Imagine you staked your assets on Solana and have zero liquidity. LSTs on Solana give you unique tokens you can use till you get your reward from your staked asset.
That’s the essence of LSTs on Solana. Read on to grasp this concept and see how it can be helpful to you.
What are LSTs?
LSTs (Liquid Staking tokens) represent your staked assets. So, LSTs offer liquidity along with rewards. Your assets lock up when you stake SOL, increasing your rewards. But this makes the staked assets unavailable for immediate use. LSTs change that by giving you tokens, you can use anytime while your Solana is still staked.
LST is a product of Solana’s consensus mechanism, DPOS. DPOS inspired the creation of LSTs through stake pools and validators. Here is a good thread about LSTs:
I spent the last month fielding questions in the Sanctum (@sanctumso) Discord about LSTs and staking.
I bring you two glorious whiteboard explainers in one…
Why staking with LSTs on Solana is safer than you think and why CHADS laugh at 'de-peg risk'.
What to expect:
– How… pic.twitter.com/GwACoZXUpk— James Hanley (@JamesleyHanley) May 7, 2024
With this method, you can deposit SOL into the stake pool. The stake pool invests your SOL in different validators. In return, you get LSTs (unique tokens) representing your staked assets, such as JitoSOL. Each stake pool works by setting different strategies for rewarding participants. JitoSOL has its staking strategies. Let’s take a look at LSTs’ token mechanics:
1) LST Token Mechanics
LST tokens function like Ethereum (ERC-20) tokens, with a few differences. You either get rewards or adjust your token amount to see the rewards you earn over time. Rebasting LSTs is yet to be available on Solana.
2) LST Usage on Solana
LST on Solana is getting started. People are yet to become familiar with the significance of Solana LSTs. In no time, users will see that Solana’s LSTs are valuable liquidity means, and more people will get into them. Here is another good summary about LSTs:
Wrote some words about the liquid staking landscapes on Ethereum and Solana + @sanctumso, a protocol rethinking liquid staking on Solana from the ground up.
I love this chart because of how clearly it captures the evolution of LSTs on Solana.
– Initially, @LidoFinance, a… pic.twitter.com/CyJ2SnklWH
— Shlok Khemani (@shloked_) May 13, 2024
There is more to LSTs on Solana. The second part of this article dives deeper into what it entails. Also, you can read more about it in this blog post.
Disclaimer
The information discussed by Altcoin Buzz is not financial advice. This is for educational, entertainment, and informational purposes only. Any information or strategies are thoughts and opinions relevant to the accepted levels of risk tolerance of the writer/reviewers and their risk tolerance may be different than yours. We are not responsible for any losses that you may incur as a result of any investments directly or indirectly related to the information provided. Bitcoin and other cryptocurrencies are high-risk investments so please do your due diligence. Copyright Altcoin Buzz Pte Ltd.
