The Sui community has been asking for liquid staking, and now, through the SIP process, the protocol has been upgraded to enable this feature.
Sui uses Delegated Proof of Stake to select and reward the set of validators that are responsible for operating the network. In exchange for securing the network, validators earn staking rewards in the form of SUI tokens. To participate, operators must have a minimum amount of tokens “staked” to their validator. Any token holder, no matter the size of their holdings, can “back” a validator they believe to be a good actor by delegating their tokens to that validator’s stake. These delegated tokens help the validator reach the minimum amount needed to be part of the active set of validators. Rewards accrue at the end of every epoch (24 hr) for all token holders who delegated to that validator’s stake (called a staking pool), minus a small commission fee paid to the operator of the validator. Individual token holders receive their portion of the rewards when they unstake.
Currently, when tokens are staked, the token holder receives a wrapped token in exchange that represents the stake. However, this wrapped token can not be traded or transferred, effectively taking them out of circulation. The tokens can be unstaked at any time and either staked to a new validator or released to the owner. The result is a reduction in flexibility for individual users.
The upgraded protocol now allows for the wrapped token received from staking to be traded, transferred, and also wrapped into another object. Adding this functionality allows for developers to offer liquid staking as well create apps that offer financial products that use the liquid staking token.
The SIP Process
Sui Improvement Proposals are the mechanism by which the Sui community can most effectively and efficiently impact the protocol. Many community members had been interested in upgrading staking to allow for the wrapped receipt tokens to be traded, transferred, and owned by other objects. One team took it upon themselves to write a proposal of how this could be done and submitted it to the SIPs repository. Given the level of interest and enthusiasm for this feature, the proposal was fast tracked, allowing for a faster upgrade process while still allowing for contributions and comments from the community.
At the moment, the final upgrade is live on Testnet and, assuming all tests and compatibility issues are fulfilled, it will be added to Mainnet with the next upgrade.
Resource: Sui Foundation
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