LSBs

Liquid Staking Bonds are a novel DeFi primitive that separates staking capital into principal and yield tokens - which are more granular and unlock an entirely new design space for liquid staking.

​How it works

When a user stakes via Pye, their assets are deposited into an interest generating protocol (eg. Jito) or a PoS validator (eg. Kiln) and locked up for a pre-determined period of time.

Upon deposit, the Pye Core contracts issue the following tokens:

• Principal SOL (PSOL): Redeemable for the locked principal at maturity. Receives no yield.

• Yield SOL (YSOL): Redeemable for the yield generated by the principal token.

1 YSOL is equal to the yield generated by 1 PSOL until maturity. Both principal and yield tokens are SPL tokens, designed to be composable across AMMs and lending protocols.

​Example:

Imagine Alice owns 100 SOL and the SOL staking APY is 10%. SOL is at all time high and she wants to take advantage of the favorable market conditions to sell all her yield up front.

Alice deposits 100 SOL into Pye. She chooses Galaxy Digital as her node operator and selects a 12 month lockup (Sep 2024 - Sep 2025) The system mints her the following tokens:

• 100 PSOL-SEP24-SEP25

• 100 YSOL-SEP24-SEP25

​Strategies:

At this point in time Alice can sell her 100 YT at Pye’s Yield Marketplace and get all of her yield upfront today at market rate.

We’re also exploring a new mechanism that would make PSOL tokens of any kind composable across DeFi, using a metavault pattern - this would allow users to:

• Use PSOLs as collateral to get a loan and trade

• Use PSOLs to participate in re-staking protocols like Jito

• Use PSOLs to earn VRT points on Jito and other shared SVMs using shared security

The same strategy can be applied to LSTs, where instead of the assets being locked with the validator generating the yield the LST is locked in a smart contract vault. Since these assets are themselves yield generating the same logic will apply, and both PSOL and YSOL tokens will be minted as representations of the LSTs.

​Takeaways

Pye is a platform where DeFi users can build flexible yield trading strategies.

1. Sell Yield Upfront: Immediately monetize future yield streams without sacrificing underlying asset ownership - ideal for those seeking instant liquidity from staked positions.

2. Sell Lockups Earlier: Trade locked positions before maturity, providing unprecedented flexibility for managing lockup periods and portfolio rebalancing.

3. Trade the Discount Curve of PSOLs/YSOLs: Take advantage of the natural discount in bond market, users can re-sell the yield or discounted PSOL as the discount gap gets smaller as it approximated maturity.

4. Unlock Additional Capital: Use locked assets as collateral for loans, transforming illiquid staked positions into productive capital while maintaining yield exposure.