Sanctum
$CLOUD
Target Name
Sanctum
Ticker
$CLOUD
Strategy
long
Position Type
token
Current Price (USD)
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Circulating Market Cap ($M)
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Fully Diluted Market Cap ($M)
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CoinGecko
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Sanctum's $CLOUD TGE
15 Jul 2024, 12:38pm
Currently looking for tokens that have strong fundamentals combined with a community-focused distribution. A successful example of this that exists today is BananaGun’s BANANA token.
The upcoming token generation event (TGE) for Sanctum’s CLOUD is a chance to get into position for something similar, with the pre-sale vault opening on 16th July. A couple of aspects are coming together to make this launch interesting:
Team has bucked current trends in a number of ways, including the Wonderland farming event which was a great user experience and engaged the community via quests, without lasting too long. This is being followed up by an airdrop with allocation to earnest users rather than objective criteria (like capital supplied) which is the norm.
Public sale via a Meteora vault. Valuation will begin at $1m and max out at $180m FDV before going live on Jupiter. Combined with the airdrop to earnest users, the launch is poised to reward early, genuine community for their conviction.
Opportunity for growth in the liquid staking token (LST) sector on Solana. Sanctum has a chance to capture a growing share of a growing pie. With block rewards forming a larger part of validator earnings, individual LSTs offer a simple way to distribute this revenue to delegators. This is vital as validators compete against each other for stake, now that stake-weighted quality of service (SWQoS) is live.
More than that, they’ve built ‘Curve for LSTs’. Using the governance token to vet new partners and direct attention to their LSTs, CLOUD becomes integral to capital and attention allocation in the LST ecosystem.
Crypto natives have been clamouring for this type of launch, though it remains to be seen if the same crowd will put their money where their mouth is. Recent launches like Blast and Friendtech certainly haven’t painted a pretty picture of tokens with a generous community allocation.
Sanctum is attempting to bring the proliferation of LSTs to Solana by making them easy to launch and deeply liquid. By taking away the hassle of bootstrapping liquidity, teams can focus on creating unique LSTs that return idiosyncratic yields to holders. This ranges from hold-to-earn options like bonkSOL, where users receive BONK airdrops, to the classic validator tokens like hSOL from the Helius validator.
There is also an interesting reflexive flywheel that Sanctum can benefit from, created by two properties of Solana. Firstly, Solana doesn’t offer a native way to return block rewards to delegators. Secondly, the service a validator can offer in terms of landing transactions is improved by having a larger delegated stake (SWQoS). As priority fees and tips have increased drastically in 2024 and validators are competing to attract stake, Sanctum’s LSTs offer a simple way to distribute this revenue to delegators, giving an edge in the race to accrue staked SOL. Traditionally, Solana’s liquid staking ratio remained low as validators didn’t earn significantly from block rewards and had less incentive to grow liquid delegations. The changes discussed above should see more of them enter the LST arena to stay competitive.
Aside from the core offering, Sanctum also launched ‘profiles’ which are designed to ‘empower users to build identity and reputation within our community’. Profiles act as a sybil protection mechanism as users link wallets with social accounts, but the team clearly sees it as a way to reward genuine users more accurately in future.
The team is Singapore based, and the project was founded by FPLee back in 2021. Was 5 team members until recently, now at 7 full time.
Outside of Sanctum, Lee is contributing to Pathfinders, an NFT project inspired by Studio Ghibli and also built on Solana.
Despite being pre-launch there are a number of interesting aspects to $CLOUD. From their blog:
Will be used/important during season 2 of Wonderland.
Future LST partners will need to stake CLOUD to be considered for the verified partner programme. CLOUD holders will then be able to vote using their tokens as to where rewards and user attention are directed (becomes CRV for Solana LSTs).
Broadly used as a governance token outside of the above.
While the long term plan hasn’t been announced the founder has been open to discussing revenue share in the Discord.
Season 1 of Wonderland led to a 155% increase in TVL in SOL terms.
TVL taken from DefiLlama currently sits at $815m. More interestingly, shown below in SOL terms, this has continued to grow even after the end of Wonderland Season 1 and is 5% higher than when the season ended on 6th June.
Raised $6.1m back in 2021, led by Dragonfly. With only 7 team members, and the upcoming public sale aiming to raise $10m, the team should have plenty of runway given the $6m has lasted them 3 years already.
If we look at LST market dominance, the growth of INF (blue) and the most popular Infinity based LST jupSOL (grey) is clear. This appears to have come at the expense of Marinade’s mSOL (green).
Liquid staked Solana has roughly doubled since November at last year, and now stands at 6.7%. Of this amount, INF makes up 7% and all LSTs on the platform account for almost 22%. They have captured a growing share of a growing sector.
Taking the limited info available and historical data since launch, we can make some assumptions and come out with a back-of-napkin estimate for fair FDV on Sanctum. Firstly, from the team in Discord, Sanctum currently charges fees on a few different protocol operations:
Combining these numbers with protocol data, we get the following range for annualised fees:
From there we can give a range of fully diluted valuations based on price/fee ratio:
The token is trading at very rich multiples on Whales Market, which is to be expected on low volume and before token is actually live. Now let’s see how Sanctum would stack up against the competition if things stay as they are.
If we take max price at TGE then CLOUD will trade at 138x revenue given today’s numbers. Clearly this is quite rich but they will only need to double revenue to bring that ratio in line with the competitor set.
As the protocol market cap climbs, we can see that the project is priced more ‘realistically’ i.e it gets closer to the tradfi consensus of 20-25x p/e.
These protocols earn revenue in different ways, so there isn’t a metric we can point to as an anchor for how to value them consistently.
Data compiled from Defillama, Token Terminal and Coingecko dashboards.
CLOUD will take ‘pride of place’ in season 2, acting as a supply sink. Taking Kamino as a recently launched example, 48% of the current circulating supply is staked, earning a points boost during their season 2 farming campaign.
50% of the airdrop is being given to community members who engaged earnestly without expecting anything in return. If any demographic is likely to hold for long term it is this one. They are also subject to 6 month linear vest.
At launch there will be the 10% airdrop, plus the 8% set aside for launching on LFG, Jupiter’s launchpad. Any tokens sold via the community sale will be subject to 6m linear vesting.
Team and investors have a 33% cliff unlock 12m after TGE. From there the tokens unlock linearly over the following 24m.
Overall the launch is lining up to get the tokens into the hands of core believers, reinforced by vesting components, at a reasonable valuation. On top of that there is no significant sell-side supply from elsewhere.
3 months: Season 2 of wonderland will grow the partner list and act as a supply sink for CLOUD.
6 months: Profiles will allow users to experiment with new types of LST (see fpSOL for the first personal LST). CLOUD will be important to decide the direction of the protocol. Would expect the LST space to become more competitive as validators vie for delegated stake. Sanctum is positioned to capture this.
The market needs to value the community-first launch as a narrative in and of itself. There has been lots of discussion in the space about airdrops, allocations and how to make things fairer in light of regulations favouring private investment. The Sanctum team have put a lot of thought into their launch, ensuring the airdrop goes to the right people (in their view), and that the community can buy at a price that is not heavily inflated compared to private investors. Want to see this translate to strong price action.
The team needs to prove out demand for the protocol itself, rather than just the (admittedly very nice) Wonderland farming campaign. This looks achievable given the 5% increase in TVL since farming ended and the natural competition between validators to attract stake via rewards to LST holders.
Recent ‘community-first’ launches Blast and Friendtech have both performed poorly. FT in particular is down >90% since launch despite being a 100% community allocation. Be careful what you wish for!
The team have publicly stated they will not pay for CEX listings. This risks making the token less accessible as it only trades onchain. Some funds can’t/won’t trade onchain leaving them unable to buy, unless exchanges decide to list the token regardless. It can also hamper the addressable market.
The alpha here comes from the team proving their ability to execute + their commitment to doing things the right way, combined with market timing and in particular, the rise of a fair launch meta. Making your early community rich is a proven way to kick off a positive flywheel for a protocol. CLOUD will either be an example of how doing a launch this way can break new ground, or it will be consigned to the pile of community token corpses.
Bull case: LSTs create a whole new category of governance token, combining PoS yield with idiosyncratic value, all returned to the LST holder. Liquid staking on Solana continues to grow, reaching >15% as validators are forced to compete for delegation and offer block rewards through Sanctum LSTs. Profiles become a schelling point for anti-sybil and other social applications. 20% chance of >$1.
Base case: Sanctum is an interesting new way to approach LSTs but well-known, individual validators like Jito remain the most popular LSTs to hold. Liquid staking on Solana tops out at 10% ratio. 50% chance of >$0.3.
Bear case: fragmentation of LSTs actually reduces their uptake as people prefer not to have to research the best option. InfinitySOL is too niche to break out and capture potential customers even as an aggregator of the underlying LSTs. This is made worse by the lack of CEX listings for the token as even fewer people are exposed to what Sanctum has built. 15% chance of <$0.22.
Conviction score 4/5
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gm ser - any updates given the recent CEX support on staked SOL + pending Breakpoint?