Sirwin
Sirwin

Why everyone ̶s̶h̶o̶u̶l̶d̶ will move their $SOL to Sanctum

By Messin' With Cryptos | MWC | 19 May 2024


Just over the past couple of months and really out of nowhere, one of Solana’s hottest and newest protocols, Santcum, has been able to amass an up-only parabolic amount of TVL — a 400%+ growth in just the last month, making it already the 5th largest protocol on Solana:

In today’s article, I’ll be doing a deep dive on Sanctum to explain why it’s become so popular, and why I think that Sanctum might have found the secret sauce to successfully revolutionize the liquid-staking game.

Let’s dive in shall we?

What is Sanctum?

Although it’s not technically a liquid staking platform itself, Sanctum offers exposure to nearly every single liquid-staking solution in the entire Solana ecosystem — a total of 29 in fact:

Apart from offering zero slippage trades in-and-out of all of the different LSTs, Sanctum has taken things a step forward, offering multiple features to not only help earn you more yield, but to give you a the potential of earning future alrdrops as well.

Earning more Yield through $INF

As I mentioned before, Sanctum doesn’t have it’s own LST, but instead it offers a “multi-LST liquidity pool” allocated by one token called Infinity ($INF). Once whitelisted LST is deposited on Sanctum, it gets entered into the same liquidity pool as everything else. The pool’s allocations of different LSTs are periodically rebalanced and subsidized by a dynamic fee structure, depending what specific LST in the liquidity pool might be over or underweight.

Similar to LSTs, the $INF token can have a variable interest rate depending on network conditions, however apart from the normal yield it gains from securing the Solana network, $INF yields gain a little boost as you also earn some of the trading fees accrued by the platform.

As you can see from the graphic above, the current projected APY is roughly 9.61% APY, which is slightly higher than mainstays such as Jito’s 7.83% APY or Marinade’s 6.24% APY:

Simply holding $INF will earn you staking yields plus trading fees, not to mention additional yields/points if you use a DeFi platform (more on that later).

Gamification through Sanctum Pets and Wonderland

https://learn.sanctum.so/guides/wonderland/pets-and-experience-exp/all-season-1-pets

Getting slightly higher yields is great, but I think the the most revolutionary system that Sanctum has started is their point system in which users can accrue “EXP” for holding different LSTs. Just by holding some of the LSTs in your wallet, you can start accruing 10 EXP per minute for every 1 $SOL’s worth of the LST. Depending on which LSTs are in your wallet, you can start growing pets, which can level up and evolve in accordance with how much EXP you’ve been able to accrue. Take the Helie pet for instance that you can gain EXP for when holding $hSOL:

As long as you hold a minimum amount of 0.1 $SOL of that particular LST, you’ll start accruing points automatically, without the need to re-stake or lockup anywhere. And although there’s a total of 29 different LSTs that are accessible on Sanctum, there’s only 18 different types of pets that are currently available in Season 1:

(not pictured, $hSOL)

As you can see in the graphic above, the EXP earning rates will appear pretty standard, however Sanctum can incentivize people to hold more of certain LSTs by adding boosts. At time of writing, there’s active 2x boosts on $jucySOL, $lanternSOL, $pwrSOL, and $stakeSOL:

Community Quests

In addition to their pets, Sanctum has weekly community quests that can add bonus EXPs for certain tasks, like this one which gave you 2x EXP multipliers on two of your pets for one 24-hour period:

Once again, these are community quests where all “Wonderers” are collectively challenged and rewarded — something which I actually appreciate moreso than a competition, as it breeds a more collaborative sentiment within the community. In order to unlock the rewards of the quest, users need to answer a riddle, this week’s being particularly difficult (and currently unsolvable):

(If you have any idea what the answer might be, feel free to join the discussion on Discord)

Editor's Note: The answer to quest 4 has now been found, the answer "THE EARNEST SHALL BUILD OUR NEW WORLD"

Cupcakes

The last way to earn additional EXP is through referral cupcakes. If you use a referral code upon signup and/or if someone connects their account using your referral code, you can earn additional EXP through referral cupcakes at the end of the season. And be wary that you can only enter a referral code upon account setup, otherwise it cannot be added retroactively. If you don’t have one, feel free to use mine (referral code JOF2KW):

 

Other things to consider

More LSTs should lead to more decentralization: One of the biggest criticisms for Solana is that it’s not very decentralized, yet with Sanctum, this might begin to change. Given how Sanctum is able to draw so much liquidity and exposure to not-so-well-known LSTs, I would imagine that given the right incentives, Sanctum will be able to drastically reduce the barriers to entry to new and existing competitors who may be looking to spin up their own validators. This perhaps might give Sanctum too much gatekeeping power, but I think overall that this is a definite net-positive for the Solana ecosystem.

What the heck is $jucySOL? In full transparency, many of these LSTs and protocols were/are completely new to me, and I still haven’t taken the time to dive into the specifics of each one. As we’ve already seen with products like $stETH or $ezETH, just because they’re backed by an underlying asset, apart from regular smart contract exploits and hacks, LSTs are still susceptible to possible depegs from regular market forces.

Sanctum is heavily undervalued: As of last month Sanctum closed their latest round of fundraising, drawing a cumulative total of $6.1 million dollars:

Now this may seem like a lot, but to put things in perspective, LayerZero’s last Series B funding round drew in $120 million dollars giving them a $3 billion dollar valuation. And given that LayerZero has multiple competitors and Sanctum doesn’t, in my opinion either LayerZero is way overpriced or Sanctum is way underpriced (or perhaps both).

My Strategy

My big assumption is that once more and more people find out about Sanctum, the TVL will continue to grow as well as the dilution of everyone’s points. What’s also clear from following their socials is that they’re going to keep growing — more pets, more LSTs, more points. All that being said, my bet is that one of the biggest determinants of any future alrdrop will be those who hold $INF, as it’s the only thing right now that’s inherently native to Sanctum’s platform. This isn’t a bad play, for not only do you earn more yield than you would a normal LST, but there are also currently 5 different DeFi strategies that you can employ that will all help you leverage your returns on $INF, while still allowing you to accrue EXP points at the same time:

For me personally, despite earning 0.00% APR, I lent my $INF MarginFi to earn points for their alrdrop campaign as well, but you could do the same either on Solend or Kamino and earn points on their platforms as well.

As far as the Sanctum Pets go, I have at least the minimum 0.1 $SOL required to earn EXP on all 18, and I imagine that I’ll continue to buy into new LST-pets as soon as they become available. As soon as the last Quest’s 2x EXP bonuses started, I immediately reallocated most of my extra $SOL to the ones that were eligible for the increased rates, and once the bonuses are over, most likely I’ll probably rotate them back into $INF.

Additionally, I haven’t done a deep-dive on each one yet, but I assume that there’s many opportunities to double-dip, as some projects are relatively new and are in the middle of their a1rdrop campaign as well.

Conclusion:

In my opinion, I think it’s really only a matter of time before we see Sanctum-like projects pop-up on other liquid-stakeable blockchains, for promoting more people to hold different type of LSTs is what I believe is a net-positive — promoting decentralization and overall increased security for the blockchain itself. Sanctum has found a gamified way to promote all of these benefits while at the same time attracting an insane amount of liquidity.

Are you interested in trying Sanctum out yourself? As I mentioned before, you only have one chance to enter a referral code when signing up, so be sure to use one in order to be eligible to earn additional EXP at the end of the season. If you haven’t one to use, consider supporting this blog and using mine: (JOF2KW) so that we can both earn some more EXP.

And as always, thanks for taking the time to read this and be sure to follow me on twitter (https://twitter.com/CryptosWith) to get all my latest updates. Also, looking for a gift for your Crypto-loving/hating friend? Give them a REKT journal to cheer them up!

Disclaimer: And as a final reminder, this is not financial advice and this is for educational and entertainment purposes only. Please as always, do your own research and find what investments are best for you. Cheers everyone! allocation, but I’m also earning some pretty significant yields on my assets at the same time.

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Messin' With Cryptos
Messin' With Cryptos

I've made a ton of mistakes along the way in the world of Defi and cryptocurrency. Hopefully by taking some of the lessons learned and cues i've went through, you'll be a bit more success


MWC
MWC

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