LSBs work on Solana

Solana’s unique technological architecture makes Liquid Staking Bonds (LSBs) feasible by leveraging two key features: the ability to treat stake as an asset and the delegation model for staking.

Stake is tokenized

On Solana, stake is represented by a tokenized asset, unlike Ethereum, where stakers do not receive a receipt token for their stake. This tokenization allows the stake to be transferred, traded, or used in various financial products, making it more liquid and flexible. We have already begun seeing lending protocols accept native stake as a form of collateral to get loans. This unique treatment of stake means that users can engage in more granular financial activities such as trading or using staked assets as collateral. s

Delegations

Additionally, Solana’s delegation model enables stakers to deposit directly into an existing validator node, unlike the Ethereum model where stakers must run their own validator.

Lockups at the validator level

This unique combination allows stake to be split into principal and yield components directly at the validator level, rather than requiring complex on-chain mechanisms to separate these components.

This opens up new use cases for stakers, such as rating, undercollateralized loans, yield forwarding, and packaging yield into structured products - all directly at the validator DeFi. All in all, we consider this to be a new design space that will allow for the creation of more sophisticated financial instruments.