Summary:
What is liquid staking?
Pre 202307, when token holders stake their tokens to a validator, they are locked and unable to be traded or transferred (aka “illiquid”). In exchange, they earn rewards.
After 202307, token holders can not only stake their tokens and earn rewards but they also receive a token representing their stake that can be traded and transferred, effectively making them liquid and usable in other applications.
What are the pros and cons of liquid staking?
Pros
Improves Capital efficiency:
Receive network staking rewards and still keep the option to use your Sui in defi as collateral.
Sui staking maintains free choice of validator:
Unlike other networks, such as Lido issuing the derivative and “determining” where staked tokens are delegated, Sui allows users to stake their original tokens with the validator of their choice, rather than “relinquishing this responsibility to the liquid staking protocol.”
Promotes decentralization:
Liquid staking has the benefit of promoting decentralization by offering greater utility for stakers and thus increasing the incentives to stake and secure blockchain networks.
Cons
Small Market Size:
The staked sui token will initially have less acceptance than native sui.
How does staking work looking at the code?
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When you stake Sui a StakedSui object from the staking_pool module is created.
/// A self-custodial object holding the staked SUI tokens.
struct StakedSui has key, store {
id: UID,
/// ID of the staking pool we are staking with.
pool_id: ID,
/// The epoch at which the stake becomes active.
stake_activation_epoch: u64,
/// The staked SUI tokens.
principal: Balance<SUI>,
}
Note that this StakedSui object in your wallet is NOT transferable.
The “store” ability is what is added in this commit. This makes it possible for the StakedSui object to be stored in an object. This comes with some important security considerations, which you can read here in the SIP.
How are protocols using the store ability?
Haedal
Haedal
smart contracts (not yet available)
- validator chosen by: protocol owners
- % of staking rewards fee:
- instant unstake fee: 10% of stake
Aftermath finance
Aftermath finance
(Tweet 20230511)
smart contracts (not yet available)
- validator chosen by: user
- % of staking rewards fee: 5%
- instant unstake fee: none
Open questions:
What are the implications of having multiple staked sui tokens?
How to compare the risk of a staked sui token stXSui vs stYSui?
Do we want multiple staked sui tokens or rather one?
The additional value of the stXSui token (vs native Sui) for a user lies in the widespread acceptance of the token. Many different staked Sui tokens will create fragmentation. If, in the end, we would end up with one stXSui token. Shouldn’t the package of that stXSui be owned by the foundation? What if, in the end, the stXSui token is more widely accepted than the native Sui token? Isn’t it possible for protocol X, the creator of stXSui, to start dialing up the “% of staking rewards fee” it charges as it gets rather difficult to switch to another stYSui token (which has low acceptance)?
Liquid staking on other chains
defillama liquid staking ranking
Ethereum notes:
minimum native staking size: 32 ETH → staking aggregator protocol is required for the retail user
unstake waiting period: 1-3 days on Lido
Solana notes:
Introduction to staking on solana
minimum native staking size: none (accessible for retail users)
unstake waiting period: up to 1 epoch - 3 days
Sui notes:
minimum staking size to collect rewards: 1 Sui (accessible for retail users)
unstake waiting period: up to 1 epoch ~ 24h
Lido | multi
- validator chosen by: protocol
- % of staking rewards fee: 10%
- instant unstake fee: ~swap cost in the market
- protocol 30d Revenue: 5.4m USD
Rocket Pool | ETH
- validator chosen by: protocol
- % of staking rewards fee: 5% - 20%
- instant unstake fee: ?
- protocol 30d Revenue: ? USD
Marinade Finance | Solana
- validator chosen by: protocol or user
- % of staking rewards fee: 6%
- instant unstake fee: 0.3%
- protocol 30d Revenue: 5 700 000 mSol outstanding *0.0575 staking rewards APY * 0.06 fee = 19665 SOL x 25 USD/SOL / 12 = ~50k USD/month (see mSOL stats)
Resources:
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StakedSui improvements SIP.md
StakedSui improvements SIP forum discussion (not much info)
Sui blog: All about staking
Sui blog: stake delegation faq
Sui blog: Liquid staking coming to Sui
How To Unlock The Potential Of Liquid Staking Derivatives (LSDs) by Coinmonks
theblock article
Forum discussion 20230112
Sui docs: Sui’s delegated proof-of-stake system
article comparing staking options native/pooled/liquid - finding the right approach for you
