Tokenized Stake Accounts: cgntSOL
Why cgntSOL, how it works, and what‘s next.
What is cgntSOL?
cgntSOL is a tokenized representation of a stake account delegated to the Cogent Crypto validator. It uses the audited spl stakepool program to implement this representation. After each epoch, cgntSOL’s underlying stake accounts increase in value and subsequently the amount of SOL each cgntSOL represents increases. You can read in depth on exactly how this works by heading to the “How Does cngtSOL Work?” section of this article.
You can exchange cgntSOL and SOL at https://cogentcrypto.io/app#liquid-staking.
Why cgntSOL?
Perhaps the next most important questions are “why cgntSOL?” and “Why would I want to hold cgntSOL?”
The shortest answer to “Why cgntSOL?” is composability. Having a tokenized representation of stake accounts enables stake accounts to be used by any program that operates on tokens. Here are a few examples where cgntSOL could be used.
DeFi: Jupiter, Solend, Kamino, Orca, etc.
Payments: Tiplink, Helio, Solana Pay, etc.
NFT tools: NFT mints, Cardinal staking, Gemfarm staking, etc.
Dev tools: Gumdrop, DAO governance, Squads, etc.
With tokenized stake accounts, e.g. cgntSOL, you can use almost any Solana program while holding onto an asset that is increasing value relative to SOL. That alone can be quite compelling but net new use cases utilizing the composability of tokens will bring even more compelling possibilities in the future.
Now to answer “Why would I want to hold cgntSOL?” First and foremost, staking to the Cogent Crypto validator brings some of the highest returns from our extremely high APY, our very low MEV commission (6%), But more specifically, why one might want to hold cgntSOL over just native staking with Cogent depends on your current usage of Solana. Do you mostly just stake SOL and hold for the long term, or stake SOL but also heavily use the broader SOL ecosystem?
If you fall under the “I mostly just stake SOL and hold for the long term” there are two solid reasons why it might make sense to hold cngtSOL
1. You have easy access to instant liquidity for any amount of cgntSOL you hold. When you need a specific amount, you can exchange the amount of SOL you need while keeping the rest of your tokenized stake.
Example: You need 5 SOL to pay for an NFT you’d like to purchase but you have all of your SOL staked.
Stake Accounts: To get the 5 SOL needed for the NFT you’d deactivate one of your stake accounts with at least 5 SOL, wait until the epoch ends, withdraw the SOL, create a new stake account with 5 less SOL, wait for the next epoch to end until the rest of the stake begins receiving rewards again.
cgntSOL: To get the 5 SOL needed for the NFT you’d navigate to jup.ag, swap some cgntSOL for 5 SOL. The remainder of your cgntSOL will continue to earn rewards.
2. cgntSOL will automatically collect and compound MEV rewards by increasing in value relative to SOL when the underlying stakepool automatically collects and stakes MEV rewards. read more
Currently if you have a native stake account you will have to manually collect MEV rewards and make a new stake account with the MEV rewards to compound your earnings.
If you fall under the “I stake SOL but I also heavily use the broader SOL Ecosystem” category.
Then you are hopefully comfortable with DeFi and understand the additional risks and you will be able to utilize cgntSOL to potentially earn rewards above and beyond the staking rewards from just holding cngtSOL
- Borrow USDC against your cgntSOL on lending platforms while your cgntSOL increases in value
- Supply liquidity across cgntSOL pairs and gain trading fees while your cgntSOL increases in value
- Utilize cgntSOL to arbitrage across unbalanced pools while your cgntSOL increase in value
Some of the above will take some partnerships and time to implement. You can see the whats up coming in the last section of this article.
How does cgntSOL and other stakepool tokens work?
As mentioned above, cgntSOL utilizes the spl stakepool program to automatically capture stake and MEV rewards. To help understand exactly what is going on, we’ll dive into the life cycle of a deposited SOL and later withdrawn SOL.
Deposit 1 SOL:
When depositing 1 SOL in exchange for cgntSOL a few things happen:
1. The stakepool computes the exchange rate by adding up the total Sol across the stake account(s) and the reserve account and divides by the total amount of cgntSOL issued.
2. Using the computed exchange rate, the stakepool mints the appropriate amount of cgntSOL and transfers the cgntSOL to the user .
3. The stakepool then transfers the SOL into to the stakepool’s reserve account.
End of each epoch:
At the end of an epoch the stakepool takes the SOL that has accumulated into the reserve account and creates a new activating stake account(s). For cgntSOL its just one additional stake account but for stakepools with many validators a new stake account for each validator must be made.
Beginning of each epoch: At the beginning of an epoch a few updates need to be made.
1. Recently activated stake accounts are merged into the already active stake accounts and the rent is collected and held in the reserve.
2. A new exchange rate is set based on the increase of Sol across stake accounts from both MEV and regular staking rewards.
Withdraw SOL:
When withdrawing SOL by exchanging cgntSOL, the stakepool computes the exchange rate just like it did when depositing SOL by adding up the total Sol across the stake account(s) and the reserve account and dividing by the total amount of cgntSOL issued. Because the total Sol increase from epoch to epoch from the staking and MEV rewards with no new cgntSOL issued, the exchange rate increases directly from the accrued rewards.
What’s Next
Here are a few things that are upcoming in the next month with regards to cgntSOL
Cogent Cogs v2 Mint: Wednesday March 4th 4:00 pm GMT, cgntSOL will be used as the currency for the Cogent Cogs v2 mint (https://cogentcrypto.io/app). You can read more about what Cogent Cogs are and how they work here. The whitelist presale for those who took part in the art creation will commence on Sunday March 7th and will last a week until the public mint commences on Sunday March 12th 4:00 pm GMT.
Instant Unstaking: While deposing SOL for cgntSOL and exchanging cgntSOL for stake accounts is available now at https://cogentcrypto.io/app#liquid-staking, in the next couple of weeks instant unstake via the best Jupiter route or unstake.it (which ever is offering the best price at the time) will be available.
Defi: To facilitate the kick start of cgntSOL there will be a few DeFi partnerships yet to be announced coming in early March.
Future Profile Picture NFT Project: Using cgntSOL along side some existing Solana programs new Solana program, Cogent Crypto will be introducing a first of its kind NFT that we think will change how people think of staking and PFPs .
