LSD (Liquid Staking Derivatives) is one of the most classic and fundamental protocols in the DeFi market. Today, most blockchains rely on staking their native tokens to secure the network and incentivize participants through staking rewards. This model, together with transaction fee income and lending fee income, constitutes one of the most basic revenue mechanisms in the entire crypto space, and it is also a core component of DeFi.
However, pure token staking is not efficient in terms of capital efficiency. That's when Lido introduced an innovative solution: Liquid Staking Token (LST). In this system, the pledged tokens are packaged as a "certificate token" that can circulate freely in the DeFi market. Essentially, it decouples the functionality and financial value of the native token, allowing the two to coexist.
This model unlocks great potential for crypto users. By staking tokens such as ETH, SOL, or SUI on the native chain, users can not only earn staking rewards, but also earn 1:1 LST. These LSTs can then be used in a variety of DeFi use cases, such as decentralized exchanges (DEXs), lending platforms, stablecoin collateralized debt warehouses (CDPs), and more. This approach has given rise to many "one coin, multiple returns" strategies and compound strategies, attracting more capital and holders.
Figure: LSD allows users to earn both staking and DeFi yields at the same time, and do both in a combinable way
For every ecosystem, the native token is its most unique and valuable asset. How to unlock the massive financial value locked by validators while ensuring the security of the network is critical for any ecosystem.
Current status and challenges of LSD in the Sui ecosystem
As a relatively new ecosystem, Sui's LSD development history is still short. As can be seen from the following statistics, Sui's LST staking ratio is still low compared to its market capitalization, especially compared to ETH and SOL. The fundamental reason for this is that the current annualized rate of return (APR) of Sui's staking is low.
Currently, the average APR of LST in the Sui ecosystem is about 2.33%, while many validators' direct staking APR does not even reach this value. In comparison, Lido's APR is around 3.1%, while Jito's APR is as high as 7.85%. For holders of Sui's native token, such gains are not enough to incentivize them to move their tokens from centralized exchanges (CEXs) to Sui's on-chain environment.
In the fierce competition between public chains, on-chain liquidity is crucial. As can be seen from the successful experience of ETH and SOL, high-yield, low-risk LSTs, as well as the corresponding various DeFi scenarios, are a necessary prerequisite for the prosperity of DeFi in any ecosystem. Therefore, we emphasize that the top priority of any LSD protocol is to increase the APR level of LST in the Sui ecosystem.
Evolution of LSD product strategy
In order to improve the APR, the LSD protocol should consider both reducing costs and increasing revenue.
Reducing costs is a straightforward strategy. We need to learn to be "smart stakers" and choose the most cost-effective validators, i.e., those with the highest yields. This mainly depends on two factors: the validator's APR and the percentage of commission it receives. The base APR is usually determined by these two dynamic factors.
Currently, most LST on Sui is validator-based, which means that each LST token is tied to a specific validator. While this is not a problem in itself, there is no guarantee that the validator's APR will be the highest. In addition, most validators charge a commission of 4%-8%, which further lowers LST's final APR.
The Haedal protocol provides dynamic validator selection. It continuously monitors the status of all validators on the network and selects the validator with the highest net APR during the staking process (these validators typically charge 0%-2% commissions). Similarly, when a user unstakes, Haedal chooses the validator with the lowest APR for withdrawal. This dynamic approach ensures that haSUI always maintains the highest native APR across the ecosystem.
While reducing costs can help us achieve higher APRs within system constraints, it cannot break through the issuance limits of economic models. On the other hand, increasing revenue means discovering other revenue streams for this protocol, especially through the DeFi ecosystem.
We mentioned earlier that there are almost only three stable and sustainable sources of income in the crypto world: staking, lending, and trading. LSD protocols are naturally well-suited to leverage transactions to boost revenue. For example, Jito, a well-known LSD project on Solana, chose to optimize transaction revenue through MEV (Maximum Extractable Value).
On-chain transaction costs are high. Users face slippage, transaction fees, and gas fees on every transaction. MEV services, such as those provided by Jito, profit from user slippage. Jito provides Solana validators with an efficient MEV infrastructure, optimizing the order of transactions to capture MEV opportunities, and distributing the resulting profits.
Figure: Sandwich attacks severely impact the trading experience and results
However, we believe that MEV is a product of DeFi's immaturity. Indulging in MEV and treating it as a fixed transaction cost can lead to on-chain transaction costs that are ten or even a hundred times higher than centralized exchanges, making it difficult to compete with centralized products. In addition, the slippage cost caused by MEV is something that users are unwilling to bear or accept.
Given the recent community and developer discussions about MEV on Sui, it's clear that the focus is shifting to anti-MEV. We couldn't agree more with this view and see MEV as a challenge rather than a solution for the entire ecosystem. Therefore, we have come up with a new solution: to extract value directly from the transaction fees that come with the transaction process. We call this product Hae3.
Hae3: Extracting value from ecological transaction streams
In recent years, the transaction volume on the Sui chain has grown rapidly. According to Defilama, since Q4 2024, Sui's DEX trading volume has far surpassed that of established mainstream ecosystems such as Polygon, Tron, and Avalanche.
Thanks:
This surge in trading volume translates into significant fee income, which is a healthier and more sustainable way to make a profit. We believe that this is the real "dividend" of the blockchain world.
Currently, the majority of transactions on Sui are initiated through aggregators (as do most ecosystems). After the user initiates a trade, various AMM DEXs (such as Cetus) and CLOB DEXs (such as Deepbook) will provide quotes based on the pool or order status. The routing system calculates the best path and completes the transaction.
Against this backdrop, how do you capture the flow of transactions and extract profits from them? Haedal proposes two strategies:
4.1 Haedal Market Maker (HMM): An oracle-based market making algorithm
In a previous article, we introduced the Haedal Market Maker (HMM). The core idea is that the pricing of assets in the top 200 mainstream markets by market capitalization is still dominated by centralized exchanges (CEXs), while the pool prices of decentralized exchanges (DEXs) often lag behind the latest market prices. In the process of price aggregation and transaction routing, using oracle pricing that combines multiple data sources to generate fair market prices can give us a competitive advantage in quotes.
Based on this approach, we developed HMM, an oracle-based market-making algorithm, and integrated it into an aggregator. HMM has the following three core functions:
Provides centralized liquidity based on oracle pricing: Unlike other DEXs that determine prices based on the state of the pool, HMM's prices are always priced based on oracles. The oracle provides price updates at a high frequency (every 0.25 seconds), ensuring that liquidity in the aggregator is always aligned with the "fair market price".
Automatic rebalancing and market making: HMM's liquidity is automatically rebalanced according to the state of the asset, and by capturing market volatility and using the strategy of "buy low and sell high", it is possible to convert impermanent loss into impermanent profit.
Anti-MEV: HMM is inherently protected against MEV (Maximum Extractable Value) attacks, ensuring that trading profits are not eroded by front-running or sandwich attacks.
After two months of beta operation, HMM has captured about 10-15% of the total DEX trading volume in the aggregator, while its total locked value (TVL) is only around $850,000. This performance has significantly improved haSUI's APR, which has now stabilized at 3.5%, far exceeding other LSTs in the Sui ecosystem. It is worth mentioning that HMM contributed an additional 0.92% APR growth to haSUI.
4.2 haeVault: Allows ordinary users to participate in liquidity provision like market makers in the CEX market
One of the main problems with current DEX products is that the threshold for ordinary users to become liquidity providers (LPs) is too high. In the mainstream CLAM algorithm (currently the most commonly used AMM algorithm on Sui), if users want to provide liquidity to the SUI-USDC pool, they need to deal with the following complexities:
Decide on the price range: Users need to make subjective judgments about the price range.
Adjust Liquidity: Dynamically adjust liquidity based on a set price range.
Monitor the status of your positions: Keep an eye on your liquidity to see if it's "out of range".
Decide whether to rebalance: Determine whether a position needs to be rebalanced.
For most users, this process is both unnatural and inefficient, greatly raising the barrier to entry. Due to concerns about impermanent loss and bad decisions, most average users are reluctant to put large amounts of money into DEXs to earn high yields, or only choose to provide liquidity in extremely conservative price ranges, but this tends to significantly reduce their yield performance. For reference, the average APR of the SUI-USDC pool on Sui is about 150%, while liquidity providers in the full range or ultra-wide range may only get 10%-20% APR. Some users are even more obsessed with low or zero impermanent loss risk, so they tend to choose borrowing or staking, which usually have single-digit APRs.
So, who is earning the high yields of these DEX markets? The answer is those professional on-chain LPs. By simulating the CEX's market-making strategy, professional LPs typically provide liquidity in ultra-narrow bands, and perform rebalancing and hedging operations through self-built monitoring bots and programs. For a long time, they have been earning ultra-high returns that are difficult for the average user to achieve.
Is there a way for the average user to easily participate in liquidity provision and enjoy strategies similar to those of a professional market maker? That's what haeVault is all about.
haeVault builds an automated liquidity management layer on top of the AMM DEX. It is able to automatically adjust liquidity based on token price fluctuations and rebalance positions based on key metrics. haeVault simulates the professional strategies of market makers in the CEX market, but is designed specifically for DEX LP users. Market makers in the CEX market profit by "buying low and selling high", while haeVault continuously earns trading fee income through its active liquidity on the DEX.
haeVault's core features:
Easy to operate: Users only need to deposit any asset with one click to participate.
Transparency: Users can clearly view their profit and loss (PnL).
Fully automatic management: users do not need to perform any other operations except for deposit and withdrawal operations.
High Yield: With the help of professional strategies, users will get more competitive yields compared to other LPs.
Unlike HMM, haeVault will be open directly to all users and its design is naturally suited to attract large amounts of capital. When haeVault accumulates enough TVL, it has the potential to capture a large amount of fee income from mainstream assets on DEXs.
Currently, we are planning to launch an alpha version of haeVault in a few weeks, so stay tuned.
4.3 haeDAO: Community & Protocol Controlled Liquidity
HMM and haeVault will deeply integrate with existing aggregator and DEX systems, providing better depth of liquidity and reduced slippage for trading on Sui. As TVL continues to grow with these two products, we are confident that Haedal will capture a significant amount of transaction fee revenue in the Sui ecosystem.
Profit Distribution Mechanism:
50%: APR used to boost Haedal LSTs.
10%: Allocated to the team to ensure the long-term sustainability of the agreement.
40%: Allocated to the Haedal treasury as protocol-owned liquidity (POL).
Initially, treasury funds will be reinvested into Haedal's products to expand liquidity. As the product matures, we will introduce HaeDAO to manage the treasury and empower Haedal's token and community.
The Haedal token (HAEDAL) will be able to be locked to veHAEDAL (name tentative) in order to receive all the stakes in haeDAO. These benefits include:
Management of the Haedal vault: determine the proportion of assets in the vault, the distribution of liquidity between different product modules or different protocols, the distribution of rewards, etc.
Boost haeVault revenue: Users' weights in haeVault can be boosted to enjoy higher APRs.
Proposals and voting: Some of the protocol's major decisions will be made through DAO voting, such as key product directions, treasury usage, and more.
We plan to launch HaeDAO in Q2, which will be the final piece of the puzzle for the Hae3 portfolio. Hae3 will provide the perfect complementary product for Haedal LSTs, including two powerful revenue-boosting products, a growing treasury, and an established DAO community. We believe that the Hae3 economic system will generate a sustainable and expanding treasury, which will promote the long-term sustainable development and growth of the Haedal ecosystem in the context of the rapid expansion of the Sui ecosystem.
Say a few more words
Haedal will soon support Walrus' LST, or haWAL, which will go live after Walrus' TGE (Token Generation Event). Smart contract development has been completed and is currently undergoing a third-party audit. haWAL will also be integrated into Hae3's empowerment system, providing users with lucrative staking and yield opportunities.
Just as we believe in Sui, we also believe that Walrus will be a significant player in the Web3 space, reinventing decentralized storage and becoming an essential infrastructure for the next generation of dApp builds. Haedal is ready to work with Walrus for a win-win situation.
Final Thoughts
The current 3.5% APR of haSUI is only the starting point for Haedal. As Jito says on his staking homepage: "Increase your yield up to 15% when staking. "We have a lot of respect for pioneers like Jito. Haedal will bring this vision to the Sui ecosystem and do better. Let's Haedal together!
The content is for reference only, not a solicitation or offer. No investment, tax, or legal advice provided. See Disclaimer for more risks disclosure.
Introducing Haedal Hae3: A liquid protocol for the Sui ecosystem, reshaping the brilliance of LSD and DAO
Author: Haedal Protocol
Compilation: Deep Tide TechFlow
LSD (Liquid Staking Derivatives) is one of the most classic and fundamental protocols in the DeFi market. Today, most blockchains rely on staking their native tokens to secure the network and incentivize participants through staking rewards. This model, together with transaction fee income and lending fee income, constitutes one of the most basic revenue mechanisms in the entire crypto space, and it is also a core component of DeFi.
However, pure token staking is not efficient in terms of capital efficiency. That's when Lido introduced an innovative solution: Liquid Staking Token (LST). In this system, the pledged tokens are packaged as a "certificate token" that can circulate freely in the DeFi market. Essentially, it decouples the functionality and financial value of the native token, allowing the two to coexist.
This model unlocks great potential for crypto users. By staking tokens such as ETH, SOL, or SUI on the native chain, users can not only earn staking rewards, but also earn 1:1 LST. These LSTs can then be used in a variety of DeFi use cases, such as decentralized exchanges (DEXs), lending platforms, stablecoin collateralized debt warehouses (CDPs), and more. This approach has given rise to many "one coin, multiple returns" strategies and compound strategies, attracting more capital and holders.
Figure: LSD allows users to earn both staking and DeFi yields at the same time, and do both in a combinable way
For every ecosystem, the native token is its most unique and valuable asset. How to unlock the massive financial value locked by validators while ensuring the security of the network is critical for any ecosystem.
As a relatively new ecosystem, Sui's LSD development history is still short. As can be seen from the following statistics, Sui's LST staking ratio is still low compared to its market capitalization, especially compared to ETH and SOL. The fundamental reason for this is that the current annualized rate of return (APR) of Sui's staking is low.
Currently, the average APR of LST in the Sui ecosystem is about 2.33%, while many validators' direct staking APR does not even reach this value. In comparison, Lido's APR is around 3.1%, while Jito's APR is as high as 7.85%. For holders of Sui's native token, such gains are not enough to incentivize them to move their tokens from centralized exchanges (CEXs) to Sui's on-chain environment.
In the fierce competition between public chains, on-chain liquidity is crucial. As can be seen from the successful experience of ETH and SOL, high-yield, low-risk LSTs, as well as the corresponding various DeFi scenarios, are a necessary prerequisite for the prosperity of DeFi in any ecosystem. Therefore, we emphasize that the top priority of any LSD protocol is to increase the APR level of LST in the Sui ecosystem.
In order to improve the APR, the LSD protocol should consider both reducing costs and increasing revenue.
Reducing costs is a straightforward strategy. We need to learn to be "smart stakers" and choose the most cost-effective validators, i.e., those with the highest yields. This mainly depends on two factors: the validator's APR and the percentage of commission it receives. The base APR is usually determined by these two dynamic factors.
Currently, most LST on Sui is validator-based, which means that each LST token is tied to a specific validator. While this is not a problem in itself, there is no guarantee that the validator's APR will be the highest. In addition, most validators charge a commission of 4%-8%, which further lowers LST's final APR.
The Haedal protocol provides dynamic validator selection. It continuously monitors the status of all validators on the network and selects the validator with the highest net APR during the staking process (these validators typically charge 0%-2% commissions). Similarly, when a user unstakes, Haedal chooses the validator with the lowest APR for withdrawal. This dynamic approach ensures that haSUI always maintains the highest native APR across the ecosystem.
While reducing costs can help us achieve higher APRs within system constraints, it cannot break through the issuance limits of economic models. On the other hand, increasing revenue means discovering other revenue streams for this protocol, especially through the DeFi ecosystem.
We mentioned earlier that there are almost only three stable and sustainable sources of income in the crypto world: staking, lending, and trading. LSD protocols are naturally well-suited to leverage transactions to boost revenue. For example, Jito, a well-known LSD project on Solana, chose to optimize transaction revenue through MEV (Maximum Extractable Value).
On-chain transaction costs are high. Users face slippage, transaction fees, and gas fees on every transaction. MEV services, such as those provided by Jito, profit from user slippage. Jito provides Solana validators with an efficient MEV infrastructure, optimizing the order of transactions to capture MEV opportunities, and distributing the resulting profits.
Figure: Sandwich attacks severely impact the trading experience and results
However, we believe that MEV is a product of DeFi's immaturity. Indulging in MEV and treating it as a fixed transaction cost can lead to on-chain transaction costs that are ten or even a hundred times higher than centralized exchanges, making it difficult to compete with centralized products. In addition, the slippage cost caused by MEV is something that users are unwilling to bear or accept.
Given the recent community and developer discussions about MEV on Sui, it's clear that the focus is shifting to anti-MEV. We couldn't agree more with this view and see MEV as a challenge rather than a solution for the entire ecosystem. Therefore, we have come up with a new solution: to extract value directly from the transaction fees that come with the transaction process. We call this product Hae3.
In recent years, the transaction volume on the Sui chain has grown rapidly. According to Defilama, since Q4 2024, Sui's DEX trading volume has far surpassed that of established mainstream ecosystems such as Polygon, Tron, and Avalanche.
Thanks:
This surge in trading volume translates into significant fee income, which is a healthier and more sustainable way to make a profit. We believe that this is the real "dividend" of the blockchain world.
Currently, the majority of transactions on Sui are initiated through aggregators (as do most ecosystems). After the user initiates a trade, various AMM DEXs (such as Cetus) and CLOB DEXs (such as Deepbook) will provide quotes based on the pool or order status. The routing system calculates the best path and completes the transaction.
Against this backdrop, how do you capture the flow of transactions and extract profits from them? Haedal proposes two strategies:
4.1 Haedal Market Maker (HMM): An oracle-based market making algorithm
In a previous article, we introduced the Haedal Market Maker (HMM). The core idea is that the pricing of assets in the top 200 mainstream markets by market capitalization is still dominated by centralized exchanges (CEXs), while the pool prices of decentralized exchanges (DEXs) often lag behind the latest market prices. In the process of price aggregation and transaction routing, using oracle pricing that combines multiple data sources to generate fair market prices can give us a competitive advantage in quotes.
Based on this approach, we developed HMM, an oracle-based market-making algorithm, and integrated it into an aggregator. HMM has the following three core functions:
Provides centralized liquidity based on oracle pricing: Unlike other DEXs that determine prices based on the state of the pool, HMM's prices are always priced based on oracles. The oracle provides price updates at a high frequency (every 0.25 seconds), ensuring that liquidity in the aggregator is always aligned with the "fair market price".
Automatic rebalancing and market making: HMM's liquidity is automatically rebalanced according to the state of the asset, and by capturing market volatility and using the strategy of "buy low and sell high", it is possible to convert impermanent loss into impermanent profit.
Anti-MEV: HMM is inherently protected against MEV (Maximum Extractable Value) attacks, ensuring that trading profits are not eroded by front-running or sandwich attacks.
After two months of beta operation, HMM has captured about 10-15% of the total DEX trading volume in the aggregator, while its total locked value (TVL) is only around $850,000. This performance has significantly improved haSUI's APR, which has now stabilized at 3.5%, far exceeding other LSTs in the Sui ecosystem. It is worth mentioning that HMM contributed an additional 0.92% APR growth to haSUI.
4.2 haeVault: Allows ordinary users to participate in liquidity provision like market makers in the CEX market
One of the main problems with current DEX products is that the threshold for ordinary users to become liquidity providers (LPs) is too high. In the mainstream CLAM algorithm (currently the most commonly used AMM algorithm on Sui), if users want to provide liquidity to the SUI-USDC pool, they need to deal with the following complexities:
Decide on the price range: Users need to make subjective judgments about the price range.
Adjust Liquidity: Dynamically adjust liquidity based on a set price range.
Monitor the status of your positions: Keep an eye on your liquidity to see if it's "out of range".
Decide whether to rebalance: Determine whether a position needs to be rebalanced.
For most users, this process is both unnatural and inefficient, greatly raising the barrier to entry. Due to concerns about impermanent loss and bad decisions, most average users are reluctant to put large amounts of money into DEXs to earn high yields, or only choose to provide liquidity in extremely conservative price ranges, but this tends to significantly reduce their yield performance. For reference, the average APR of the SUI-USDC pool on Sui is about 150%, while liquidity providers in the full range or ultra-wide range may only get 10%-20% APR. Some users are even more obsessed with low or zero impermanent loss risk, so they tend to choose borrowing or staking, which usually have single-digit APRs.
So, who is earning the high yields of these DEX markets? The answer is those professional on-chain LPs. By simulating the CEX's market-making strategy, professional LPs typically provide liquidity in ultra-narrow bands, and perform rebalancing and hedging operations through self-built monitoring bots and programs. For a long time, they have been earning ultra-high returns that are difficult for the average user to achieve.
Is there a way for the average user to easily participate in liquidity provision and enjoy strategies similar to those of a professional market maker? That's what haeVault is all about.
haeVault builds an automated liquidity management layer on top of the AMM DEX. It is able to automatically adjust liquidity based on token price fluctuations and rebalance positions based on key metrics. haeVault simulates the professional strategies of market makers in the CEX market, but is designed specifically for DEX LP users. Market makers in the CEX market profit by "buying low and selling high", while haeVault continuously earns trading fee income through its active liquidity on the DEX.
haeVault's core features:
Easy to operate: Users only need to deposit any asset with one click to participate.
Transparency: Users can clearly view their profit and loss (PnL).
Fully automatic management: users do not need to perform any other operations except for deposit and withdrawal operations.
High Yield: With the help of professional strategies, users will get more competitive yields compared to other LPs.
Unlike HMM, haeVault will be open directly to all users and its design is naturally suited to attract large amounts of capital. When haeVault accumulates enough TVL, it has the potential to capture a large amount of fee income from mainstream assets on DEXs.
Currently, we are planning to launch an alpha version of haeVault in a few weeks, so stay tuned.
4.3 haeDAO: Community & Protocol Controlled Liquidity
HMM and haeVault will deeply integrate with existing aggregator and DEX systems, providing better depth of liquidity and reduced slippage for trading on Sui. As TVL continues to grow with these two products, we are confident that Haedal will capture a significant amount of transaction fee revenue in the Sui ecosystem.
Profit Distribution Mechanism:
50%: APR used to boost Haedal LSTs.
10%: Allocated to the team to ensure the long-term sustainability of the agreement.
40%: Allocated to the Haedal treasury as protocol-owned liquidity (POL).
Initially, treasury funds will be reinvested into Haedal's products to expand liquidity. As the product matures, we will introduce HaeDAO to manage the treasury and empower Haedal's token and community.
The Haedal token (HAEDAL) will be able to be locked to veHAEDAL (name tentative) in order to receive all the stakes in haeDAO. These benefits include:
Management of the Haedal vault: determine the proportion of assets in the vault, the distribution of liquidity between different product modules or different protocols, the distribution of rewards, etc.
Boost haeVault revenue: Users' weights in haeVault can be boosted to enjoy higher APRs.
Proposals and voting: Some of the protocol's major decisions will be made through DAO voting, such as key product directions, treasury usage, and more.
We plan to launch HaeDAO in Q2, which will be the final piece of the puzzle for the Hae3 portfolio. Hae3 will provide the perfect complementary product for Haedal LSTs, including two powerful revenue-boosting products, a growing treasury, and an established DAO community. We believe that the Hae3 economic system will generate a sustainable and expanding treasury, which will promote the long-term sustainable development and growth of the Haedal ecosystem in the context of the rapid expansion of the Sui ecosystem.
Haedal will soon support Walrus' LST, or haWAL, which will go live after Walrus' TGE (Token Generation Event). Smart contract development has been completed and is currently undergoing a third-party audit. haWAL will also be integrated into Hae3's empowerment system, providing users with lucrative staking and yield opportunities.
Just as we believe in Sui, we also believe that Walrus will be a significant player in the Web3 space, reinventing decentralized storage and becoming an essential infrastructure for the next generation of dApp builds. Haedal is ready to work with Walrus for a win-win situation.
The current 3.5% APR of haSUI is only the starting point for Haedal. As Jito says on his staking homepage: "Increase your yield up to 15% when staking. "We have a lot of respect for pioneers like Jito. Haedal will bring this vision to the Sui ecosystem and do better. Let's Haedal together!
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