What’s next for Socean? Staking Alliance, unstake.it, Pathfinders Validator and NFT Collection
- We think that stake pools, as they stand, have no product-market fit.
- But we love staking and we want to continue to build on it. We do this in three ways:
- We’ve built out the Staking Alliance to support good validators and support the move to single-validator stake pools.
- We’ve built out unstake.it to provide deep liquidity to all stake accounts and stake pools, allowing all stake accounts to be used in DeFi.
- We’re rebranding to run our own validator and revitalising the community with our Pathfinders NFT collection.
Hey folks. It’s time for a long-overdue update. We’ve been quite quiet over the past six months. We’ve struggled with our thinking that stake pools in their current incarnation do not have product-market fit. We want to explain our thought process, talk through what we have done, and what we’re doing going forward.
We started Socean because we wanted to solve these three problems:
- How can we best support good validators?
- How can we allow staked SOL to access all of DeFi?
- How can we give the best risk-free yields to stakers?
For the past six months, we’ve been thinking hard about how best to solve these three problems. We don’t think that stake pools are the best way to do so. Let us explain why:
Supporting good validators: Since inception, we’ve delegated to the highest APY validators that are not in the superminority. But this excludes many excellent validators. We’ve seen many great validators build open-source staking dashboards and websites (jStake, Solana Compass, Stakewiz, Cogent), contribute code to the Solana codebase (Zantetsu), and provide delinquency notifications to stakers (Laine). Additionally, many validators get into the superminority by providing great value to Solana. There is thus a disconnect between who stake pools delegate to and the value a validator provides to Solana.
Letting staked SOL access all of DeFi: By issuing a token (e.g. scnSOL) that can be instantly swapped for SOL, the stake pools allow staked SOL to be used in DeFi. For example, scnSOL can be used as collateral to borrow USDC. However, many people have a particular validator that they prefer. We didn’t like the fact that people had to choose between staking with their preferred validator and having access to DeFi.
Giving the best risk-free yields to stakers: Socean uses Bayesian mean-variance optimisation, which gives the best risk-adjusted return from several volatile financial assets. Empirically, however, we’ve found little risk-return tradeoff: the top validators stay high-performing. Unlike equities, the factors underlying validator performance are deterministic and well-understood. Therefore, delegating to a bunch of validators does not in practice give us better risk-adjusted returns than picking a single best validator. Even if Socean delegated to the single best validator, it would by definition do worse than that validator, because Socean charges a fee on top of the validator’s commission.
Several have mentioned that stake pools lack product-market fit. And they’re right! In fact, we’ve known this for many months. Apart from the issues we mentioned above, we also see strong empirical evidence: stake pool deposits have stagnated across the board, despite generous liquidity mining incentives. The incumbents have given out millions of dollars of liquidity mining rewards weekly to secure a small amount of recurring revenue. This may well be the right approach to grab market share, but we aren’t interested in playing that race to zero.
Lastly, we want to apologise for not communicating well with you. We struggled in silence with these problems, and didn’t keep the community updated. We have been thinking and building, but people thought we were dead.
What’s next for Socean?
Our first love is staking, and even though we don’t think that stake pools are the right approach, we still believe in trying to solve the three problems we laid out. I want to share with you what we have built over the past few months, and the stuff that we are continuing to build.
We’re building the Staking Alliance to improve staking on Solana
First and foremost, we want to support good validators that provide value to Solana. So we’re building the Staking Alliance.
The Solana Staking Alliance is a credibly-neutral, community-driven organisation whose goal is to grow and enhance staking on Solana. It’s something that’s close to our hearts and has been in the works for almost a year now.
In the light of the FTX debacle, it became clear to us that the Alliance was needed more than ever. We’ve thus accelerated the process and brought the staking community together to bring life to the Alliance.
It’s still early days, but the Alliance is starting to take shape. Many excellent validators and stake pools have joined the Alliance, and have proposed many improvements to Solana. Here’s a list of the cool things that Alliance members have worked on:
- Pumpkin’s Pool wrote a helpful guide on how validators can set up alerting with PagerDuty and Watchtower
- Mainnet Benchmark Test: a benchmark to see just how many transactions Solana can support
- omniSOL: a new liquid staking primitive that allows any staked account to be used in DeFi
- Shinobi’s proposal and PR: punishes validators that cheat (“vote lag”) to improve their performance
One of the core proposals that we’re spearheading with the Alliance is the Alliance Stake Pool. The Alliance Stake Pool is a program that delegates SOL to small and promising validators and supports them towards self-sustainability in 12 months. You can read more about it here.
We believe the Alliance has a lot to offer to Solana. Please join the Alliance and improve staking on Solana! You can join the Discord, participate in the discussion on Discourse and follow our Twitter.
We’re unlocking deep liquidity for all staked SOL
Our second goal is to let all staked SOL access DeFi. The holy grail is a world where staked SOL from any validator can be used directly in DeFi, without the need for stake pools. In order to do this, however, you need to be able to dispose of staked SOL immediately — you need a source of liquidity for staked SOL.
So we built unstake.it, a service that lets you instantly unstake your staked SOL — no matter where you stake it to! Since launch, we have serviced almost a million dollars worth of SOL. Unstake.it looks across all of Solana to unstake staked SOL at the cheapest rate. We’ve recently launched an update that gives deep (~5M USDC) liquidity to even the smallest stake pool.
We believe that unstake.it is a better way to provide liquidity to staked SOL than any existing solution — better than even stake pools. It is optimally capital-efficient, and doesn’t fragment liquidity.
We’re building the world’s best community-led validator
Our final goal is to give the best risk-free yields to stakers. To this end, Socean will focus our efforts on building the world’s best community-led validator: the SCN Pathfinder.
We make three core promises to you:
- Pathfinder will have the best staking returns across all of Solana.
- Pathfinder will be fiercely community-driven.
- Staking to Pathfinder will be really fun.
Why are we running our own validator? By running our own validator, we can cut out the validator’s commission, and give you even higher returns. Plus, our team has the technical expertise to improve upon even the top validators today. With the help of our friends like Ben (Cogent Crypto), Michael (Laine.za) and Zantetsu, we’ve been able to identify several optimisations to the validator codebase, which we believe will give our validator the highest performance out of all validators. Running a validator also allows us to unlock exciting new sources of yield, like MEV/arbitrage, to further increase risk-free returns.
We’ve cultivated many personal relationships with validators, and had the good fortune to meet them in person at Breakpoint. One thing struck us: these are people who are intelligent, kind, and incredibly passionate about Solana. All of them encouraged us to start a validator.
Now more than ever, Solana needs good, passionate people to come together. We don’t just want to run a validator. We want to build a community that’s as passionate about Solana as we are. And we won’t make the mistake of building in isolation anymore: we will open up from day one.
In order to bring everyone together on our journey, we’re launching a collection of NFTs we call the Genesis Pathfinders. The Genesis Pathfinders will be essential in our journey to build, grow, and secure Socean’s future.
Pathfinders is a 10K supply NFT collection launching on Solana. Inspired by Studio Ghibli, the world of Pathfinders is vast, mysterious, and filled with wonders. Join five unique factions and discover what lies out on the Endless Ocean. Explore an immersive fantasy world and free your inner child in a narrative and community-driven experience that celebrates resilience, joy, and hope.
Uniquely for NFTs, all Genesis Pathfinders will have a chance to win SOL forever. The mint proceeds will be staked to SCN Pathfinder. At the end of every epoch, the staking rewards from the mint proceeds will be pooled together in a “staking jackpot”, and all Genesis Pathfinders will have an equal chance to win the jackpot. If no Pathfinder wins, the jackpot will roll over to the next epoch, so the prize gets bigger and bigger.
💰 As a special treat, our first jackpot will have an additional 5,000 USDC added to the prize pool: 2,000 USDC to the grand prize, and 3,000 USDC for all the other prizes. 💰
These Genesis Pathfinders aren’t just lottery tickets. We have big plans for the Pathfinders universe. The Genesis collection will be the first step in an expanding story-driven universe rich in lore and content. Genesis Pathfinders will get first dibs on future NFT drops, sneak peeks at upcoming content releases, and be able to shape the development of the Pathfinders universe on our forums and Discord.
And we’re opening up Socean from day one — just like we should have done before. Every single Genesis Pathfinder will be able to claim 5,000 SOCN governance tokens for free after the mint (Q1 2023). This makes up 5% of our total supply. The SOCN token will be used to govern staking jackpots, vote on our future direction, and share validator profits — this will be set up immediately after the mint.
Of course, we haven’t forgotten our loyal supporters. Anyone who owns an old Pathfinder will automatically be whitelisted for a Genesis Pathfinder.
What will happen to the Socean stake pool?
The Socean stake pool is here to stay, and we will continue to push for more DeFi integrations. We plan to delegate (not necessarily exclusively) to the SCN Pathfinder validator. Our core promise for the Socean stake pool is to give you the best risk-free returns, and we will continue to deliver that.
If and when the SCN Pathfinder reaches the supermajority, we will delegate to additional validators outside the supermajority.