Opening

In our "Sanctum Research Part 1" article, we discussed how liquid staking is changing asset management in PoS networks. We talked about how liquid staking technology issues liquid staking tokens (LSTs) in exchange for staked assets, representing the staked amount and accumulated rewards. We also highlighted the rapid growth of total staked amount in liquid staking, pointing out that Solana's staking rate exceeds 70%, far higher than Ethereum's 27%. Nevertheless, LSTs only account for 6% of Solana's staking supply, while Ethereum exceeds 40%, providing a huge market opportunity for Sanctum in the Solana ecosystem.

Source: Dune Analytics

For more detailed information about the Sanctum protocol, its capabilities, technical structure, and comparison with other competitors, please refer to "Part 1." It only takes a few minutes and will demonstrate why Greythorn is closely monitoring this project.

In this article, we will focus on recent airdrops and their structure, the success of the Alpha Vault, token economics, key DeFi partnership integrations and listings, the growth of LSTs, and their adoption in Web2.

Token Economics

Since the token economics were not disclosed in our initial research, let's start from here. Sanctum adopts a multi-token system to support and enhance its ecosystem. As the project aims to enable people to mint and trade millions of LSTs in the Solana ecosystem, there must be a way to ensure that these LSTs have real liquidity. Here, Sanctum introduces the Infinity Pool, a multi-LST liquidity pool that allows exchange among all LSTs in the pool. Users can become liquidity providers by depositing any whitelisted LST and receive $INF tokens, which can accumulate staking rewards, benefit from trading fees in the pool, and be used directly in DeFi protocols.

On the other hand, the Sanctum governance token, $CLOUD, controls capital and attention within the ecosystem. Partners need to stake $CLOUD to qualify for the Sanctum Verified Partner (SVP) program, and $CLOUD holders vote to decide which partners are accepted.

The total supply of $CLOUD tokens is 1 billion (1B), allocated as follows:

• Launch Liquidity (20%): 10% for initial airdrop, 10% for launching liquidity.
• Community Reserve (30%): Managed by the community for growth plans.
• Strategic Reserve (11%): Used by the team for ecosystem growth and partnerships.
• Team (25%): Allocated to founders and core contributors.
• Investors (13%): Allocated to investors.
• Jupiter LFG (1%): Reserved for Jupiter LFG.

Source: Sanctum

TGE, Airdrop, and Community Feedback

The Sanctum airdrop took place at 11:00 AM EDT on July 18th. This airdrop distributed 10% of the CLOUD tokens, with 5% (50 million CLOUD) allocated to the capital portion and another 5% (50 million CLOUD) to the honest portion. A total of 108,185 accounts were eligible for the airdrop.

Participants had two options for claiming the airdrop. They could choose the "Long-Term-Aligned" option, waiting to claim the tokens and receiving larger bonuses over time, up to 100%. Alternatively, they could choose the "Sanctum-Curious" option to claim the tokens immediately without any bonus.

To receive the full 100% bonus for the capital portion, participants needed to wait for 14 days. The full 100% bonus for the honest portion was distributed after a 180-day waiting period. Participants could claim the tokens at any time, but claiming early would forfeit the remaining bonus.

The community's response to the Sanctum airdrop was not as expected, with some users feeling frustrated, especially those who had invested a large amount of $SOL, as they felt unfairly treated compared to non-monetary contributors.

As seen recently, many projects struggle to establish fair standards to reward all deserving participants and balance the distribution between small and large contributors; in other words, it's challenging to satisfy everyone.

The Sanctum team expressed gratitude to all supporters, clarifying that the honest distribution aims to build a loyal user base. They acknowledged that they missed out on many deserving users and committed to being more careful in reviewing submitted content in the future.

Source: X

To address these issues, the team held a temporary Twitter Spaces meeting, reiterating their commitment to building top-tier products on Solana and making Sanctum the best destination for SOL holders. This response demonstrates the commitment of the Sanctum team and the resilience of its community, as well as the need for better communication and fairer distribution.

As of today, July 24th, a total of 12.44 million CLOUD tokens have been claimed, accounting for 24.24% of the total allocation (including forfeited tokens). This includes 6.53 million tokens from the honest portion and 5.91 million tokens from the capital portion, based on data from Flipside by Marqu.

Source: Flipside

On the same day, the Sanctum TGE minted 1 billion CLOUD tokens, allocated in a 60/40 split to the team cold wallet and the community cold wallet. From the team cold wallet, 250 million tokens were allocated for liquidity, with 100 million used to bootstrap pools through Meteora DLMM. The remaining tokens will meet liquidity demands within the first year. From the community cold wallet, 150 million tokens were earmarked for airdrop initiation and community needs. This makes a total of 300 million tokens available within the first year, with a maximum of 125 million tokens initially circulating.

Source: Sanctum

Success of Sanctum Alpha Vault

The Alpha Vault is a special feature of Sanctum in collaboration with Meteora, allowing long-term supporters to purchase $CLOUD tokens at a potentially better price. Participants can deposit USDC into the vault and, in return, receive $CLOUD tokens at a discounted price. However, these tokens have a six-month vesting period to encourage long-term commitment.

The vault has a cap of 50 million CLOUD tokens, with a maximum purchase limit of 7.5 million USDC. The initial price of CLOUD is determined by the amount of USDC in the vault, ranging from $0.001 to a maximum of $0.5 on the LFG curve. If the USDC deposit exceeds the cap, tokens will be proportionally allocated, and excess USDC will be refunded to contributors.

If the total value locked (TVL) reaches $7.5 million, the maximum price paid by vault buyers is $0.15 per CLOUD. If not, both spot and vault buyer prices will be lower.

Participants can deposit into the Alpha Vault at a discounted price with a six-month vesting period or purchase on the open market for immediate liquidity. The Alpha Vault was open from July 16th, 2024, to July 18th.

The Alpha Vault was highly successful, with an oversubscription of 416%, attracting long-term supporters and demonstrating strong interest and confidence in the Sanctum project.

Source: Meteora

Optimistic Future for Sanctum: Outlook

CEX Listings and DeFi Partnership Integrations

From the start, $CLOUD has refrained from paying any CEX listing fees, but it has successfully increased market presence by strategically listing on major exchanges such as Kraken, Bybit, and Bitget. These moves have improved liquidity, making the token more accessible to traders and investors. Additionally, there are rumors of more listings in the future, which could further enhance the token's visibility and its integration into the DeFi space.

In addition to exchange listings, Sanctum has established valuable partnerships in the DeFi space to expand its ecosystem. Collaborations with platforms like Kamino, Drift, Texture, and Orca have added unique advantages to the Sanctum network. Kamino improves liquidity through its pools, Drift introduces advanced trading options such as perpetual swaps, Texture extends the functionality of $CLOUD through asset synthetics, and Orca simplifies token swaps through its user-friendly interface.

Sanctum Launchpad

Sanctum's founder, fplee, announced plans to create a Launchpad to kickstart on-chain economies within the Sanctum community. The platform will leverage liquidity-backed tokens (LSTs) to support new projects and innovative products of interest to the community. For example, the Pathfinders team is using pathSOL earnings to fund groundbreaking free NFT minting. This initiative is not limited to creative projects but aims to support enterprises looking to adopt crypto-native frameworks. Sanctum is collaborating with Jupiter to develop the infrastructure needed to support these projects, fostering a circular economy where each success paves the way for more success, ultimately nurturing a vibrant on-chain ecosystem.

Sanctum Profiles V2

Sanctum announced an upgrade to its profile feature, aiming to redefine identities within the Sanctum universe. These profiles allow users to build and expand their reputation within the community, serving as a digital identity open to everyone. The upcoming Sanctum Profiles V2 aims to change social interactions and loyalty programs on the Solana blockchain by introducing a customizable layer that anyone can tailor as needed.

With Sanctum Profiles V2, users will be able to create their own LSTs, allowing them to monetize their activities in various ways. The platform will go beyond standard communication channels like private Discord or Telegram chats. For example, Greythorn can generate research reports accessible only to its LST holders (greythornSOL) and publish them on Twitter or other platforms. This enhancement will allow users to identify and reward their followers with unique content, deepening connections within the community.

Sanctum Pay

Sanctum Pay is also collaborating with BasedApp, a Web3.0 financial platform. This innovative project involves creating the first debit card backed by LST. By directly converting cardSOL staking rewards into USDC, Sanctum Pay allows users to make purchases without needing to liquidate their SOL holdings. This integration aims to eliminate the need for traditional cash settlements, enabling users to manage their transactions directly through the debit card, providing a convenient user experience.

Summary

We believe Sanctum offers a novel and compelling solution to the liquidity issues in traditional staking. By serving as a liquidity backstop, it allows staked SOL to be more flexibly utilized in DeFi, significantly enhancing the utility and accessibility of staked assets. Many other potential future growth opportunities outlined by James Hanley, such as payment subscriptions, mobile plans, and more, may bring positive traffic to Sanctum.

With TVL healthily increasing to nearly $1 billion (5.54 million SOL), Sanctum has integrated with Jupiter Exchange, Kamino, and several other platforms. These integrations may attract more users and drive adoption and growth.

Source: DeFiLlama

Sanctum plans to establish a DAO for decentralized governance to ensure its development according to community consensus. This approach brings trust and participation from the growing Solana community.

Considering these factors, Sanctum's $CLOUD governance token, with a market cap of $53 million and a fully diluted valuation of less than $300 million, presents an interesting protocol worth watching.

However, the DeFi space on Solana is highly competitive, with multiple projects competing for liquidity and user adoption. Sanctum must continue to innovate and provide higher value to maintain its lead, which will be a challenge.

We hope our Sanctum Research Series has provided valuable insights. Please remember that our content should not be interpreted as financial advice. These are just our thoughts and opinions as we navigate the market. The protocols we research do not necessarily represent our investment portfolio.

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