How does it work?
elSOL is an incentivized Liquid Staking Token (LST) designed to maximize security and yield within the Solana network. This section provides a detailed explanation of the technical mechanisms and operational methods of elSOL, and how it benefits users.
Utilizing the Solana Foundation's Official Staking Pool Program
elSOL leverages the Solana Foundation's officially provided Staking Pool Program without customization. This program was designed and implemented by the Solana Foundation to enhance the security of the Solana network and mitigate risks associated with over-concentration of staking on specific validators. When staking is concentrated on a small number of validators, the entire network becomes more vulnerable to attacks, increasing the risks of censorship and centralization.
By distributing staking more evenly across the network, this program helps to reduce reliance on a few validators, promoting the overall health and decentralization of the network. This design prevents any single entity from controlling the network, minimizing the risks of tampering and manipulation.
Implemented in 2021, this program has undergone more than 10 rigorous audits, making it one of the most secure staking pools on Solana.
Reference (Solana Documentation - Stake Pool Introduction): https://spl.solana.com/stake-pool
Token Address: ELSoL1owwMWQ9foMsutweCsMKbTPVBD9pFqxQGidTaMC
Token Name: Enhanced Linkage SOL
Tick: elSOL
elSOL - Solscan: https://solscan.io/token/ELSoL1owwMWQ9foMsutweCsMKbTPVBD9pFqxQGidTaMC
elSOL - Orca: https://www.orca.so/?tokenIn=So11111111111111111111111111111111111111112&tokenOut=ELSoL1owwMWQ9foMsutweCsMKbTPVBD9pFqxQGidTaMC
elSOL - Jupiter: https://jup.ag/swap/SOL-elSOL
elSOL - Sanctum: https://app.sanctum.so/trade/SOL-elSOL
The Mechanism of Staking Rewards in elSOL
elSOL's staking rewards are accumulated through Solana's official staking pool program. This mechanism works as follows:
When a user deposits SOL into the selected staking pool, they receive staking pool tokens (elSOL) that represent their share of the stake. The staking pool then delegates the stake to selected validators. The value of elSOL tokens increases as rewards are added to the total amount of SOL in the pool. Through this mechanism, simply holding elSOL allows staking rewards to automatically accumulate, increasing the token's value over time.
A Specific Example:
For instance, if a user deposits 100 SOL into the staking pool, they receive 100 elSOL tokens. At this point, 1 elSOL is equivalent to 1 SOL.
After 1 Year: Assuming an annual percentage yield (APY) of 7%, the total SOL in the pool increases to 107 SOL. However, since the total number of elSOL tokens remains unchanged, the value of each elSOL increases to 1.07 SOL.
At Withdrawal: When the user decides to convert their elSOL back to SOL, the 100 elSOL tokens will be exchanged for 107 SOL.
In this way, simply holding elSOL tokens allows the rewards to be automatically reflected and the value to increase. This system enables users to earn staking rewards without requiring additional procedures or management.
Using elSOL
elSOL can be used to provide liquidity in LP pools such as those on Orca, allowing users to aim for returns higher than the staking rewards alone. (However, aiming for higher returns comes with increased risk. Always NFA/DYOR.) Additionally, elSOL can be instantly converted into SOL or USDC, enabling users to maintain liquidity while earning staking rewards. This allows for flexible responses to sudden liquidity needs.
elSOL LP Pool on Orca: https://www.orca.so/pools?tokens=ELSoL1owwMWQ9foMsutweCsMKbTPVBD9pFqxQGidTaMC
Incentives for Holding elSOL
elSOL is an incentivized Liquid Staking Token (LST) that offers holding incentives. elSOL holders are eligible for the VLD token TGE (Token Generation Event) airdrop and a vesting airdrop over ten years from Validators DAO. By staking VLD tokens with a specified lock period, users can acquire veVLD (Vote Escrowed Tokens: veTokens) voting rights, which can be used to support the decentralization of the ecosystem by voting for new validators.
Validators DAO: https://dao.validators.solutions/
Reference (CoinGecko: What are veTokens and Understanding veTokenomics): https://www.coingecko.com/learn/vetokens-and-vetokenomics
elSOL's Decentralized Delegation Strategy
elSOL aims to enhance staking decentralization and network security through a refined delegation strategy.
- 40% - High-performance validators operated by the solv development team: These validators utilize high-spec servers and high-bandwidth networks, ensuring no downtime during operations. They offer zero staking fees due to the presence of MEV (Maximal Extractable Value) rewards and block rewards, making them highly efficient for staking.
- 30% - Validators participating in the MEV Premium Plan from Validators Solutions: Validators participating in the MEV Premium Plan from Validators Solutions: This automated service, operated under the same high-performance conditions as the solv team's validators, is highly reliable and is chosen as a delegation target for elSOL.
- 30% - Voting via veVLD: elSOL holders can mine VLD tokens and convert them to veVLD, allowing them to exercise voting rights for new validators and support network decentralization.