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Given the dynamic and ever-changing nature of blockchain technology, the need for consistent and reliable decentralized financial ecosystem functions is more critical. Sanctum, the revolutionary protocol can significantly expand and stabilize liquidity depth in decentralized finance ecosystem. Responding to Solana’s ever-evolving needs, Sanctum acts as a critical safety net, allowing staked SOL to be released for use in DEFi while protecting the collateralized debt obligations (CDOs) of borrowing-lending protocols.
SOL solves the scalability issues of previous blockchains such as Bitcoin, Ethereum, etc. SOL solves these problems with innovative consensus mechanisms such as Proof of History. SOL is the 3rd generation blockchain technology platform developed by Atanyol yakovenko. SOL can handle 50,000 transactions/Second (TPS). SOL has the potential to handle much more throughput. SOL is the native cryptocurrency of the Solana blockchain. SOL is used for transaction and staking. SOL is used to ensure the security of the network. SOL architecture supports smart contract, dApp, and various Decentralized Finance Platforms (DeFi). Solana’s unique consensus mechanisms, which combine proof of history with proof of stake, contribute to the platform’s high throughput and rapid block creation time. Despite its benefits, Solana faces centralization issues due to the computational resources needed for validators.
The stability protocol in a blockchain environment is critical for ensuring the reliability and predictability of financial systems in the field of blockchain. Additionally, the stability protocols such as a variety of stability mechanisms, particularly stablecoins, are relevant for assisting in stabilizing the value of digital currencies. Stablecoins are a tokenized form of other digital and traditional assets, including fiat currencies, commodities, and other cryptocurrencies that are pegged to provide a stable alternative for major cryptocurrencies such as bitcoin that are frequently subject to price volatility. They are the best way to interact with the digital world, serving its primary purpose as a means of exchange and its secondary purpose as a store of value due to their stability.
Stability protocols in the blockchain ecosystem, through stablecoins, facilitate various essential functions:
Medium of Exchange: Stablecoins work on the same terms and conditions as traditional currencies, which makes them more practical for everyday transactions.
Value Store: By holding their value steady, stablecoins offer traders and investors a safer option to volatile cryptocurrencies.
Decentralized Finance (DeFi): Stablecoins are used as an exchange and collateral for loans on DeFi platforms, enabling decentralized financial systems with transparency and ease of use.
Bridge to Traditional Finance: Stablecoins connect traditional financial institutions with blockchain technologies, making it easier to integrate blockchain systems into existing financial systems.
Sanctum is Solana’s first-of-its-kind stability protocol designed to improve liquidity depth and stability for the entire Solana DeFi environment. Sanctum serves as a buffer by releasing staked SOL to use in DeFi. It also serves as a solvency buffer for the Solana borrow-lend protocol, providing a safe haven for a flash loan and closing LST collateralized positions. The two primary functions of Sanctum are to: Unlock staked SOL for use in DeFi and to maintain Solvency of Borrow-Lend protocols. Sanctum has been formally audited by Sec3 and is 100% open-sourced. Sanctum is governed by 5 of 8 Squads V3 multisig, providing transparency and security.
As discussed before briefly, the key features of Sanctum are:
Unlocking staked SOL liquidity:
With traditional staking methods, the process of unstaking SOL usually takes 2-3 business days. Sanctum solves this problem by acting as a liquidity backstop for SOLs. This means that staked SOLs can be used more flexibly in DeFi applications without the time lag.
Ensuring DeFi solvency:
Sanctum acts as a safe pool of SOL liquidity, which DeFi protocols have access to manage and close unsecured positions. By acting as a liquidity source, Sanctum helps to avoid a cascade of liquidations and insolvency scenarios in the DeFi environment.
Integrating with Solana DeFi:
Sanctum has integrated with Jupiter Exchange which is one of the leading decentralized finance platforms on the Solana network. Users can stake, unstake, and trade liquid staking tokens (LSTs) through Jupiter’s easy-to-use interface, making it easier and more convenient for users.
Decentralized governance:
Sanctum is designed to be governed by the Solana community. Plans are in place for the establishment of a decentralized autonomous organization (DAO) to oversee the protocol's development, upgrades, and decision-making processes. This ensures that the protocol evolves in a decentralized manner, driven by community consensus and participation.
Security:
Sanctum consider security as a top priority and has been audited by a reputable security audit firm called Sec3. The protocol is governed by a multi-signature wallet. For a transaction to be approved or activated, there must be an agreement among 5 out of 8 respected Solana community members. A multi-signature wallet is an efficient means of maintaining protocol safety since it distributes control to reputable peers, reducing the likelihood of an unauthorized party or breach.
Sanctum's solution for aggregate liquidity staking on Solana will be a key component in the wider ecosystem's shift away from meme coins and towards integrated investment solutions. The service provided by the platform fulfills a fundamental requirement of the Solana community: the ability to stoke assets and remain liquid while doing so.
This feature is critical in today’s rapidly-evolving ecosystem, providing users with the ability to rapidly capitalize on new risks or put their funds to work while simultaneously acting as a safety net against potential emergencies, giving them full access to funds deposited in staking services whenever necessary.
Because Sanctum compiles utility staking assets across different protocols, Solana’s liquidity and availability are enhanced. Staked assets convert into liquid tokens that are easy to trade or exchange. This makes Solana’s DeFi market stronger and more efficient. This, in turn, creates a better user experience that draws more players into the ecosystem. This helps its growth and development. Additionally, Sanctum’s platform offers excellent interoperability, allowing users to profit from multiple staking options and investment strategies. This plays a crucial role in encouraging composability and innovation in the Solana ecosystem.
Furthermore, the growth and success of Sanctum are a testament to Solana’s resilience and competitiveness within the wider crypto industry. Being the fastest growing DeFi project on Solana and a strong signal of the project’s unique technical capabilities and a dynamic community, Sanctum has set a high standard within the greater crypto space. With millions of active users and billions of dollars in assets, it’s easy to see why Solana is attractive as a robust blockchain network for sophisticated blockchain applications and how it can scale to support more users. All in all, the contribution to the aggregation efforts within the ecosystem strengthens its infrastructure and puts it on a better footing to become a leading blockchain ecosystem for growth and innovation.
There are several disadvantages to implementing Sanctum, especially when it comes to its integration with the Single Page Application frontend. The most important problem is to set the configuration of CRSF parameters correctly in order to properly enable communication between Single Page Application and the Laravel API backend. This requires specifying the URL address from which the SPA will communicate with the Laravel server in the CORS configuration. This must be done to enable cross-origin requests as it crucially affects the level of security of the server and application.
Another important issue is integrating the authentication logic in the SPA with Axios or a similar tool. More specifically, the key difficulty in this area is correct handling of user authentication, i.e. the login and log out procedures, as well as sending authenticated requests to the API endpoint. These aspects need to be properly managed through handling the responses from the PHP API and adding cookies to requests configuration via the with Credentials parameter. Such a task also requires familiarity with both frontend and backend-related concepts and practices as well as peculiar implementation tools like Sanctum, which relies on additional mechanics for session management.
Moreover, an additional level of complexity is presented by the need to implement Sanctum in the middleware stack for the maintenance of authentication session states, as well as the management of the authentication tokens when the same-origin policy fails to prevent the use of API services with the SPA. The developer needs to configure and ensure that the Sanctum middleware works properly in the Laravel application to establish efficient, seamless, and secure authentication. Similarly, developers for whom the SPA and API cookie-based session authentication is not a familiar feature, which is used for most token-based authentication, will need to conduct in-depth research regarding the proper implementation of the session-based approach, potentially resulting in a trial-and-error process.
Solana uses Proof-of-Stake (PoS) and Proof-of-Happening (PoH) as its consensus layer. This innovative layer requires validators to stake SOL to protect the network and uses proof of history to give a digital record of what happened on the network at each point in time.
Sanctum protocol is a new primitive built on the Solana blockchain to power liquid staking and bring Solana into an "infinite-LST future".
LST Solana refers to Liquid Staking Tokens on the Solana blockchain. These tokens represent staked SOL (Solana's native cryptocurrency) and are used in the liquid staking process, allowing users to stake their assets while still maintaining liquidity and flexibility to trade, spend, or transfer them.
The high rate of failed transactions on Solana is primarily due to the network's popularity for memecoin and DEX trading, leading to slippage issues and bot-driven spam, as well as potential security and architectural challenges compared to more established blockchain networks like Ethereum.
Solana is considered less secure than Ethereum due to several key factors.
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