Time-bound vs. Traditional

Time-bound is not something new but rather has been introduced in the industry for many years. One of the most notable examples is from Ethereum's side with the UMA protocol. They allowed other projects to tokenize tokens into derivative tokens in the form of future contracts.

Following are the key characteristics of the time-bound:

  • Price Dependency - The value of derivative tokens depends on the future price of an underlying asset. In our case, the staked assets include Sui's Staked SUI object.

  • Settlement - Future contracts typically settle at a predetermined future date, where the parties involved exchange the derivative token for the underlying asset.

  • Arbitrage Opportunities - In derivative markets, traders often take advantage of arbitrage situations, profiting from differences in prices between derivative and spot markets.

  • Liquidity - The liquidity of derivative tokens can vary, depending on factors such as market demand, trading volume and the availability of counterparties willing to enter into the market.

Without time-bound or future contracts for staked assets, stakers are unable to hedge against potential price fluctuations of the staked assets during the staking period. As a result, they bear the full risk associated with market volatility.

Most traditional liquid staking protocols follow a 2-token system model where only the secondary token earns rewards over time. The model is passive while still needing to maintain a certain degree of complexity.

Staking on SUI

Since SUI has native liquid staking on their system, the above illustration may not be entirely accurate for Sui. SUI operates 100+ staking pools with varying reward rates. Staked assets are received as semi-NFTs that can tradable and mergeable within the same epoch and validator.

Legato builds a time-bound staking protocol on top of their native liquid staking, assisting stakers by converting non-fungible Staked SUI into fungible tokens. These tokens are tradeable and partially transferable.

Moreover, the protocol provides full functionality for time-bound staking, serving stakers with a tool to engage in liquid staking while leveraging market fluctuations to their advantage.

Last updated