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Authors: Trav and TheOpenChain
Messari just dropped their latest report on Solana. Spoiler alert... the alpha is real!
It talks about what the next big wave will be in the ecosystem. Here's what you need to know:
Table of Contents
Solana's Explosive Growth
Over the past 12 months, Solana has seen massive growth across several metrics:
Transaction Fees: Skyrocketed from thousands to millions of dollars per day.
Active Daily Addresses: Increased from tens of thousands to millions.
Total Value Locked (TVL): Surged from $300 million to over $5 billion.
Despite these impressive figures, one area still lags: liquid staking, which only holds a 6.5% market share among total staked tokens.
To put this in perspective, let's compare Solana's liquid staking market share with its top competitors:
Ethereum: Approximately 30% of staked ETH is in liquid staking derivatives.
Polkadot: Around 20% of staked DOT is in liquid staking tokens.
Avalanche: Roughly 15% of staked AVAX is in liquid staking tokens.
Solana clearly has room to grow in this area, presenting a significant opportunity.
The Challenge of Liquid Staking
Liquid staking allows users to wrap their staked tokens into liquid tokens, providing the ability to trade without waiting for the usual unstaking period. However, a significant challenge exists: the liquidity barrier.
New projects launching liquid staked tokens (LSTs) often struggle to find markets for these tokens, facing the "cold start" liquidity problem.
Solana's Unique Staking Mechanics
Solana's unique staking mechanics allow for what can be termed "infinite liquidity." Here's how it works:
Staking Accounts: Users can stake their tokens.
Liquid Staking: These staked tokens can be wrapped into liquid tokens (LSTs) that can be traded instantly.
Unwrapping and Rewrapping: Solana allows these LSTs to be unwrapped and rewrapped quickly, which creates instant liquidity without the traditional need for large liquidity pools.
Sanctum's Solution
Sanctum is addressing the liquidity barrier with a unique approach:
Infinite Liquidity: By leveraging Solana’s staking mechanics, Sanctum offers infinite liquidity for LST to LST swaps.
Cost Efficiency: Removing the need for extensive liquidity provision makes it easier and cheaper for new LST projects to launch.
Example: Infinite Liquidity in Action
Imagine you hold an LST called lSOL. You want to trade it for regular SOL. Typically, you would need to find a market with sufficient liquidity to swap your lSOL for SOL. With Sanctum's solution, you can:
Unwrap lSOL: Instantly convert your lSOL back into staked SOL.
Rewrap into Another LST: Convert this staked SOL into another LST like jSOL, which has more liquidity.
Swap for SOL: Trade your jSOL for SOL on an Automated Market Maker (AMM) with higher liquidity.
This process, facilitated by Sanctum, ensures you can always find liquidity, effectively creating "infinite liquidity."
Another perk of hodling LST’s is to level up your pets!
The $CLOUD Token
Sanctum's native token, $CLOUD, plays a crucial role in their ecosystem. Here's a brief overview:
Tokenomics: $CLOUD has a total supply of 100 million tokens, with allocations for development, staking rewards, community incentives, and a reserve for future growth.
Utility: $CLOUD is used for governance, staking rewards, and as collateral within the Sanctum ecosystem.
Recent Airdrop: Sanctum recently conducted an airdrop to early adopters and active community members, distributing 5 million $CLOUD tokens to incentivize participation and growth.
Infinite ($INF)
Sanctum's Infinite ($INF) product is a groundbreaking addition to their ecosystem. Here's what you need to know:
Aggregate Liquidity: Infinite ($INF) acts as an aggregator of LSTs, pooling liquidity from various sources to ensure seamless swaps and high liquidity.
Basket of LSTs: The INF product comprises a basket of different LSTs, enabling users to swap between them with infinite slippage, ensuring liquidity is always available.
Yield Generation: INF earns yield from the aggregate staking rewards of the LSTs within its pool and a portion of trading fees from swaps. This dual-source yield ensures competitive returns for $INF holders.
Rebalancing Mechanism: Sanctum can rebalance the pool of LSTs within the INF product to ensure optimal performance, swapping out underperforming LSTs for better-performing ones.
Key Risks - How Sanctum Could Fail
Despite the promising potential, there are risks to consider:
Market Growth: The LST market on Solana needs to grow for Sanctum's solution to succeed.
Cost of Liquidity: LST providers need to see the value in Sanctum's cheaper liquidity solution.
Adoption of Infinity Product: Sanctum's Infinity product, which aggregates LSTs and offers competitive yields, needs to gain traction among users.
The Potential Impact to the Solana Ecosystem
If successful, Sanctum's approach could have broad implications:
Increased LST Market Share: More projects might launch LSTs on Solana, boosting the market share significantly.
Higher Yields: Increased competition among LSTs could lead to higher yields for token holders.
Expanded Use Cases: Lower barriers to entry could lead to innovative uses for LSTs, such as NFTs backed by staked tokens or fundraising mechanisms.
Sanctum's innovative solutions could significantly transform the liquid staking landscape on Solana, making it easier for projects to launch and for users to gain liquidity. Keep an eye on this space as it develops.
For more detailed insights, you can read the full report on Messari's website and consider subscribing to their Pro service for in-depth analysis and updates.
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