Whitelisting bSOL (wrapped stSOL on Terra) as collateral to the Anchor Protocol will supplement the UST deposit rate with Solana staking rewards, and allow stSOL holders to access to collateralized lending and ANC liquidity mining rewards.
We want to suggest whitelisting of bSOL to diversify Anchor’s available collateral base and supplement the protocol with staking rewards provided through industry-leading node operators of one of the top 10 cryptoassets and layer-1 ecosystems: Solana.
Lido is a multi-network liquid staking protocol currently live on Ethereum, Terra, Solana, Polygon, and Polkadot/Kusama - with further protocols such as Avalanche in the making.
By depositing into Lido, users receive liquid tokens that represent their staking positions with the protocol, which diversifies the stake with professional node operators selected by the Lido DAO, accruing staking rewards in the process. The liquid token, in Solana’s case stSOL, can be transferred, traded, and used in DeFi applications to leverage, hedge, earn rewards for providing liquidity, and more.
stSOL is currently used by over 11,000 accounts and has a market cap of $350m. stSOL supports at the time of writing around $150m+ in liquidity on decentralized exchanges on Solana and Terra (Astroport) and is listed on FTX. In addition, stSOL is integrated on various other DeFi/lending protocols on Solana with over $200m TVL.
bSOL is a wrapped version of stSOL on the Terra and Solana blockchains. Users are able to exchange (wrap) stSOL to bSOL and back (unwrap). While stSOL is wrapped to bSOL all staking rewards from Lido will be converted to UST and can be claimed by bSOL owner. Once bSOL is deposited as collateral to Anchor, all the staking rewards are accumulated by Anchor to be distributed to aUST holders, supplementing Anchor’s yield.
- Stake SOL with Lido and get stSOL.
- Wrap stSOL to bSOL on Solana (holder gets staking rewards on bSOL in Terra).
- Send the bSOL through Wormhole from Solana to Terra, where it ends up as Wormhole-wrapped bSOL (wsbSOL).
- Convert the wsbSOL to native bSOL using Anchor.
- Deposit bSOL as collateral to Anchor and borrow UST on that collateral.
- Pay borrow APR and receive rewards in ANC, distributed as incentives to borrowers.
Once secondary markets for bSOL exist, users could skip directly to 5. Ending the borrowing process described in 5. means users get their bSOL back and can continue to claim/earn staking rewards, unwrap back to stSOL, etc.
- Bringing more TVL to Anchor by onboarding Solana stakers that use stSOL as collateral.
- Support the Anchor yield with Solana staking rewards.
- Enable leveraged Solana staking.
- Increase Solana decentralization by supporting stSOL and its node operators
- Diversity the Anchor yield, to make it less exposed to the volatility in rewards of other networks
(Values as of 2022-04-13):
APY in SOL (since launch): 5.83%
APY in SOL (based on 60 days, epoch 279–299): 5.98%
APY in SOL (based on 30 days, epoch 289–299): 5.91%
Whitelist bSOL as collateral on Anchor to increase TVL through stSOL liquidity and APY through stSOL rewards converted to UST.
The proposed LTV is 60%.
- Smart contract/technical risks: Lido faces smart contract risks. To mitigate these, Lido for Solana has been audited multiple times by Neodyme, Brahma Systems, and it was peer-reviewed by engineers from the Solana Foundation. The program that implements the Anchor integration has been audited by Neodyme. Furthermore, Lido for Solana offers a $2M bug bounty, which will cover the Anchor integration program as well.
- Counterparty risks: Lido is a DAO. Decisions in the Lido DAO are made through proposals and votes — community members manage protocol parameters, node operators, governance multisig holders, and more. The Lido staking infrastructure for stSOL consists of handpicked node operators which are selected by the Lido Node Operator Subgovernance Group according to stringent criteria. Because Lido governance happens on Ethereum, a 4/7 multisig that consists of node operators and ecosystem partners is responsible for executing governance decisions on Solana.
- Staking risks: stSOL faces risks of lowered rewards from node operators not performing. To mitigate these, Lido works only with best-in-class validators with a track record of success. There are no slashing risks on Solana, as slashing is not currently part of the protocol.
- Liquidity risks: Staking rewards earned through stSOL are converted to UST on Solana through the stSOL/UST pool on Orca. If this pool is low on liquidity, Anchor could get a bad deal on the rewards. The liquidity in this pool has fluctuated between $1.1M and $8M over the past months, but if Anchor becomes a heavy user of this pool, that would likely attract more liquidity. In addition, adding further LDO and LUNA incentives to this pool could improve liquidity depth of this pool as well.
- Bridge risk: bSOL is bridged to Terra through Wormhole’s Portal Token bridge and can lose all value if the bridge is compromised.
Lido for Solana TVL as seen by Defi Llama, since launch:
Lido on Solana List of DeFi Integrations: Stake | Lido
All Solana-side smart contracts are free and open source software and can be built reproducibly (also called verifiable builds).
Terra (Contract) Addresses
- CW20 bSOL Token (Wormhole-wrapped): terra1c3xd5s2j3ejx2d94tvcjfkrdeu6rmz48ghzznj
- CW20 bSOL Token (Terra native): (to be deployed)
Solana (Contract) Addresses
- stSOL: 7dHbWXmci3dT8UFYWYZweBLXgycu7Y3iL6trKn1Y7ARj
- bSOL: EbMg3VYAE9Krhndw7FuogpHNcEPkXVhtXr7mGisdeaur
- Lido for Solana program (“Solido”): CrX7kMhLC3cSsXJdT7JDgqrRVWGnUpX3gfEfxxU2NVLi
- Anchor integration program (“Anker”): (to be deployed)
Neodyme, the top auditing firm in the Solana ecosystem, conducted an audit of the Solana-side smart contract (called “Anker”) between January 10th and February 18. The report is available in the repository. Neodyme concluded:
“The code has been written to a high standard, and the team expertly responded to all questions. (…) Nevertheless, the audit revealed two major vulnerabilities, which were reported and subsequently fixed by the Anker team.”
For a full list of previous audits and the audit reports, see the audits section in the documentation.