Sanctum Research Report: Innovation and Challenges of Liquid Staking

In previous research, we explored how liquid staking changes asset management in PoS networks. Liquid staking technology issues liquid staking tokens (LSTs) in exchange for staked assets, representing the amount staked and accumulated rewards. The total locked amount in liquid staking is rapidly increasing, with Solana's staking rate exceeding 70%, far higher than Ethereum's 27%. However, LSTs only account for 6% of Solana's staking supply, while Ethereum exceeds 40%, providing a significant market opportunity for Sanctum within the Solana ecosystem.

In this article, we will focus on the recent airdrops and their structure, the success of Alpha Vault, token economics, key DeFi partner integrations and listings, the growth of LSTs, and their adoption into Web2.

Token Economy

Sanctum adopts a multi-token system to support and enhance its ecosystem. To ensure that LSTs truly possess Liquidity, Sanctum introduces the Infinity Pool, a multi-LST liquidity pool that allows for exchanges between all LSTs in the pool. Users can become liquidity providers by depositing any whitelisted LST and earn $INF tokens, which can accumulate stake rewards, benefit from trading fees from the pool, and be used directly in DeFi protocols.

The Sanctum governance token $CLOUD controls the capital and attention within the ecosystem. Partners need to stake $CLOUD to qualify for the Sanctum Verified Partner (SVP) program, while $CLOUD holders vote to decide which partners are accepted.

The total supply of the $CLOUD token is 1 billion (1B), distributed as follows:

• Launch liquidity (20%):10% for the first airdrop, 10% for launching liquidity.
• Community Reserve (30%): Managed by the community, used for growth plans.
• Strategic Reserve (11%): Used by the team for ecosystem growth and partnerships.
• Team (25%): allocated to founders and core contributors.
• Investors (13%): allocated to investors.
• Jupiter LFG(1%): Reserved for Jupiter LFG.

TGE, Airdrop and Community Feedback

The Sanctum airdrop took place on July 18. This airdrop distributed 10% of the CLOUD tokens, with 5% (5000 million CLOUD ) allocated to the capital part and another 5% (5000 million CLOUD ) allocated to the honest part. A total of 108,185 accounts were eligible for the airdrop.

Participants have two ways to claim airdrops. They can choose the "Long-Term-Aligned" method, waiting to receive tokens and earning larger rewards over time, up to 100%. Alternatively, they can choose the "Sanctum-Curious" method, receiving tokens immediately without any rewards.

To receive the full 100% bonus of the capital portion, participants need to wait for 14 days. The full 100% bonus of the honest portion is granted after a waiting period of 180 days. Participants can claim tokens at any time, but if they withdraw early, they will forfeit the remaining bonus.

The community's reaction to the Sanctum airdrop was not as expected; some users felt frustrated, especially those who invested a large amount of $SOL, as they believed they were treated unfairly compared to non-monetary contributors.

The Sanctum team expresses gratitude to all supporters and clarifies that the honest distribution aims to build a loyal user base. They acknowledge missing many deserving users and promise to be more careful when reviewing submitted content in the future.

To address these issues, the team held an impromptu social media meeting to reaffirm their commitment to building top-tier products on Solana and making Sanctum the best place for SOL holders. This response showcases the commitment of the Sanctum team and the resilience of its community, as well as the need for better communication and a fairer distribution.

As of July 24, 12.44 million CLOUD tokens have been claimed, accounting for 24.24% of the total allocation. ( includes the abandoned tokens ). This includes 6.53 million tokens from honest allocation and 5.91 million tokens from capital allocation.

On the same day, Sanctum TGE minted 1 billion CLOUD tokens, allocated 60/40 to the team's cold wallet and the community's cold wallet. From the team's cold wallet, 250 million tokens were allocated for liquidity, of which 100 million were used to launch the pool through Meteora DLMM. The remaining tokens will meet liquidity demands within the first year. From the community's cold wallet, 150 million tokens were designated for launching airdrops and community needs. This brings the total available tokens in the first year to 300 million, of which up to 125 million tokens are initially circulatable.

The Success of Sanctum Alpha Vault

Alpha Vault is a special feature developed in collaboration between Sanctum and Meteora, allowing long-term supporters to purchase $CLOUD tokens at potentially better prices. Participants can deposit USDC into the vault, and in return, they will receive $CLOUD tokens at a discounted price. However, these tokens come with a six-month vesting period to encourage long-term commitment.

The vault has a cap of 50 million CLOUD tokens, with a maximum purchase limit of 7.5 million USDC. The initial price of CLOUD is set by the amount of USDC in the vault, ranging from $0.001 to a maximum of $0.5 on the LFG curve. If the USDC deposit exceeds the limit, the tokens will be distributed proportionally, and any excess USDC will be refunded to the contributors.

If the full subscription reaches $7.5 million TVL, the maximum price paid by the vault buyer will be $0.15 per CLOUD. If not reached, both the spot price and the vault buyer price will be lower.

Participants can deposit into the Alpha Vault at a discounted price, with a six-month vesting period, or purchase on the open market for immediate liquidity. The Alpha Vault will be open from July 16 to July 18, 2024.

Alpha Vault was very successful, with an oversubscription of 416%, attracting long-term supporters and demonstrating strong interest and confidence in the Sanctum project.

The Optimistic Future of Sanctum: Outlook

Exchange listing and DeFi partner integration

$CLOUD has successfully increased its market presence through strategic listings on major exchanges. These initiatives have enhanced liquidity, making it easier for traders and investors to access the token. Additionally, there are rumors of more listings in the future, which could further boost the token's visibility and its integration in the DeFi space.

In addition to being listed on exchanges, Sanctum has also established valuable partnerships in the DeFi space to expand its ecosystem. Collaborations with multiple platforms have added unique advantages to the Sanctum network. These partnerships have improved Liquidity, introduced advanced trading options, expanded the functionality of $CLOUD, and simplified token swaps.

Sanctum Launchpad

The Sanctum project aims to create a Launchpad to initiate the on-chain economy within the Sanctum community. The platform will leverage Liquidity to support tokens (LSTs) for new projects and innovative products that the community is interested in. This initiative is not limited to creative projects; it also aims to support businesses that wish to adopt a crypto-native framework. Sanctum is collaborating with Jupiter to develop the infrastructure needed to support these projects, facilitating a circular economy where each success paves the way for more successes, ultimately nurturing a vibrant on-chain ecosystem.

Sanctum Profiles V2

Sanctum announced an upgrade to its profile feature, aimed at redefining identity within the Sanctum universe. These profiles allow users to build and expand their reputation within the community, serving as a digital identity open to everyone. The upcoming Sanctum Profiles V2 aims to change social interactions and loyalty programs on the Solana blockchain by introducing a customizable layer that anyone can tailor as needed.

With Sanctum Profiles V2, users will be able to create their own LSTs, allowing them to monetize their activities in various ways. The platform will go beyond standard communication channels, such as private chats. This improvement will enable users to identify unique content and reward their followers, deepening connections within the community.

Sanctum Pay

Sanctum Pay is collaborating with BasedApp to develop a Web3.0 financial platform. This innovative project involves creating the first debit card supported by LST. By directly converting the staking rewards of cardSOL into USDC, Sanctum Pay allows users to make purchases without needing to liquidate their SOL holdings. This integration aims to eliminate the need for traditional cash settlements, enabling users to manage their transactions directly through the debit card, providing a convenient user experience.

Summary

Sanctum provides an innovative and compelling solution to the liquidity problem in traditional staking. By acting as a liquidity backstop, it allows staked SOL to be used more flexibly in DeFi, significantly enhancing the utility and accessibility of staked assets. Many other potential future growth opportunities, such as payment subscriptions, mobile plans, etc., could bring positive traffic to Sanctum.

As the health of TVL rises, approaching 1 billion (5.54 million SOL ), Sanctum has integrated with multiple platforms. These integrations may attract more users, driving its adoption and growth.

The Sanctum project plans to establish a DAO for decentralized governance, ensuring its development according to community consensus. This approach has brought trust and participation from the growing Solana community.

Considering these factors, Sanctum's $CLOUD governance token, with a market cap of $53 million and an FDV of less than $300 million, presents an interesting protocol worth paying attention to.

However, the DeFi sector on Solana is highly competitive, with multiple projects vying for liquidity and user adoption. Sanctum must continuously innovate and provide greater value to stay ahead, which will be a challenge.