What is Sandglass? Sandglass is a yield trading protocol on Solana that allows users to trade yield. Users might want to trade yield because yields are always fluctuating, even in traditional finance (TradFi), with interest rates being a notable example. Interest rates, which used to be close to 0%, recently increased to around 5% to combat inflation.
Yield is ubiquitous, especially in the crypto space. You earn yield when you stake assets, provide liquidity, or lend assets, and the amount of yield constantly changes due to various factors. Imagine you are an astute individual who can accurately predict whether the yield will rise or fall. Without a yield trading protocol, there would be no way to capitalize on your predictions. However, with a yield trading protocol, you can trade based on your yield predictions.
Here's a simplified example: if you believe that the staking yield is going to rise, you would want to increase your exposure to yield. With a yield trading protocol like Sandglass, you can buy more exposure to staking yield, and if your prediction is correct and the yield increases, you will profit from it.
Sandglass’ unique approach to Yield Trading A helpful way to understand yield trading is to compare it to the spot SOL-USDC market. When you buy SOL, you gain exposure to SOL, meaning you're essentially buying or selling spot exposure. In a yield trade market, you're buying exposure to the yield. Thus, yield trading markets are to yield what spot markets are to price.
Currently, there are order books on Solana, but not every asset trades on an order book. Much more trading of assets occurs on constant product market makers and concentrated liquidity market makers (CLMMs). The main reason for this is that order books require a significant number of market makers to provide meaningful liquidity. Additionally, providing liquidity on an order book requires a bot, as the process involves constantly removing and placing new orders at high frequency, which cannot be done manually.
There was a project called Jungle DeFi that aimed to implement yield trading on Solana using order books. However, this approach was challenging because it required professional market makers to provide liquidity. This is one area where Sandglass differentiates itself.