Intro to SpringSui Standard

What's sSUI?

Spring Staked SUI (sSUI) is the first LST built using the SpringSui standard.

What is SpringSui?

SpringSui is a Liquid Staking Token (LST). It offers significant improvements over existing LSTs, most notably instant unstaking. Instant unstaking allows for infinite liquidity when unstaking, enhancing safety by reducing the risk of depegging. In the future, other teams will be able to deploy their own LSTs on the platform permissionlessly and at no cost using the SpringSui Standard.

How does it work?

LSTs & Depegging

When you stake your SUI, you receive a StakedSui object in return. An LST contract holds these StakedSui objects and issues LSTs to the user. This token represents your stake and can be freely traded or used within the Sui ecosystem.

One of the significant challenges with LSTs is maintaining their peg to the underlying asset’s value. Ideally, the price of an LST should be the value of the stakedSui objects in the contract. However, in times of thin liquidity or market irrationality, LSTs can sometimes deviate from their fundamental value.

Even in such a robust ecosystem, irrational market behaviors can cause depegging, posing risks to stakers and the broader network. Depegging is not just a minor inconvenience—it can lead to liquidations and bad debt, creating instability in DeFi and harm to users.

The Solution: Instant Unstaking

To address this issue, Suilend proposed SIP-33. This SIP ensures that you can always redeem your LST for the underlying Sui instantly, thereby eliminating the risk of depegging. Prior to SIP-33, this was not possible. Since sSUI can always be redeemed into Sui, and Sui liquidity is orders of magnitude greater than any LST liquidity, the economic security of sSUI is much stronger than other LSTs which do not implement SIP-33.

Instant unstaking is not an entirely new concept—LSTs on Solana like mSOL have implemented similar mechanisms, relying on liquidity to allow for immediate redemptions. However, on Sui, our new standard enables instant unstaking for the entire supply of the LST. This means that no matter how much sSUI (our SpringSUI LST) is in circulation, users can always convert their tokens back to the underlying Sui without delay.

SpringSui Architecture

Why choose sSUI?

The SpringSui Standard offers liquidity through sSUI tokens, allowing users to freely transfer or sell them while still earning staking rewards. Users can also use sSUI in DeFi protocols such as Suilend, maximizing the utility of their staked assets.

How long does unstaking take?

sSUI can be unstaked instantly for SUI and only requires 1 transaction.

How do I collect my yield?

The token’s yield is reflected in its price rather than through continuous distributions. At launch, 1 sSUI will be equal to 1 SUI. As rewards accumulate, the value of sSUI will increase relative to SUI (e.g., 1 sSUI may become equivalent to 1.05 SUI). This price appreciation ensures that all sSUI holders receive yield, no matter where or how the token is stored.

How are APRs determined?

Underlying Network Staking Rewards: The primary component of the APR for LSTs on Sui, such as sSUI from SpringSui, comes from the staking rewards generated by the Sui network. These rewards depend on factors like the total amount of SUI staked, the network’s inflation rate, and validator performance. On Sui, staking rewards are primarily derived from transaction fees and new token issuance (inflation).

Validator Performance: The performance of validators in the Sui network plays a crucial role in determining the APR for LSTs like sSUI. Validators that consistently validate transactions and secure the network without downtime or penalties generate higher rewards. Poor-performing validators may face penalties or slashing, which reduces the overall staking rewards.

Commission Fees: Validators on Sui charge a commission on the rewards they earn from staking. The APR for LST holders is impacted by the commission percentage that validators take. Lower commission rates lead to higher APRs for those staking through LSTs like sSUI.

Protocol Fees: SpringSui may charge a fee for providing its liquid staking services, which can also influence the APR for LST holders. This fee is typically deducted from the staking rewards before being distributed to sSUI holders, affecting their final yield.

What fees are there?

Mint Fee: The mint fee is a charge applied when users mint or create new LSTs. This fee is often a small percentage (in basis points, or bps) of the total amount deposited. It compensates the protocol for processing the transaction and managing the staking operation. The mint fee may be set by the pool operator and can vary depending on factors such as the operational costs of the protocol and the competitiveness of the pool.

Example: If a user deposits 1,000 SUI to mint sSUI and the mint fee is set at 10 bps (0.10%), the user would pay 1 SUI as a fee, receiving LSTs equivalent to 999 SUI.

Spread Fee: The spread fee is the percentage of staking rewards that the LST creator keeps as a fee. This is deducted on every epoch change (~1 day).

Example: If there is 1000 Sui supplied in the LST, and the LST earns 10 Sui as rewards for the epoch, if the spread fee is 10%, the LST creator will receive 1 Sui and the LST owners will receive 9 Sui.

Redemption Fee: The redemption fee is a charge applied when users redeem their LSTs for the underlying asset, such as converting sSUI back into SUI. This fee is intended to cover the operational costs associated with unstaking and redeeming the assets. SpringSui enforces a minimum redemption fee of 1 basis point (1 bp), ensuring there is always at least a nominal cost to redeeming LSTs. A low redemption fee improves user experience (UX) by keeping costs minimal while still covering the basic expenses of the protocol.

Example: If a user redeems 1,000 sSUI and the redemption fee is 1 bp (0.01%), they would pay 0.1 SUI as a fee and receive 999.9 SUI in return.

What are the risks?

Smart Contract Risk

Smart contract risk is one of the primary concerns when interacting with LSTs like SpringSui. A few key risks include:

• Exploit: Since LST protocols are governed by smart contracts, they are vulnerable to potential hacks or exploits. If a vulnerability is discovered in the smart contract code, an attacker could exploit it to drain the contract’s assets. In such cases, the value of the LST could plummet to zero, as the underlying staked assets are compromised. This could result in the complete loss of user funds and confidence in the protocol.

• Unstake Mechanism Failure: If the smart contract governing the LST’s unstake function malfunctions or is compromised, users may be unable to redeem their LSTs for the underlying staked assets. This could lead to a situation where the LST loses its peg to the underlying asset (such as SUI), causing a significant drop in value. When the market realizes that unstaking is no longer possible, the LST could rapidly depeg, harming all holders.

To mitigate these risks, SpringSui has undergone several rigorous smart contract audits. Click here to access the SpringSui audits.

Validator Risk

When users stake their tokens through an LST, the performance of the validators responsible for securing the network directly impacts the rewards they receive. The key risks associated with validators include:

• Poor Validator Performance: If a validator performs poorly during an epoch, for example, by failing to validate transactions consistently or experiencing downtime, the staking rewards for that period will be lower. This impacts LST holders because their rewards are tied to the validator’s performance. Poor performance can also lead to penalties, reducing the overall yield for LST holders.

• Slashing Risk: Validators may also be “slashed” for severe misbehavior, such as double-signing or prolonged inactivity. Slashing refers to the punishment of a validator by confiscating a portion of the staked tokens as a penalty. In cases of slashing, a percentage of the staked assets (and consequently the value of the LST) is permanently lost, reducing the overall staking rewards and impacting LST holders’ returns.

Before staking with a validator, users should perform their own due diligence by thoroughly evaluating the LST protocol, the pool operator, and the validators being utilized. It’s important to ensure that the protocol has safeguards in place, such as regular performance monitoring and dynamic reallocation to high-performing validators, to mitigate validator risk. Users should also assess the track record of the pool operator and the reliability of the validator to minimize potential risks to their staked assets.