capital-efficient LST LP is coming – the optimal liquidity solution for an infinite-LST future.

  1. Launch a thousand LSTs — With a unified liquidity layer, we can launch a thousand LSTs, and we’re starting off with six: bonkSOL, compassSOL, dSOL, jucySOL, pwrSOL, and superSOL. These validator LSTs have zero deposit stake fee, zero withdrawal fee, and zero management fee. They therefore represent a strict upgrade over native staking. And many more are coming.

  2. Distribute ownership via LFG – We don’t have all the answers, and there are many things that I’d love the wisdom of the community on. We absolutely want to reward early adopters of Solana’s new staking meta, and we want to do it in a fair and equitable way. What is the best way to do it? How should our token be used to govern the Sanctum DAO and steward this public good far into the future? How should our token accrue value?

We have worked with Jupiter for a long time, and admire the ethos of Jup DAO. LFG represents the perfect opportunity to get the right folks across Solana to be involved in Sanctum’s mission. We aim to do this via a fair and decentralised launch, and would love to work with JUP DAO to pull this off.

Sanctum – more than any other protocol – belongs to Solana’s users. We work tirelessly to build the new staking meta, but we need buy-in from everyone. We need evangelists to spread the word. We need native stakers to convert to LSTs. We need protocols, existing and new, to integrate Infinity and the new wave of LSTs. We need projects to launch innovative new kinds of LSTs: personal LSTs, NFT LSTs, subscription-based LSTs. We need to build the LST economy together, and we need your help.

A New Meta For Liquid Staking

Before we end, we want to stress that the new meta of liquid staking on Solana is fundamentally different from what came before, or indeed on any other chain.

The liquid staking meta on other chains (and in the past on Solana) used to be winner-take-all. Before Jupiter built its aggregator, and before we built Sanctum Router, liquidity was incredibly fragmented. You had for example a stSOL-SOL pool on Saber, a mSOL-SOL pool on Raydium, and a scnSOL-SOL pool on Orca, and these pools were completely separate. So every stake pool fought for liquidity, and everyone wanted to use liquidity as a moat to extinguish the competition. I saw this game being played between Marinade and Lido when we were Socean. They were giving out millions in their token in order to incentivise deposits into these AMMs.

This is a super PvP mindset, imported from Ethereum. (Does anyone remember the “Curve Wars”?) But we didn’t want to play this PvP game. So we shifted our mindset from “how can we win this liquidity war” to “how can we help liquid staking flourish”.

Once we did that, we found the secret. The secret is that LSTs are (semi-) fungible. They’re not really different assets; they’re just wrappers over the same stake accounts. So we built to take advantage of this underlying fungibility, to build a 100x better liquid staking landscape than Ethereum.

So we have built that. We built Reserve, Router and Infinity. We have built a unified LST liquidity layer, and kickstarted a Cambrian explosion of new LSTs.

Critically, this is a PvE, not PvP moat. Everyone wants us to succeed, and we want everyone else to succeed. Stake pools want us to succeed and grow Reserve. DeFi protocols love that they can integrate LSTs without fear of depegging. Solflare loves that they can help users instant unstake from their wallet. Jupiter loves our Router because it connects liquidity and lowers prices. Validators love their validator LSTs which help their stakers get the best of both worlds.

We want stake pools to grow as much as possible. We want as many people to stake with validators as possible (via validator LSTs). We want everyone to get as much stake as possible, and for liquidity to be as deep as possible. Our goal should not be to destroy each other, but rather to unlock the ~95% of native staked SOL, and the ~33% of unstaked SOL.

This is the difference between staking on Solana vs Ethereum. This is why I think we can be bigger than Lido. Because we are building a moat that grows bigger by working with and helping others, not extinguishing others. Because that’s how Sanctum wins, and that’s how we all win.

To learn more and read about Sanctum, check out our links here:

  1. Blog: Blog

  2. Docs: Docs

  3. Website: https://sanctum.so

  4. Twitter: https://twitter.com/sanctumso

  5. Telegram: https://t.me.sanctumso

The Sanctum Team will be available on this forum, to answer any and all questions.

102 Likes

I appreciate the fact that part of the approach here is to mitigate a “lido” situation on Solana. With my background with Marinade.Finance I am very emotionally attached to LSTs haha. I think your product is fascinating and potentially brings a whole new LST opportunity to Solana DeFi

19 Likes

very interesting, really looking forward

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Is Sanctum safe?

Many have reached out asking whether Sanctum is safe, what risks there are in buying LSTs, etc. Let me try and answer some of these questions.

Are LSTs safe? Most LSTs that Sanctum support use a version of the SPL stake pool program. Multiple security firms have audited the stake pool program nine times to ensure total safety of funds. So far it has controlled 1B+ dollars of value over more than two years, with no exploits found. Of course, just because a contract has not been exploited in the past does not mean it will never ever be exploited in the future, but it is clear that the stake pool program is one of the safest programs in the world.

We also support the Marinade and Lido programs, which are also battle-tested and have undergone multiple audits.

Who controls the LSTs? We have launched many new LSTs; some have asked who controls these. The individual projects do not control the LSTs. Rather, it is controlled by a multisig.

The upgrade authority of Sanctum’s LSTs is currently held by a 9-member multisig. All members are highly reputable actors in the space: Jupiter, Laine, Mango, mrgn, Solblaze, and Sanctum. Any changes to the LST program will have to be approved by a majority vote from this multisig. No single party can unilaterally change the program. We plan to significantly grow the size of the multisig and eventually freeze the program.

The day-to-day management of the LSTs is currently held by Sanctum. This management authority is in charge of setting up the LSTs and staking the deposited SOL. Please that the management authority cannot steal your funds, even if compromised. It is possible for the management authority to raise fees, however the program is designed that fee changes are capped and happen with ample warning, so you can withdraw your SOL before any changes take effect: see here for details. We plan to use Jito’s Stakenet to perform this delegation in the future.

“Depeg” risk. This is a risk often misunderstood by many. People often think of depegs like a bank run: you deposit money in the bank, the bank lends out your money, those loans default, and the bank does not have the money to pay you. However, this is not possible in the case of an LST. Unlike on Ethereum (which has withdrawal queues), LSTs on Solana are designed such that you can always get your staked SOL immediately, no matter what.

How is it possible for the price of an LST to fall below par then? This reflects a very strong (sometimes irrational…) preference for immediate liquidity. For example, when a whale sells a very large amount of mSOL without caring about slippage. This is a self-resolving problem, in that large depegs are often arbitraged back to par in a matter of minutes, and will not affect the majority of LST holders – their SOL is still there. Rather, this is of most concern for people using LSTs as collateral on borrow-lend protocols, as they may get liquidated. This should hopefully be mitigated as liquidity gets deeper (infinity! reserve! router!) and oracle structures on borrow-lend protocols become more robust.

28 Likes

Cool to see Sanctum here.

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Pleasure seeing fplee & the rest of the Sanctum team and their contributions to Solana and spl-stake-pool!

True OGs of the space who should be looked at when discussing staking or LSTs. Thanks for this proposal!

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Hey there,

I love the approach of PVE instead of PVP. It only will help grow the Solana system.

Thanks for the cool introduction

Cheers

Perry_Hope

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Thank you! Pleasure seeing such a great OG like you back on Solana :slight_smile:

5 Likes

very excited for sanctum!!

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Love love love this idea, and if you’ve read my other replies you would see that I am typically very critical :slight_smile:

Concerns: Is this token for a cash raise, or a different type of value add for your customers? How will you ‘break that down’? Tokenomics, etc…

Your path seems ‘loosely defined’ instead of ‘well-defined’ for a project that has been around since 2021 on SOL.

Random questions: Do you have a plan to include fractionalize NFTs or different token protocols? Is this possible with LSTs on Solana?

Thanks

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Sanctum is a game changer. LFG. Nough said!

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Very excited to see you as one of the first applicants for LFG lanchpad. Your integration since summer 2023 by Jupiter has helped to solve the LST liquidity in DeFi protocols.
LFG!

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Sanctum is family, brings new meta
Side by side with Jupiter on mission to make Solana Great Again :heart:

4 Likes

Excited to see a more PVE approach to liquidity staking. This will benefit the entire ecosystem!

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sounds like a great idea when everybody can have their own LST to get support in the beginning for example.

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what is PVE and what is PVP in this context?

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Well said frens, appreciate the insightful post.

2 Likes

IMHO it is likw this:

PVP would be in this case everyone against each other while

PVE would be a group of people against the environment

As in Sanctums post he said

Hope I cleared it up.

So as a Solana Community we would flourish by helping each other and all the Protocols.

Liquid Staking will be going to have more share of the pie in 5 years than now.

Cheers

Perry

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Hi Blizzy, this is J from Sanctum. Thank you for your reply. We love critical questions! Re tokenomics, as mentioned above, it’ll be a process as we want to consult the community to make sure we get it right. We do have some ideas though, and our ultimate goal is to ensure that holders have a strong stake in the protocol, given that it’s such a crucial and important protocol to the network.

What do you mean by “loosely defined”? Are you looking for a more concrete roadmap with dates?

We do not have plans to fractionalise NFTs or different token protocols - but if you have an idea on how to incorporate it with LSTs, we’d love to hear it!

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I couldnt see your reasoning for LFG launchpad and token launch? Could you explain these more?

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