Solana Staking Ecosystem: Competition of Liquid Staking Projects

As the cryptocurrency market rebounds, Solana (SOL) has risen to become the sixth largest cryptocurrency in the world. Among all proof-of-stake (PoS) based blockchains, Solana's staked assets rank second only to Ethereum. However, compared to its market position, the level of capital aggregation in the decentralized finance (DeFi) applications within the Solana ecosystem is relatively low, with a total value locked (TVL) of $1.137 billion, which is only 11.3% of its historical peak.

In Solana's TVL, liquid staking projects play a key role and are an important force in driving the TVL back to historical highs. Among them, Marinade and Jito occupy a significant position with the highest TVL, highlighting the importance of the liquid staking category. This article will delve into the important players in the liquid staking sector on Solana and conduct a comparative analysis of their strategies and market performance.

Staking and Liquid Staking Overview

As of December 12, data shows that the market capitalization of SOL is $30.53 billion, with a staked market capitalization of $27.62 billion, a staking ratio of 69.18%, and a staked amount of 391 million SOL. The inflation rate is 6.75%, and the reward rate is 6.87%. SOL's staked market capitalization ranks second among all PoS public chains, second only to ETH; the staking ratio is also relatively high among the top market capitalization PoS public chains.

The Solana network has a total of 1986 validators, with the top-ranked validators offering an APY close to 8%, all with no commission.

To incentivize SOL holders, enhance network security, and improve censorship resistance, Solana has launched the "staking pool program." Users can deposit SOL into the staking pool and receive SPL tokens representing their share, known as liquid staking tokens (LST). Data shows that a total of 16.82 million SOL is locked in the staking pool, with an average APY of 6.68%, accounting for approximately 4.3% of the total staked amount. The top four staking pools are Marinade, Jito, BlazeStake, and Lido, which are also the largest four liquid staking projects in the Solana ecosystem.

Analysis of Major Liquid Staking Projects

Marinade Finance

Marinade Finance is one of the earliest liquid staking protocols in the Solana ecosystem, launched on the Solana mainnet in August 2021. Users can stake SOL on Marinade to receive mSOL, with staking rewards accumulating directly into mSOL.

Marinade's unique feature is that it also provides native staking services, allowing users to earn staking rewards without using smart contracts. Currently, Marinade has 7.058 million SOL staked, making it the largest liquid staking project on Solana; its TVL has reached $777 million, ranking first in the Solana ecosystem; the staking yield is 6.543%; the staking volume has increased by 31.22% in the past 30 days.

The governance token MNDE of Marinade has a circulating market cap of $85.99 million and a total market cap of $356 million, showing strong performance recently.

Jito

Jito launched its liquid staking platform at the end of 2022. Users can stake SOL in Jito to earn JitoSOL, and the staking rewards are directly accumulated into JitoSOL.

Jito's uniqueness lies in developing the Maximum Extractable Value (MEV) infrastructure for the Solana network, including the Jito Solana client, Jito Bundles, Jito Block Engine, and the MEV distribution system. Due to its own MEV business, a portion of the MEV profits will be allocated to JisoSOL, making the returns for users staking through Jito relatively higher.

There are 6.38 million SOL staked in Jito; the staking volume has increased by 17.77% over the past 30 days; the TVL has reached $455 million; the staking yield is 6.892%.

Jito's governance token JTO has a circulating market value of $342 million and a total market value of $2.973 billion, performing excellently recently.

BlazeStake

BlazeStake was launched in May 2022 and has rapidly developed recently due to the overall rise of the Solana ecosystem, surpassing Lido to become the third largest liquid staking project on Solana. Users can stake SOL in BlazeStake to receive bSOL, and the staking rewards are directly accumulated into bSOL.

BlazeStake mainly uses the official staking pool smart contract of Solana Labs, which has the largest set of validators, allowing users to liquid stake to specific validators.

There are 1.52 million SOL staked in BlazeStake; the staking amount has increased by 177% over the past 30 days; the TVL is $108 million; the staking yield is 6.232%.

The governance token BLZE of BlazeStake has a total market value of 38.84 million USD and has performed well recently.

Lido

Lido launched its liquid staking service on Solana in September 2021, but failed to fully leverage its first-mover advantage and brand effect. In October, Lido announced that it would stop accepting new stakes on Solana. Users staking SOL in Lido can receive stSOL, and the staking rewards are also accumulated into stSOL.

Currently, Lido has staked 887,000 SOL on Solana; the staking volume has decreased by 41.43% over the past 30 days; the TVL is $63.4 million; the staking yield is 6.717%.

Lido's governance token LDO has a circulating market cap of $2.095 billion and a total market cap of $2.356 billion, showing relatively stable performance recently.

Application of LST in DeFi

Marinade's mSOL, Jito's JitoSOL, Blaze's bSOL, and Lido's stSOL are widely supported in Solana's DeFi applications.

The main lending protocols marginfi and Solend on Solana support mSOL, JitoSOL, and bSOL as collateral for borrowing, but stSOL has been delisted.

In Solana's largest DEX Orca, the mSOL/SOL and bSOL/SOL trading pairs have over ten million dollars in Liquidity, and there are also direct trading pairs between mSOL and bSOL; whereas the liquidity of JitoSOL/SOL and stSOL/SOL is relatively low.

The growth of staking volume and liquidity in DEX may be related to the project's incentive measures. Blaze offers the highest incentives, with a 15.37% APR subsidy of BLZE governance tokens for deposits in Solend; mSOL deposits receive a 1.98% APR subsidy of MNDE governance tokens. Jito has not yet provided incentives for the use of JitoSOL in DeFi, while Lido is unable to continue incentives as its tokens have been mostly distributed.

Summary

There are various representative liquid staking solutions in the Solana ecosystem, all supported by ecological DeFi projects. Marinade, as a pioneer, provides native stake services; Jito offers higher yields through MEV infrastructure; BlazeStake allows users to stake directionally; Lido represents multi-chain liquid staking services.

However, the total amount of liquid staking is still relatively low, with only 4.3% of all staked SOL being staked through staking pools. The diversification of liquidity solutions has also led to a dispersion of liquidity, and more competitive new solutions may emerge in the future.

Incentives are still crucial for the increase in staking volume and the liquidity of LST in DEX. Although Blaze has lower visibility, it achieved significant growth in a short period through high subsidies. In contrast, even Lido, which is well-known in the liquid staking space, had to choose to exit the Solana market due to its inability to continuously provide incentives.