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Solving the LST Liquidity Problem through AVS Tokens

Solving the LST Liquidity Problem through AVS Tokens

Solayer Core

May 31, 2024

Key takeaways

  • Solayer's pooled liquidity design significantly improves liquidity for AVS Tokens by consolidating all liquidity using the sSOL-SOL pair.

  • This approach reduces price impact and provides instant unwrapping of LSTs, enhancing user experience and adoption


Challenges for LSTs on Solana

Liquidity is the most critical factor for the adoption of any asset. Conversion delay and slippage are major considerations. In an ideal scenario, there would be no slippage and instant conversion, making yield-bearing Liquid Staking Tokens (LSTs) more attractive than standard SOL for all Solana users. However, the primary challenge lies in maintaining sufficient liquidity for these LSTs. Each LST needs a deep pool with low swap fees and substantial trading volume to offset liquidity providers' (LPs) capital costs.



Super liquidity for LSTs

To address these liquidity challenges, Solayer introduces a superior liquidity solution for AVS Tokens using a pooled liquidity design. Solayer AVS LST Tokens can be instantly unwrapped (or undelegated) back to the underlying representation, sSOL. Unlike other systems that use a multi-LST pool—where each LST's liquidity depends on its specific LP pool—Solayer consolidates all liquidity for AVS Tokens into a single sSOL-SOL pair. This strategy ensures a smaller price impact and significantly improved liquidity for users, making the conversion process more efficient and cost-effective.


Conclusion

Solayer's innovative approach to solving the liquidity issues of Liquid Staking Tokens (LSTs) through a pooled liquidity design marks a significant advancement in the ecosystem. By consolidating liquidity into a single pair and providing instant unwrapping, Solayer enhances the user experience and promotes wider adoption of yield-bearing LSTs on Solana. This method not only addresses the current liquidity challenges but also sets a new standard for efficiency and reliability in the management of staked assets.

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Solayer leverages the economic principles of staking to extend the security of Solana's base layer.

©2024 Solayer · All Rights Reserved

solayer

Solayer leverages the economic principles of staking to extend the security of Solana's base layer.

©2024 Solayer · All Rights Reserved