Sui Network, a Layer 1 blockchain and smart contract platform, has launched functionality that enables liquid staking as part of its latest network upgrade – ensuring developers can offer services allowing token holders to receive derivative tokens proportional to the value of their staked SUI tokens.
Third-party liquid staking apps on Sui will now be able to offer the benefits of liquid staking, without concentrating staking power in one or more validators. This is possible due to the way the network is built, meaning it continues to offer more incentives for staking and ultimately greater network security.
Liquid staking generally consists of two parts. Firstly, a third-party Move package issues a derivative token in the same amount as the staked token. A stake of 100 Sui would receive 100 ‘stSUI’. In this case, stSUI is a hypothetical derivative token issued by a third-party package. Users can then utilise the derivative token for other purposes, or be traded and loaned.
The second aspect relates to the original token, which remains staked, continuing to help secure the network as part of the consensus process.
Addressing “a clear need voiced by our community members”
Through the changes based on Sui Improvement Proposal (SIP) #6, formulated by a proactive team within the Sui community, Sui developers will now be able to offer fully non-custodial liquid staking solutions. Community approval was instrumental in launching SIP #6 on the Sui network.
Greg Siourounis, managing director of the Sui Foundation, said: “Adding native support for liquid staking dApps as part of the Sui core technology addresses a clear need voiced by our community members who wanted to participate in securing the Sui Network without sacrificing liquidity.
“We are thankful for the continued dedication and ingenuity displayed by the Sui community in generating and approving SIP #6, and we look forward to seeing how developers will use this new functionality to build on Sui.”
Liquid staking has the benefit of promoting decentralisation by offering greater utility for stakers and can therefore increase the incentives to stake and secure blockchain networks. Constraining the stakers’ choice of validator has the opposite effect by concentrating power in one or a few validators on the network. Sui’s liquid staking formulation aims to avoid this.