DeFi Usage

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DeFi Usage

We describe several ways scnSOL can be used as a financial primitive in DeFi.

In the DeFi context, scnSOL behaves like a fixed-income security which represents ownership of staked SOL in a stake pool. We believe scnSOL (and other stake pool tokens) will replace SOL in many DeFi use-cases.
Liquidity in SOL Markets
scnSOL holders can provide liquidity for traders who are looking to long or short SOL, as well as to users looking to trade SOL for SOCN.
We believe that scnSOL will replace a large portion of the market for SOL, whether on the orderbook backbone of Solana, Serum, or in liquidity providers like Raydium, Mercurial and Orca. 
scnSOL/SOL is essentially a pegged asset pair with a slowly changing conversion ratio, and is thus suited to stablecoin price curves like those used on Mercurial and in Orca's stableswap. This conversion ratio, representing cumulative yield, increases at a rate of approximately 1.08 per year.
Collateral for Lending
Since the total value of staked SOL overshadows the total capitalisation of all other tokens on Solana, we believe that scnSOL--by unlocking liquidity in staked SOL--will become one of, if not the most liquid form of collateralisation in the network.
This liquidity would make scnSOL very suitable as collateral in lending and margin trading protocols like Mango and Oxygen. 
Risk-Free Asset in Rebalancing Portfolios
Although SOL price still has high variance relative to USD as well as more mature cryptocurrencies like BTC and ETH, we believe that over time, the price of SOL will stabilize. scnSOL, which is pegged to SOL except for a slowly-changing conversion ratio, will serve as a risk-free asset [^0] that can be used in rebalancing portfolios in on-chain index funds like Symmetry or in managed investment funds like Solrise. 
[^0]: A risk-free asset is essentially a fixed-income asset with a risk-free rate. A stake pool token that accrues value over time like scnSOL closely resembles a risk-free asset.
Purely for illustration, as of 28/07/21, staking reward APY is about 7.5% APY while the SOL/USDC 24hr APY is around 9.3%. The SOL-USDC pool is, at this time, the largest pool on Raydium with approximately $93M USD TVL. The reader is advised to make their own investigations and calculations based on prevailing conditions.
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Litepaper

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Outline

Liquidity in SOL Markets

Collateral for Lending

Risk-Free Asset in Rebalancing Portfolios