Introduction
On July 2, the first-ever SOL staking ETF, launched by RexShares and Osprey Funds, officially went live, paving the way for dozens of future ETFs and potentially billions in capital inflows.
The RexShares ETF filing explicitly references liquid staking as a mechanism that may be utilized in managing fund operations. Given that crypto ETFs must meet the requirement of daily tradability, it is expected that many issuers will partially rely on liquid staking to fulfill this criterion.
With Solana’s liquid staking ratio currently at 11.3%, the introduction of staking ETFs is likely to accelerate adoption.
Sanctum, now the fourth-largest protocol on Solana by TVL and holding approximately 30% market share in the liquid staking space, is well-positioned to benefit from this emerging trend.
Below you’ll find our full thesis on Sanctum. The first pages focus on the protocol’s fundamentals. If you’re already familiar with Sanctum’s business model, we recommend starting from page 9, where we explore Sanctum’s growth catalysts alongside Staking ETFs.
Native Staking on Solana
Before diving into liquid staking, let’s first explore native staking on Solana.
When the network launched in 2021, it introduced an initial inflation rate of 8% to incentivize stakers who help secure the network. This inflation rate was designed to decrease annually by 15%, with a long-term target of 1.5%.
As of now, Solana’s inflation rate stands at approximately 4.5%. If you’re not staking your SOL, you’re being diluted by this inflation.
To mitigate this, you can delegate your SOL to a validator. In return, you earn staking rewards at the end of each epoch, which include both inflationary rewards and MEV-related incentives, such as Jito tips. However, native staking comes with trade-offs: your SOL is locked for the duration of an epoch, and if you choose to unstake, you’ll face a short unbonding period. While two days may not seem long, it can be a disadvantage in the fast-paced world of crypto.
The rise of Liquid Staking:
Liquid staking was introduced on Solana in 2022 to offer staking rewards without sacrificing liquidity. When you stake through a liquid staking protocol, you receive an LST that represents your staked position.
These tokens continue to earn staking rewards and can also be used across DeFi protocols to generate additional yield.
Liquid Staking landscape:
Currently, three protocols dominate this 38 million SOL market:
- Jito, with 15.11M SOL
- Sanctum and its partner LSTs, with 12.65M SOL
- Marinade, with 3.7M SOL
Jito and Marinade operate in a similar way. Unlike native staking, where you delegate your SOL directly to a validator of your choice, with Jito & Marinade, you deposit your SOL into a stake pool and receive a Liquid Staking Token (JitoSOL or mSOL) which represents your share of the total SOL held by the pool. The stake pool then delegates the SOL to validators and collects rewards over time. As rewards accumulate, the total SOL in the pool increases, which in turn raises the value of your JitoSOL or mSOL.
What makes Sanctum different ?
Next, we have Sanctum, which, drawing lessons from Marinade, Jito, and Ethereum’s liquid staking landscape, has chosen a different approach.
Sanctum has decided to unify liquidity across all Solana LSTs through a shared liquidity layer called Infinity.
Infinity is a unified liquidity pool that enables instant, seamless swaps between LSTs, eliminating the need to manually exit one stake pool and deposit into another. Infinity handles it all behind the scenes.
To gain exposure to Infinity, users can simply deposit LST or SOL directly into the pool to receive INF, the LP token representing a share of the Infinity pool.
What are Sanctum offerings?
Sanctum’s offering focuses on two key pillars:
- Best strategy to stake your SOL
When you deposit into Infinity, you receive INF, your share of the pool. Infinity is actively managed by algorithms that allocate capital toward the highest-yielding LSTs.
On top of that, 90% of the fees generated from LST swaps within Infinity are reinvested into the pool, increasing the value of INF over time. As a result, INF currently delivers the highest yield among Solana LSTs, 15% higher than the second-best option.
- Best protocol to launch an LST
Before Sanctum, launching an LST typically required bringing several million dollars to the table just to ensure sufficient liquidity within your stake pool.
Now, Sanctum streamlines the process by helping projects create their own LSTs and, if they have at least 1,000 SOL in external stake (≈ $150K), granting them access to the deep liquidity of the Infinity pool, along with several other benefits.
Since launch, Sanctum has enabled major players like Jupiter, Bybit, Drift & Crypto.com to launch their own LSTs. It also supported DeFi Dev Corp, the first publicly traded company to adopt a Liquid Staking Token, in launching dfdvSOL in collaboration with Sanctum.
Sanctum Business Model
Sanctum’s business model relies on three primary revenue streams. The largest source comes from monetizing its TVL (≃85%)
- Specifically, Sanctum charges a 5% fee on staking rewards generated by this TVL at the end of each epoch. Of that 5%, Sanctum retains 2.5% as revenue and redistributes the remaining 2.5% to its LST partners.
This model creates a sustainable and mutually beneficial structure. Partners can leverage Sanctum’s infrastructure to launch their own LSTs with minimal capital and effort, while earning 2.5% of the staking rewards.
- In addition, Sanctum collects 100% of the fees generated by its Reserve and Router components, as well as 10% of the trading fees within its Infinity Pool.
These two revenue sources together account for approximately 15% of Sanctum’s monthly income.
Sanctum since inception
Sanctum achieved PMF
Sanctum initially attracted its TVL through the “Wonderland Season 1” airdrop campaign, which ran from April to June 2024. The campaign was a success, with TVL growing from 2.2M to 5.9M SOL over that period.
But more importantly, after the campaign and airdrop, which distributed 10% of the token supply, TVL remained relatively stable, decreasing only 12%, from 5.9M to 5.2M SOL by August 2024.
Since that local low, TVL has entered a strong upward trend, now sitting at an ATH of 12M SOL (≃$1.8B), an organic growth of 130% in under a year.
The fact that TVL remained stable post-airdrop and has continued to grow in recent months is a strong indicator that Sanctum has achieved PMF.
With a TVL of 12M SOL, Sanctum ranks as the fourth-largest DeFi protocol on Solana, just behind Kamino (25M SOL), Jito (18M SOL), and Jupiter (15.7M SOL). Sanctum has no intention of slowing down. Their target is to reach 30M SOL in TVL by EOY.
What’s driving this TVL Growth ?
Sanctum owes much of its growing TVL to the success and expansion of its LST partners. Since the protocol’s inception, over 1000 LSTs have been created, with 27 of them now exceeding 10,000 SOL in TVL.
The three largest LST partners are jupSOL from Jupiter (5M SOL), bbSOL from Bybit (2.1M), and dSOL from Drift (1.6M), followed by INF, the LP token for Sanctum’s Infinity Pool (1.2M).
A special mention goes to DeFi Dev Corp and dfdvSOL, the first publicly traded company to launch and own LSTs on Solana. Powered by Sanctum, this initiative has been a strong success, recently entering the top 10 Sanctum LST partners by TVL, with 82,000 SOL in under a month.
We’ll take a closer look at dfdvSOL later in this analysis.
Sanctum’s revenue
The protocol has now surpassed $3 million in cumulative revenue since launch.
In January, the team made a strategic decision to revise its fee structure to boost protocol revenue, and the impact was immediate. As shown in the chart, monthly revenue increased by 760% from December 2024 to January 2025.
Since the change, Sanctum has generated an average of $445,000 in monthly revenue, which translates to an annualized revenue of $5.3 million.
Sanctum Catalysts:
In our view, there are several strong catalysts ahead for both Sanctum and the broader liquid staking market over the coming months and years.
Solana’s liquid staking ratio has been on a consistent upward trend, from 8% in December, when we published our initial analysis, to 11.3% today, representing a 41% increase in just six months.
We believe this ratio will continue to rise. Liquid staking offers a superior staking experience: higher yield, no lock-up period for unstaking, and the ability to deploy your LSTs across DeFi. That last point, in particular, has seen major improvement in recent months.
DeFi’s Growth Fuels LST Adoption
Solana DeFi is expanding rapidly. TVL has reached an all-time high in SOL terms and is approaching new highs in USD as well. This growth is driving new use cases for LSTs.
One notable example is Kamino, a lending and borrowing protocol that has introduced dedicated markets to enhance LST utility. To date, over $968M worth of LSTs have been supplied on Kamino alone, with the majority coming from INF and Sanctum’s partner LSTs.
This allows users to borrow against their LSTs while continuing to earn native staking rewards, a significant step forward in capital efficiency.
As LST use cases continue to grow, we expect Solana’s liquid staking ratio to rise accordingly.
Impact of SIMD-96: opportunity for Sanctum Validator LSTs.
SIMD-96, a network upgrade launched on mainnet in February 2025, introduced a change to the distribution of priority fees, which are fees paid by users to prioritize their transactions during periods of network congestion.
Previously, 50% of these fees were burned, and the remaining 50% were distributed to validators. Following the upgrade, 100% of the priority fees now go to validators.
This represents a meaningful source of additional revenue for validators. If redistributed to delegators, it could significantly enhance staking yields.
However, there’s currently no native mechanism for validators to redistribute these fees. Doing so manually would be time-consuming, technically complex, and expensive, especially given the large number of individual stake accounts.
- The solution is liquid staking.
By having their own LSTs, validators can route these fees into their stake pools in a single transaction, increasing the value of the LST and enhancing yields.
Sanctum seized this opportunity by creating a custom LST for each validator, allowing them to claim it and begin distributing both block rewards and priority fees.
Several validators have already adopted this model; notably, rkSOL and mangoSOL have each surpassed 100,000 SOL in TVL, while adraSOL has reached 52,000 SOL.
Validators are strongly incentivized to claim their Sanctum-generated LSTs in order to stay competitive. This, in turn, drives value for Sanctum, which generates revenue based on the TVL of its partners (2.5% of staking rewards)
Companies with Sol reserve: The case of DeFi Dev Corp.
One trend Sanctum could capitalize on in the coming years is the growing interest from corporate entities similar to MicroStrategy, companies whose objective is to accumulate as much SOL as possible.
- But what should they do with this reserve of SOL?
DeFi Dev Corp (Nasdaq: DFDV) is setting the precedent as the first publicly traded company to create and own an LST on Solana with the launch of dfdvSOL.
For companies looking to replicate this strategy, the advantages are compelling. By investing in their own LST, they can increase their SOL per share through staking yield while maintaining full liquidity.
It also unlocks a new revenue stream: as a Sanctum partner, companies receive 2.5% of the staking rewards generated by their LST. The more deposits they attract, the higher their TVL, and the greater the income. Another lever to grow their SOL per share.
With 82,000 SOL in TVL, dfdvSOL is off to a strong start, already ranking among Sanctum’s top 10 LST partners. And growth is expected to continue., DeFi Dev Corp holds over 620,000 SOL and is likely to allocate more capital to its LST. In fact, the company is actively raising additional funds to expand its SOL holdings.
DeFi Dev Corp won’t be alone for long. Other companies like Upexi (680,000 SOL) and Sol Strategies (479,000 SOL) may soon follow its lead.
Staking Sol ETF coming
This is arguably the most important catalyst for Sanctum.
June marked a turning point for Solana ETFs. On June 10, the U.S. SEC requested that prospective Solana ETF issuers submit amended S-1 filings, a clear signal of progress toward approval. Just weeks later, on July 2, REX Shares and Osprey Funds launched the first Solana Staking ETF, paving the way for dozens of other ETFs currently in the pipeline and poised for imminent launch.
These SOL staking ETFs are expected to attract billions in inflows within the first year. In fact, we believe they could surpass Ethereum staking ETFs in inflow volume, given that SOL’s smaller market cap allows for greater upside volatility, and its staking yield is materially higher (≃8% vs. ≃2%).
- Why is this positive for liquid staking?
SEC filings explicitly confirm that liquid staking will be used in these ETF structures. For example, the REX-Osprey SOL + Staking ETF filing states:
“The Funds will also earn staking rewards by investing in liquid staking protocols, which are staking protocols that provide a freely-tradeable digital token called a ‘Liquid Staking Token’ (e.g., JitoSOL)…”
This makes perfect sense. Daily tradability is a fundamental requirement for crypto ETFs, both from a regulatory and investor protection standpoint. We expect that many issuers will partially rely on liquid staking to fulfill this criterion.
- Competitive Landscape
The Solana liquid staking ecosystem is currently led by Jito, Marinade, and Sanctum, all well-positioned to benefit from this ETF-driven momentum. However, Marinade appears to have a first-mover advantage: so far, it is the only staking provider explicitly mentioned in a Solana ETF filing: the “Canary Marinade Solana ETF”.
To serve institutional demand, Marinade has launched Marinade Select, an institutional-grade offering featuring a KYC-verified, curated validator set, bonded for accountability and optimized for compliance, decentralization, and performance.
That said, Sanctum may hold a unique competitive edge: it is the only protocol currently enabling ETF issuers to create and manage their own custom LSTs, fully tailored to their operational and structural requirements.
Game on.
CLOUD: Sanctum Governance Token
At present, CLOUD primarily functions as a governance token. To participate, users simply stake their CLOUD tokens and gain the ability to vote on governance proposals. Sanctum has introduced a novel approach to governance by partnering with MetaDAO, a new governance model based on market forces, similar in spirit to the prediction-market platform Polymarket.
Supply Overview
CLOUD has a total supply of 1 billion tokens, with 33% currently in circulation. At launch, 18% was unlocked: 10% for the initial airdrop and 8% to seed liquidity in the LFG launch pool.
On July 19th, 2025, the largest token unlock to date will take place, releasing 13% of the total supply, 8.55% allocated to the team and 4.45% to investors. An additional 25% is scheduled to unlock gradually through July 2027, comprising 16.45% for the team and 8.55% for investors.
Despite the size of these unlocks, Sanctum is currently profitable, reducing pressure on the team to sell. Potential sell pressure is more likely to come from the investor allocation.
By July 2027, 58.5% of the total supply will be unlocked. The remaining 41.5% is held in reserves: 28.5% in the community reserve and 13% in the strategic reserve. These are intended for initiatives like the ASR1 airdrop (1.5% of supply), rewarding active governance participants.
To date, reserve usage has been minimal, and a large portion may remain locked in the long term.
Token transparency
On June 24, Sanctum also released a comprehensive audit of its CLOUD token, detailing all movements since launch. This is a strong transparency initiative that once again highlights Sanctum’s commitment to setting a standard and driving positive change within the industry.
Sanctum, alongside MetaDAO, is the only project to have achieved a perfect score of 40/40 under the newly launched Token Transparency Framework, an initiative by Blockworks aimed at enhancing disclosure standards across crypto projects.
Revenue sharing?
There is currently no revenue-sharing mechanism in place, which is understandable given that Sanctum remains in its early stages. At this phase, reinvesting revenue into growth and ecosystem expansion is likely the most impactful strategy. However, as revenue scales, it is possible that a fee switch could be introduced in the future.
Risks and Considerations
Security Risks
As with any DeFi protocol, liquid staking through Sanctum carries inherent risks, including smart contract vulnerabilities, LST depegging that could trigger DeFi liquidations, and validator-related risks, among others.
While zero risk doesn’t exist, Sanctum has taken meaningful steps to mitigate these concerns. First, the Sanctum stake pool program is a fork of the Solana Labs stake pool, which is the most audited smart contract on Solana.
Additionally, upgrade authority for Sanctum’s stake pool programs is currently controlled by an 11-member multisig. Any modification to the LST program must be approved through a majority vote, ensuring strong governance and security oversight.
Since launch, the protocol has safely handled several billion dollars in value over more than a year, with no known exploits to date. While no system is entirely immune to future threats, this strong audit foundation and incident-free history speak to the protocol’s reliability.
Moreover, the Solana Foundation recently deposited 400,000 SOL (≈ $60M) into Sanctum’s Infinity Pool, further underscoring their trust in the protocol.
Some Considerations
Moreover, the Solana Foundation recently deposited 400,000 SOL (≈ $60M) into Sanctum’s Infinity Pool, further underscoring their trust in the protocol.
We also want to highlight a few key considerations regarding Sanctum. First, as outlined in the Business Model section, approximately 85% of Sanctum’s revenue currently comes from staking rewards (inflation and MEV).
Given that Solana’s inflation rate decreases by 15% annually with a long-term target of 1.5%, Sanctum’s future revenue will become increasingly dependent on MEV, and therefore heavily tied to on-chain activity on Solana.
While we remain confident in Solana’s long-term outlook, this is a risk worth considering.
Additionally, Sanctum operates in a highly competitive space alongside well-established players such as Jito and Marinade. The liquid staking market shows strong growth potential, but execution will be critical.
The Sanctum team must move decisively to capture these opportunities ahead of their competitors in order to grow its market share.
Final Thoughts:
Currently sitting at 11.3%, Solana’s liquid staking ratio is expected to continue rising, driven by the introduction of staking ETFs and the various catalysts outlined in this thesis.
With approximately 30% market share, Sanctum is well-positioned to capitalize on these trends and grow its TVL toward its target of 30 million SOL by year-end, a milestone that would significantly boost protocol revenue.
A key lever to achieving this goal will be the continued growth of existing LST partners, as well as the onboarding of new strategic collaborators.
Sanctum has already attracted major players such as Bybit, Crypto.com, and DeFi Dev Corp, and we anticipate this list will continue to grow. Could an ETF issuer be next?
The coming months will be crucial for Sanctum, and we look forward to seeing how effectively they can leverage these catalysts.
