- Liquid staking is a crucial element of DeFi on PoS blockchains, with a high demand for liquid staking tokens.
- Sui sets itself apart in the liquid staking space by addressing challenges through native integration, a unified coin standard, and enhanced composability.
- Sui promotes stake decentralization, transparency, and active user participation, making it a prominent platform in the liquid staking ecosystem.
Liquid staking has emerged as a foundational element for decentralized finance (DeFi) on proof-of-stake (PoS) blockchains. With approximately 45 percent of total staked ETH currently locked in liquid staking protocols, there is a clear demand for liquid staking tokens (LSTs) among users. In this article, we will explore the innovative approach taken by Sui, a leading platform in the liquid staking space, and how it sets itself apart by addressing challenges faced by users and developers on Ethereum and other EVM-based blockchains.
The Challenges of Existing Liquid Staking Protocols
On many blockchains, including Ethereum, existing liquid staking protocols present challenges for both users and developers, often raising concerns about stake decentralization. For instance, over 30% of staked ETH on Ethereum is attributed to Lido, the primary liquid staking protocol. This concentration of stake in a single protocol can lead to centralization risks and potential vulnerabilities.
Sui’s Approach to Liquid Staking
Sui takes a unique approach to liquid staking by providing native integration with the network through a unified coin standard and composability. These features lay the foundation for more efficient and cost-effective liquid staking transactions, while also addressing key issues faced by users and developers.
Sui’s Coin Standard
Liquid staking on Sui addresses a prevalent issue seen in various proof-of-stake implementations, where users who have already staked SUI encounter the unbonding period when attempting to utilize a liquid staking protocol. Sui introduces a significant improvement in staking design by enabling the exchange of the staked SUI object for an LST. This innovative approach allows users to seamlessly transition to liquid staking without the constraints of the unbonding period, a notable advancement facilitated by Sui’s use of a single coin standard.
Unlike other platforms that have multiple token standards depending on the intended use, Sui adopts a unified and comprehensive coin standard. This simplifies integration for applications, as they only need to support this single coin type, eliminating the necessity to integrate different token standards for compatibility. On Sui, all tokens, regardless of their purpose, are treated equally as coin objects at the network layer. This uniformity is advantageous for liquid staking protocols, ensuring that applications seamlessly recognize both SUI and staked SUI objects. The functionality of natively staked SUI can be extended without requiring changes to the security of the underlying staked asset.
A distinctive feature of Sui’s single coin type is the absence of differing computational requirements when interacting with LSTs compared to the native asset, SUI. In contrast, platforms like Ethereum impose higher gas costs for interacting with ERC-20 tokens, such as LSTs, compared to the native asset, ETH. On Sui, this translates to no difference in gas pricing between native SUI and LSTs. This eliminates any gas-related burdens commonly observed on EVM-based chains, providing a seamless and uniform experience for users interacting with different tokens on the Sui network.
Sui LST Composability
Sui’s native staking implementation enhances the composability of liquid staking by enabling stake and unstake actions to be entirely on-chain and atomic. This sets Sui apart from predominantly off-chain solutions in many other ecosystems, which lack the atomic nature necessary for composable extensions of native staking. Sui’s approach ensures seamless and secure composability, allowing for more flexible and integrated interactions within the liquid staking ecosystem on the Sui network.
Upon unstaking an LST on Sui, users can receive the corresponding SUI in the same transaction. Leveraging Sui’s primitive, Programmable Transaction Blocks (PTBs), the unstaked SUI can be seamlessly utilized as input for another function within the PTB. This high degree of composability is a direct result of both PTBs and Sui’s innovative liquid staking design, showcasing the platform’s ability to enable versatile and interconnected transactions.
Staking Decentralization and Transparency
Liquid staking serves as a fundamental catalyst for enhanced decentralization by incentivizing users to engage in both staking to the network and providing capital to DeFi protocols. The dual incentivization mechanism in liquid staking promotes a more balanced and decentralized participation, contributing to the robustness and resilience of the network.
Sui’s native staking mechanism facilitates permissionless delegation, allowing users to stake as little as one SUI to any validator within the active validator set. This intentional design choice plays a crucial role in promoting long-term decentralization of stake. The LSTs on Sui follow a similar design, preserving the same decentralized benefit. This commitment to accessibility and decentralization underscores Sui’s dedication to creating an inclusive and robust staking ecosystem.
Transparency stands as a paramount consideration in product design for any DeFi protocol. Sui promotes transparency by providing visibility into the protocol’s underlying delegation. This, coupled with the capacity for permission less delegation to any validator, offers users a valuable level of insight into the state of a liquid staking protocol at any given point in time.
Solidifying Liquid Staking Knowledge with Sui
Sui’s innovative approach to liquid staking represents a significant evolution in the realm of DeFi. By addressing challenges seen in other ecosystems, Sui introduces a unified and comprehensive coin standard, eliminating many common issues observed by both users and developers.
Embracing the core philosophy of promoting decentralization in blockchain technology, Sui’s liquid staking implementation not only contributes to the decentralization of the network but also encourages active user participation in DeFi activities. Liquid staking on Sui reflects a holistic and forward-thinking approach, poised to enhance and reshape the landscape of decentralized finance.
Liquid staking has emerged as a vital component of DeFi on PoS blockchains, with a substantial demand for liquid staking tokens among users. Sui’s approach to liquid staking sets itself apart by providing native integration, a unified coin standard, and enhanced composability. Moreover, Sui’s commitment to staking decentralization and transparency further solidifies its position as a leading platform in the liquid staking space. As the DeFi ecosystem continues to evolve, Sui’s innovative solutions pave the way for more efficient, cost-effective, and inclusive liquid staking transactions.
The information provided in this article is for informational purposes only and should not be considered financial advice. The article does not offer sufficient information to make investment decisions, nor does it constitute an offer, recommendation, or solicitation to buy or sell any financial instrument. The content is opinion of the author and does not reflect any view or suggestion or any kind of advise from CryptoNewsBytes.com. The author declares he does not hold any of the above mentioned tokens or received any incentive from any company.