As the crypto market re-shapes this year, so does the demand for liquid staking, especially in the Solana ecosystem.
Liquid participation protocols in the so-called “Ethereum Killer” have increased 91% in terms of total value locked (TVL) since the beginning of 2023, according to The Block Research. Specifically, protocols including Marinade Finance, Lido, Jito, JPool, and Socean accumulated $187 million in staked SOL tokens at the end of June, compared to just $98 million at the beginning of the year.
This would comprise the bulk of the $270 million currently locked in Solana’s DeFi ecosystem, according to defillama. However, Ethereum remains the overwhelming king of DeFi, with $26 billion of $44 billion locked up across the industry.
Staking is when they lock up your crypto to provide security for a proof-of-stake blockchain, such as Ethereum, Solana, Cardano, and others. Participants are rewarded for their block with more crypto overtime, paid as newly minted coins or network fees.
While anyone can technically access staking on a public blockchain, many prefer to use Liquid Staking Services to eliminate the technical headache of having to run a personal node. Ethereum co-founder Vitalik Buterin has accepted to refrain from staking most of your Ether (ETH) due to technical risks and complications.
Liquid Staking also provides users with tokens that can be redeemed 1:1 with the tokens being staked (eg SOL for stSOL, with LIDO). In this way, participants manage to maintain the liquidity of their staked assets and, at the same time, benefit from the performance.
Solana VS Ethereum Staking
Analysts suggest that the increased staking activity on Solana is visible across all cryptocurrencies as a whole. “Overall, LSD has grown as a category in crypto in 2023, largely due to the new dynamics around gambling on Ethereum, although demand for these products has also seeped into the Solana ecosystem,” he wrote. Kevin Peng from The Block.
Ethereum introduced staking in September 2022 and has quickly become the most popular staking network by a wide margin. More than 20% of the network’s Ether supply has already been staked.
Data of participation rewards shows that staking returns on Solana are roughly 6.89% APY right now, outperforming Ethereum’s 5.09% return.
