- the thesis
- unstake.it (sanctum v0)
- introducing sanctum
- a. instant liquidity for all staked SOL
- Sanctum provides deep liquidity for all these LSTs
- b. safe haven of SOL
- jupiter integration
- the future
- DAO & Governance
- Visit our Website.
- Read our Docs.
- Follow our Twitter.
- Check out our Blog.
- Join our Telegram.
The Sanctum core team has been working on liquid staking on Solana for more than two years now. We first received a grant to work on stake pools on Solana in February 2021. We worked with Solana Labs to build the canonical Solana stake pool program, and launched Socean Stake in September 2021. Our long experience with stake pools have given us a unique perspective and thesis on liquid staking tokens.
Our thesis: in order to unlock liquid staking on Solana, liquid staking tokens (”LSTs”) cannot be reserved only for stake pools.
If you want liquid staked SOL on Solana, your only option is to stake with a stake pool and receive an LST. But while liquid staking is incredibly strong on Ethereum, it hasn’t done well on Solana. To date, there is over 393.9M active SOL staked. Of that, only 11.3M SOL is staked with stake pools. A paltry 2.87% of staked SOL is liquid staked.
Why are stake pools on Solana struggling to get deposits? In a nutshell, stake pools conflate three different functions: delegation, tokenisation, and liquidity. They do none of them well as a result. We will write more on this in the future.
Our vision is to unlock staked SOL in Solana. Our vision has not changed. However, we believe that for DeFi adoption, tokenisation and liquidity are far more important than delegation. Tokenisation and liquidity are needed in order for staked SOL to be used in DeFi. So we need LSTs, but they shouldn’t be reserved only for stake pools. Everyone should be able to liquid stake and unstake without having to stake in a stake pool.
For that to happen, Solana requires deep shared liquidity for staked SOL
unstake.it (sanctum v0)
In July 2022, we launched unstake.it as the first step to bring that vision to fruition.
unstake.it is a single pool of SOL that allows staked SOL from any validator to be converted to SOL with minimal slippage. It allows a user who staked their SOL with a validator to transfer their stake account to Sanctum, in return for SOL, from the pool with a minimal fee.
Over the course of the past year, we have continued to build unstake.it. We added more functionality, such as 1) unstaking LSTs and 2) swapping from one stake pool to another.
Over the past few months, we’ve received overwhelming support from the Solana community. It’s time to make the next step forward.
Sanctum is an on-chain stability protocol.
What does that mean? What is Sanctum stabilising? Sanctum stabilises Solana through two functions.
- Sanctum unlocks staked SOL to use throughout DeFi by providing a backstop of SOL liquidity.
- Sanctum makes sure DeFi borrow-lend protocols remain solvent by providing a safe haven of SOL to flash loan and close LST-collateralised positions.
By doing so, Sanctum unlocks new opportunities for staked SOL, and ensures the smooth functioning of DeFi.
a. instant liquidity for all staked SOL
Solana Labs plans to release permissionless single validator stake pools soon. This update will allow anyone to tokenise their staked SOL for free. They will be able to maintain control of their staked SOL and get maximum returns.
This means that illiquid staked SOL can be made liquid.
This will result in thousands of different LSTs. It is currently infeasible to have enough liquidity for these kinds of LSTs for them to be at all viable for use as collateral. The total liquidity would be fractured across all of these potential pairs. Depth would be laughably small. Even larger stake pools are limited by collateral depth.
Sanctum provides deep liquidity for all these LSTs
Sanctum can provide the backstop of SOL liquidity to allow all the LSTs to thrive.
With a reserve pool of over 200k SOL, Sanctum can accept ALL staked SOL and give SOL in return. It can then unstake the staked SOL to replenish its SOL reserves.
Unlike normal LST-SOL liquidity pools which fragment liquidity, Sanctum can service every single stake pool with a single pool of SOL.
This allows every LST -- no matter how big or small -- to be used in all of DeFi. Borrow-lend markets like Drift, Jet, Mango, Marginfi and Solend can safely accept any LST as collateral. Leveraged vaults like superstakesol can compose on top of any stake pool token.
In addition, because Sanctum makes staking and unstaking cheap and easy, many applications can now stake their SOL where they previously could not. For example, NFT marketplaces can now earn staking returns on SOL that's sitting around in unfilled orders.
Sanctum unlocks DeFi opportunities for staked SOL and increases the security of the network.
b. safe haven of SOL
In November 2022, FTX crashed and the lending protocol Solend ground to a halt as a large SOL collateral position (SOL that was deposited in the protocol to borrow USDC) became bad debt. Because most of the SOL collateral had been borrowed to power leveraged mSOL and stSOL strategies, there was no SOL in the protocol to pay the liquidators. Thus, liquidators could not liquidate the large USDC loan. And because liquidators could not liquidate the loan even as the price of SOL was free-falling, depositors lost millions of dollars (thankfully covered by Solend's insurance fund).
A "safe haven" of SOL with a flash loan functionality would have prevented this gridlock, and the millions of dollars of losses Solend had to cover. This safe haven could have provided the liquidity to be able to quickly close the stSOL and mSOL positions. This would have allowed the large SOL collateral position to be swiftly liquidated.
Flash loans are critical not only in times of crisis, but also useful for increasing the day-to-day efficiency of DeFi on Solana. They allow users to quickly swap the collateral type in an existing loan, or to move a loan from one lending protocol to another.
As the reserve pool of Solana, Sanctum can be that safe haven. Sanctum can easily provide flash loans for a small fee. This creates a more efficient and resilient DeFi ecosystem that doesn't choke up when it matters most.
Sanctum charges a dynamic range of fees from 0.01% to 3% based on the percentage of SOL taken from the reserve pool. This allows for low fees for smaller retail users, and ensures efficient usage of SOL in times of crisis. Sanctum also takes a 0.01% fee on swapping from one LST to another.
In addition, the Sanctum programs are controlled by a 5-of-8 Squads V3 multi-sig. The multi-sig is comprised of upstanding members of the Solana community. Multisig members include the Sanctum core team, top Solana validators, stake pool operators, and Solana DeFi founders. The multisig is viewable here.
As part of the launch, we’re excited to announce that Jupiter Exchange has fully integrated Sanctum into their routing engine.
Jupiter's integration with Sanctum enables users to stake, unstake, and swap LSTs with ease through the world-class interface of jup.ag.
This integration addresses a key challenge in LST adoption, where liquidators can now effectively manage larger liquidations with enhanced liquidity via Jupiter's routing, including Sanctum's SOL reserve pool.
We are thankful to be partners with Jupiter, who share the same vision as us. We are excited to work with Jupiter — one of the best teams in the space — to bring forth the next evolution of Solana DeFi.
Sanctum will be the main focus of the team moving forward, as we seek to bring our vision to fruition.
We are looking to work together with teams to help them stake their SOL where they previously could not, and to help DeFi protocols do safer liquidations. If you are looking to build upon Sanctum, please check out our docs and reach out via our Telegram.
DAO & Governance
We envision Sanctum as a public good that allows anyone to compose upon it, and for it to be owned by the Solana community. More details will be released regarding this in the near future.
Finally, we will be winding down the unstake.it socials. There will be no new updates from the unstake.it Twitter account and it will eventually go private. Please follow Sanctum’s new socials below for more updates.