[Proposal] Expanding Sanctum's Infinity Token Ecosystem

[ry_guy]

Proposal: Expanding Sanctum’s Infinity Token Ecosystem

Overview

This proposal suggests expanding Sanctum’s Infinity token ecosystem by creating specialized baskets of Liquid Staking Tokens (LSTs). These new Infinity tokens would offer users more targeted investment options, potentially increasing Total Value Locked (TVL) and enhancing Sanctum’s competitive edge in the LST market.

The current Infinity token, representing a basket of all Sanctum LSTs, has proven successful with deep liquidity pools. Building on this success, proposing the creation of spin-off Infinity tokens that cater to specific investment strategies, risk tolerance, and ecosystem preferences.

Comparative Analysis: Infinity Token Spin-offs vs TradFi Index Products

The proposed Infinity token spin-offs share many similarities with various index products and ETPs in traditional finance. This analysis explores these parallels, highlighting how Sanctum can leverage proven TradFi strategies while capitalizing on the unique advantages of blockchain technology.

Aspect	Traditional Finance	Infinity Tokens (DeFi)
Product Diversification	Wide range of index funds and ETFs catering to different sectors, risk profiles, and investment strategies.	Various token baskets (e.g., High-Yield, Stability-Focused, DeFi utility, Governance impact, DEX based) to cater to diverse investor preferences in the LST space.
Thematic Investing	Sector-specific or theme-based ETFs (e.g., technology, sustainability, dividend growth).	Thematic baskets like DeFi Integration Infinity or Governance-Weighted Infinity, aligning with specific DeFi trends or values.
Rebalancing Mechanisms	Regular rebalancing of index components based on predefined criteria (e.g., market cap, fundamental factors).	Similar rebalancing for LST baskets, potentially with higher frequency enabled by blockchain efficiency.
Accessibility/Fees	ETFs provide retail investors access to diversified portfolios with lower entry barriers and fees (especially for passive products).	Similar benefits in the DeFi space. Potential for reasonable but competitive fees due to low-cost nature of Solana blockchain.
Transparency	ETFs disclose holdings regularly, usually daily.	Real-time transparency of basket compositions through on-chain data.
Creation/Redemption Process	Authorized participants manage creation/redemption to maintain price alignment with underlying assets.	Smart contracts can automate this process based on pre-defined criteria, potentially increasing efficiency and reducing costs.
Regulatory Environment	Heavily regulated, with strict requirements for fund creation and management.	Operates in a more flexible regulatory environment, allowing for faster innovation but requiring careful consideration of evolving regulations, particularly under a new U.S. Presidential administration.

Proposed Infinity Token Categories

Note: Branding decisions would ultimately be deferred to the team. These are just suggestions.

1. High-Yield Infinity (hyiSOL)

   • Composition: Top 10 Sanctum LSTs with the highest APY
   • Target Market: Yield-seekers comfortable with higher risk

2. Stability-Focused Infinity (sfiSOL)

   • Composition: LSTs with lowest volatility and consistent returns
   • Target Market: Risk-averse investors

3. DeFi / DEX Infinity (ddiSOL)

   • Composition: LSTs most commonly used in DeFi protocols
   • Target Market: Users active in the broader DeFi ecosystem

4. Governance-Weighted Infinity (gwiSOL)

   • Composition: LSTs weighted by governance participation rates
   • Target Market: Users interested in protocol governance

5. Validator Diversity & Decentralization Infinity (vdiSOL)

   • Composition: LSTs with the most distributed stake across validators
   • Target Market: Users prioritizing network decentralization

6. Tokenomics-Optimized Infinity (toiSOL)

   • Composition: LSTs with favorable long-term tokenomics (e.g., high MEV, token burn components)
   • Target Market: Long-term holders focused on token value appreciation

Implementation Strategy

Concept Refinement and Research

• Conduct community surveys to gauge interest in different Infinity token categories
• Analyze on-chain data to identify trends in LST usage and performance
• Produce detailed reports backed by fundamentals on each proposed Infinity token category, including potential benefits, risks, and tokenomics

User Education and Onboarding

• Develop comprehensive, easy-to-understand documentation for each new Infinity token
• Create high-impact educational content explaining the benefits and risks of each token

Marketing and Outreach

• Develop targeted marketing strategies for each new Infinity token, highlighting their unique value propositions
• Create content (articles, podcasts, AMAs) featuring the team and community members highlighting the benefits of an expanded Infinity ecosystem
• Leverage existing Sanctum DeFi relationships to optimize launches. DEX / Top DeFi protocol token could be particularly successful here

Long-term Implications & Thesis

• Increased TVL through diversified offerings
• Enhanced ecosystem retention by catering to various investment strategies
• Expand on competitive differentiation in the LST market with advanced asset pooling strategies
• Increased utility and demand for CLOUD tokens through governance participation
• Diversified staking yield streaming allows for more dynamic Solana exposure
• Compete with burgeoning crypto index providers
• Long-term bull case: potential partnerships with TradFi market participants as growing integration of digital asset based exchange traded product continues, likely impacting the Solana ecosystem in the future.

Conclusion

Expanding the Infinity token ecosystem aligns with Sanctum’s vision of innovation in the LST space. By offering more specialized investment options, Sanctum can attract a broader user base, increase TVL, enhance decentralization of the Solana network, and solidify Sanctum’s position as a leader in liquid staking solutions.

Welcoming team & community feedback and look forward to collaboratively refining and implementing this proposal if the community is on board!

[Halfa]

wow

this

is

cool.

Sanctum Aligned

[Bengshark]

quite curious on Stability-Focused Infinity (sfiSOL), Is there any perks on why people will hold it when LST can’t depeg?

[ry_guy]

@Bengshark
The way I envisioned a product like this would be a pool of LSTs with the most TVL / control the most stake or have longer track records of good validator distribution. I’ll admit probably the weakest concept.

On your last point, I’d argue there is still a non-zero chance of LSTs depegging from the value of SOL. Especially if it’s a very low liquidity token. While recognizing that the function of staking generally at least protects principal of SOL (given no slashing on Solana), there is also the risk of validator misallocation (e.g. operators of an LST stake to bad validators that take 100% commissions or do not substantially share staking rewards with stakers).

Will admit that sfiSOL LST allocations would require a more defined methodology to determine the most established LSTs from reputable protocols (Think Jito / Marinade).

Any other thoughts on other elements of the proposal?

[Bengshark]

oh so it will contain LST with the most popular like jupsol hsol, etc? interesting!

I’m all in with focusing on some lst, but as far as i know, INF APY comes from LST swapping fees too, do you have any plan on where it should go, or should it goes to different index lst? thankyou!

[magldaron]

Hello ry_guy! Nice and well-written proposal! However, there are a few points I don’t quite understand.

Since it would be a pool of LSTs represented by an LST, such as ddiSOL, what would be the benefit of holding ddiSOL?

We agree that some LSTs are more commonly used in DeFi than others, but holding ddiSOL wouldn’t allow us to use those LSTs directly in DeFi, so what’s the benefit?

Same question for gwiSOL

Maybe you could help me understand this point.

Otherwise, other proposed lst could be a good idea !

[ry_guy]

@Bengshark that’s a really good point and an oversight on my part, re: swapping fees.

Probably would be best to keep all the fees flowing to INF. The value of these new tokens would be for investors to get diversified exposure to certain themes in the LST market. I don’t see any reason for Sanctum platform fees to accrue to anything but INF.

[ry_guy]

Thanks for the thoughtful reply @magldaron

Let’s zoom out on this proposal to understand what I think INF token spin offs could accomplish.

The main use case is for the Sanctum platform to have native tokens for diversified exposure to different nooks and crannies of the LST market.

In a way, this is just further iterating on the same concept that INF is already accomplishing by whitelisting (after due diligence) tokens for the “Sanctum List”.

I just see opportunity for more focused exposure (via asset pooling) based on the categories I outlined (as opposed to full exposure to the Sanctum list + getting rewarded from platform fees, e.g. INF).

To your specific points on ddiSOL and gwiSOL, the value prop comes from proprietary methodology (TBD) for the various Sanctum asset pooling strategies (the INF token spin offs), which would create demand for each different strategy. ddiSOL, for example, would likely come to have it’s own unique defi applications because it can access deep liquidity from Sanctum. Want to reiterate though that the main function of these proposed tokens would be for investors (retail, institutional, or otherwise) to put on specific exposure to the areas of the market they are most bullish on. That could be ddiSOL specifically, or it could be any of the others for a variety of reasons / investor preferences.

Long way of saying that having an “INF wrapper” on these various strategies is by definition valuable and marketable. Think about how ETF companies are all under one branded umbrella which creates value for their entire lineup of products.

Happy to dive deeper but hopefully this context brings a bit more clarity.

[magldaron]

Thanks for your reply!

I think I understand what you mean. If we look at the bigger picture, the goal isn’t necessarily to hold multiple LSTs and their individual utilities, but rather to invest in a sector we’re bullish on. For example, if I’m bullish on DeFi, I might prefer holding an “ETF” of LSTs that are strongly integrated into DeFi because I believe their APY could increase in correlation with the expansion of DeFi ?

[Bengshark]

Totally agree, index LST idea is cool!

[cee_808]

also dig the idea, likely a good update to add the roadmap once the current product line matures in TVL.

[Tuuxx]

GM and thank you for your well-written proposal, @ry_guy!

On my end, I either don’t fully understand it, or I don’t support it.

Your definition of “Infinity Tokens spin-off” doesn’t quite align with the concept of ETFs and indices in traditional finance in my opinion.
Solana LSTs (Liquid Staking Tokens) are all built on the same SPL program, and once an LST is integrated into the Sanctum router, it can’t really depeg, and if it does, technically all other LSTs integrated into Sanctum would depeg as well.
So, the downside risk is essentially the same for any LST within Sanctum. The only differences are the yield (which depends on several factors), the team behind the LST, and the project they are pushing.

Currently, users have four choices:

1. Support all LSTs and the Sanctum protocol (providing “deep liquidity for all LSTs”) → buy $INF
2. Maximize LST yield by choosing the best-performing LST here: Starke Validator LST Performance
3. Support a specific team and be willing to direct part of your LST yield to support their project(s)
4. Access exclusive content or communities by being ready to forego all your yield.

In all these scenarios, your Solana capital remains protected (as long as SPL program is safe, ofc). The only financial difference is in the yield.

I am personally not in favor of complicating the current model by creating multiple versions of $INF.

However, the idea of replicating traditional finance models in Web3 through tokenized indices or ETFs is excellent and has already been explored by several promising projects:

• Symmetry: You can create your own fund or invest in someone else’s, receiving a token that represents your investment in the selected assets.
• Carrot: You deposit liquidity and receive $carrot in return, which reflects the real-time value of the DeFi investments made by the team (mainly stablecoins lending).
• Synatra: Similar to Carrot, but the team invests in riskier assets, which so far offer a higher yield.
• JLP/FLP.X: Tokens that represent shares in liquidity pools composed of multiple cryptos (USDC/SOL/ETH/BTC/other DeFi tokens), whose value also increases with PERP trading fees from platforms like Jupiter and Flash Trade.
• ISC: A new “stablecoin” pegged to real-world assets like equity, bonds, commodities, gold, cash, etc., rather than the dollar or euro.

So, while your idea is definitely solid, I don’t think Sanctum should go down this path. There are already many competitors in this space, and most issues have been addressed.

Last but not least, I believe that the Sanctum DAO governance should determine the composition of the $INF basket. This way, the community can decide where to strike the balance between maximizing yield and supporting innovative teams and projects.

[JohnnyTheClown]

could the indexing be done much more simply by working along side drift/kamino/Meteora etc to create a pool you deposit into to give access to the LSTs with in given sector