Yesterday, boss sat me down…
"James, three weeks ago, I tasked you with making INF great again.
And, it's clear from the numbers that it's working. Look, TVL is up and to the right…
…If you don't stop, INF is going to take over 100% of stake on Solana and become a systemic risk to the entire network.”
I said,
"Boss,
I'd like to take this opportunity to apologize…
TO ABSOLUTELY NOBODY!
Before joining Sanctum, the thing I respected most about the team was that they were always trying to do positive-sum things - grow the pie for everyone, win alongside their partners, PVE not PVP. Shortly after joining and digging into INF, I felt as if there was an inherent tension with INF and Sanctum's partner LSTs. On the surface, it seemed to be directly competing with other LSTs.
But what I quickly realized was actually that INF wasn't necessarily directly competing, but complementing existing (and future) LSTs. I concluded INF was actually positive-sum.
Why?
INF isn't really an LST in the same way many LSTs on Solana are. It looks like an LST if you squint, but if you look closer, INF is more like an LST of LSTs - it holds a constantly changing basket of LSTs inside. What makes it unique is that it provides much-needed SOL Liquidity to almost any LST on Solana, at no cost to the LST issuer, and low cost to the swapper.
I'll explain why this is important with an example:
Imagine you're a protocol team and you want your own LST. So, you spin one up: coolSOL is born. Now, you tell all your users they'll get special benefits in your protocol if they hold coolSOL.
And they do - very cool 😎
But shortly after, some of your users wish to swap coolSOL back to SOL. So, they go to Jupiter, and it shows red text 'minus 50% price impact' !! Your user, clearly confused and concerned, is thinking, "wait, is coolSOL legit? Have I just been scammed? I can't even get out of this thing without losing half?!"
Very quickly, they lose confidence in both coolSOL and your protocol.
INF is our solution to this problem.
Each epoch, INF unstakes SOL and holds it in reserve for anyone who wants to swap an LST for it. Importantly, our partner LSTs get priority access to this SOL with more favourable fees. When the LSTs are swapped through INF, the swapper pays a small fee, which contributes to the APY of the holders of INF. This Liquidity Providing is why INF tends to produce outsized returns over time.
So, why is growing INF positive-sum?
As INF grows, it can offer more SOL liquidity to our partner LSTs and their holders. And, importantly, the bigger its TVL, the more stake INF can contribute to our partner LSTs - by staking SOL in them.
By design, INF is:
a win for our partners (more TVL),
a win for their holders (more LST liquidity),
and a win for INF holders (strong APY).