Sui Network is an innovative Layer 1 blockchain. With its object-oriented data model, the network provides a higher-performance infrastructure layer for Web3.

Today, Sui announced the launch of a new feature, liquidity staking, as part of its latest network upgrade. This upgrade is significant for the Sui community as it empowers developers to allow holders to earn derivative tokens based on the value of their staked SUI tokens, opening up new possibilities for the DeFi ecosystem.

The implementation of liquidity staking demonstrates that the network's development is community-driven. Based on Sui Improvement Proposal 6 (SIP-6), Sui developers can now offer a fully trustless liquidity staking solution. This proposal, formulated by an proactive team within the Sui community, plays a crucial role in the introduction of SIP #6 on the Sui network.

Due to the unique architecture of the Sui network, third-party liquidity staking applications on Sui can provide additional benefits, including more staking incentives. This results in the decentralization of staking power, rather than concentrating it in the hands of one or a few validators, ultimately enhancing network security.

Staking involves two aspects: derivative tokens and original tokens. Derivative tokens are issued by third parties (e.g., stETH on Ethereum) and are equal in quantity to the tokens being staked. For example, someone staking 100 SUI tokens could receive 100 stSUI tokens (stSUI is used for illustration purposes only and is issued by a third party). These derivative tokens can be used for other purposes, such as trading and lending. On the other hand, original tokens are still staked and continue to play a part in the consensus process to help secure the network.

In the process of liquidity staking, Sui differs from other networks in a crucial aspect. Other networks rely on third-party liquidity staking protocols to handle the two aspects of liquidity staking: protocol issuance of derivative tokens and delegation of staked tokens to specific validators. For example, on Ethereum, Lido provides both of these functions. However, on Sui, these two aspects are separate. Most importantly, unlike other networks, stakers on Sui can choose to stake their original tokens with any validator on the network.

Liquidity staking provides greater utility for stakers, increasing their incentives to stake and secure the blockchain network, thereby promoting decentralization. Restricting stakers' choice of validators may have the opposite effect by concentrating power in the hands of one or a few validators. Sui's liquidity staking mechanism avoids this issue.

"As part of our core technology at Sui, adding native support for liquidity pledging dApps addresses the explicit needs of our community members. They want to participate in protecting the security of the Sui network without sacrificing liquidity," said Greg Siourounis, Managing Director of the Sui Foundation. "We appreciate the continued dedication and creativity of the Sui community in formulating and approving SIP #6, and we look forward to seeing how developers will utilize this new feature to build applications on Sui."

About the Sui Network

Sui is an innovative Layer 1 blockchain and smart contract platform. The network is designed from the ground up to make ownership of digital assets fast, private, secure, and accessible to everyone. Its object-oriented model is based on the Move programming language, supporting parallel execution, sub-second confirmation, and rich on-chain assets. Sui can support a variety of applications through horizontally scalable processing and storage, running at high speed and low cost. Sui empowers creators and developers to build user-friendly platforms.