Sanctum is a reserve pool of SOL that provides instant liquidity for staked SOL. By doing so, Sanctum unlocks new opportunities for staked SOL and ensures the smooth functioning of DeFi.

Staking SOL earns returns and helps to secure the network. However, staked SOL cannot be easily transferred, and takes a few days to become unstaked SOL again. This fundamental trade-off between liquidity and returns is a problem that has existed for years.

Liquid staking tokens (LSTs) were created to solve this problem. They take your SOL and stake it according to their delegation strategy. In return, they give you a liquid staking token which can be easily transferred. LST <--> SOL liquidity pools can then be set up that allow the LST to be instantly exchanged for SOL. However, staking with LSTs normally means giving up control of the validator that you stake with. The largest LSTs on Solana also charge a management fee of anywhere from 5% to 10% of your staking yields. Finally, LSTs also pose a centralisation risk if they get too big.

This is changing very soon. The upcoming permissionless single validator stake pools release from Solana Labs will allow anyone to tokenise their staked SOL -- for free -- while maintaining control of their staked SOL and getting maximum returns. As there will be thousands of different stake pool tokens, however, it is currently infeasible to have sufficient liquidity for these kinds of LSTs for them to be at all viable for use as collateral. The total liquidity would be fractured across all of these potential pairs and depth would be laughably small.

Sanctum provides liquidity for all these stake pool tokens. As a reserve pool of SOL, Sanctum can accept staked SOL and give SOL in return. It can then unstake the staked SOL to replenish its SOL reserves. Unlike normal LST <--> SOL liquidity pools which fragment liquidity, Sanctum can service every single staked pool with a single pool of SOL.

The implications are large. This allows every stake pool token -- no matter how big or small -- to be used in all of DeFi. Borrow-lend markets like Solend, Mango, Drift and Jet can safely accept any stake pool token as collateral. Leveraged vaults like marginfi and supastake can compose on top of any stake pool token. And most excitingly, we can build LST-collateralised stablecoins without worrying about depeg risk.