Learn about Sui Network’s liquid staking innovation, providing derivative tokens for token holders and enhancing security.

As part of its most recent network upgrade, Sui Network, a Layer 1 blockchain and smart contract platform, has introduced functionality that allows liquid staking. This will allow developers to provide services that allow token holders to receive derivative tokens corresponding to the value of their staked SUI tokens.

Now that staking power is not being concentrated in one or more validators, third-party liquid staking apps on Sui will be able to provide the advantages of liquid staking. This is made possible by the network’s design, which keeps staking incentives rising and leads to improved network security.

Typically, liquid staking comprises of two components. First, a Move package issued by a third party issues a derivative token equal to the staked token’s value. A 100 Sui wager would result in 100’stSUI’. The hypothetical derivative token in this instance, stSUI, was released by a third-party program. The derivative token can subsequently be used by users for other purposes, exchanged, or lent.

The second consideration is how the initial token, which is still staked, continues to contribute to network security as a result of the consensus procedure.

Addressing “a clear need expressed by members of our community”

Sui developers will now be able to provide entirely non-custodial liquid staking solutions as a result of the modifications based on Sui Improvement Proposal (SIP) #6, created by a proactive team within the Sui community. The Sui network’s SIP #6 debut was made possible in large part by community support.

The addition of native support for liquid staking dApps as part of the Sui core technology, according to Greg Siourounis, managing director of the Sui Foundation, “addresses a clear requirement raised by our community members who wished to participate in securing the Sui Network without losing liquidity.

Finally, we appreciate the Sui community’s ongoing hard work and creativity in creating and approving SIP #6, and we’re forward to see how developers will expand on Sui using this additional feature.

By providing higher utility to stakers, liquid staking has the advantage of encouraging decentralization and can thus boost the incentives to stake and protect blockchain networks. By consolidating power in just a few validators on the network, restricting stakeholder choice of validator has the opposite consequence. This is what Sui’s liquid staking formulation attempts to prevent.

Liquid staking
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