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LearnCrypto 101

Sanctum: Solana’s liquid staking layer

Jonathan G.
sanctum liquid staking

    By enabling users to stake SOL and simultaneously access their capital through derivative tokens, liquid staking marries security contributions to network consensus with financial flexibility, making it an increasingly popular choice among savvy investors seeking to maximize their profits.

    In this context, Sanctum has become increasingly popular over the last couple of months—as the protocol offers a host of unique liquid staking benefits for both validators and individual stakers.

    In this guide, we’ll take a closer look at Sanctum and explain how you can take advantage of this Solana liquid staking layer.

    Solana liquid staking

    Liquid staking is a concept that combines the benefits of staking with liquidity.

    Traditional staking requires you to lock up your SOL directly with a validator. This means that your staked tokens aren’t readily available for trading, spending, or transferring.

    Liquid staking, however, aims to address this liquidity issue by allowing staked assets to be used in various ways while still participating in the staking process.

    When participating in liquid staking, you stake your SOL to a smart contract or staking pool—instead of directly to a validator.

    In return for staking your tokens, you receive a different type of token that represents your staked SOL. This new token—referred to as Liquid Staking Token (LST) or Liquid Staking Derivative (LSD)—can be traded, used in DeFi applications, or transferred while still earning staking rewards. This provides flexibility and liquidity for token holders.

    Sanctum: Introducing customized staking

    Apart from traditional and liquid staking, customized staking is now available on Solana as well—powered by Sanctum.

    Sanctum allows for the creation of custom LSTs, enabling projects to use LSTs as a delivery mechanism for extra yields (e.g. laineSOL), for NFT whitelist spots (e.g. pathSOL), or for subscription services (e.g. alphaSOL).

    The main use case of Sanctum, however, is the creation of validator LSTs such as laineSOL, bonkSOL, jucySOL, compassSOL, and many more. At their core, validator LSTs combine all the benefits of native staking (e.g. zero fees; choosing your preferred validator) and the benefits of liquid staking (e.g. instant liquidity; usage throughout Solana DeFi).

    Additionally, Sanctum has built a router that allows anyone to buy, sell, and trade any Solana LST instantaneously and with limited slippage—regardless whether they are established ones such as mSOL and jitoSOL, or lesser known ones such as pathSOL and alphaSOL.

    Also, this means that you don't necessarily have to liquid stake your native SOL manually with an LST provider; you can simply swap crypto, such as SOL and USDC, for the LST you'd like to hold.

    By creating a unified liquidity layer for Solana LSTs and making the creation of Solana LSTs effortless, Sanctum is attracting more SOL to be stacked—ultimately propelling the decentralization of the entire Solana network forward.

    Solana liquid staking: Market dynamics

    The Solana ecosystem has been experiencing a significant influx of users over the last couple of months.

    Mainly, this trend is driven by airdrop farmers and memecoin traders. Regardless, Solana seems to be the most used blockchain—outpacing the likes of Ethereum, BNB Chain, and Cosmos.

    Having said that, due to its popularity, Solana has been pushed to its limits, leading to network congestion and subsequently to a miniscule amount of failed transactions. This is due to the fact that validators are struggling to keep up with the consistently-high and growing demand.

    This is where priority fees come into play.

    Priority fees are an additional fee that users can opt to pay to increase the likelihood that their Solana transactions will be processed more quickly by validators. While Solana is known for its high throughput and low transaction fees, during times of network congestion or when a user needs a transaction to be processed as a priority, paying a higher fee can help ensure that the transaction is picked up and processed faster by validators.

    As a result, validator operations have been highly profitable on Solana in the last couple of weeks.

    Consequently, some Sanctum-powered LSTs such as cgntSOL, laineSOL, picoSOL, jucySOL, and compassSOL are sharing their additional priority fee profits, MEV tips, and staking rewards with their stakers—leading to APYs well above 10%.

    LFG Launchpad: Sanctum token launch

    Sanctum will likely launch its token via Jupiter’s LFG Launchpad.

    If you’d like to know more about the LFG Launchpad, read this document. And if you’d like to know more about Sanctum's LFG Launchpad profile, read this document.

    Having said that, the Sanctum token is not live yet, but as soon as it is, you’ll be able to trade it with Phantom.

    How to trade tokens with Phantom?

    Note: You need to hold SOL in your Phantom wallet to complete this process.

    1. Log-in to your Phantom wallet on the browser extension or mobile app
    2. Select the tokens you’d like to trade
    3. Click the swap icon (arrow) at the bottom
    4. Review the order
    5. Submit!

    How to set up a Phantom wallet?

    If you’d like a friendly multichain wallet for crypto, DeFi, and NFTs, try us out. We offer browser extensions for Firefox, Chrome, Brave, and Edge, as well as apps for iOS and Android.

    First, download Phantom. Then, create a new wallet.

    If you’d like to fund, or send funds to, your Phantom wallet, you can do so via the “Buy” button on your asset tab. We offer various funding options, such as MoonPay, PayPal, and Robinhood to make it easy for you to fund your wallet.

    Once you do that, you're ready to go.

    How to bridge tokens to Solana with Phantom?

    If this is your first time using Solana, you might have most of your assets on other blockchains, such as Ethereum and Polygon. With our Cross-Chain Swapper, you can bridge tokens across Ethereum, Solana, and Polygon right in your Phantom wallet. Here’s how: