Hi there,

Is some cryptocurrency lying idle in your wallet? Ever wondered how you could earn rewards with your crypto while still having the freedom to access your funds? That’s where liquid staking comes into play! But hold on, it’s not just about locking up your assets; it’s about getting rewarded in the process and unlocking a world of possibilities. 💰

In this article, we’ll dive deep into the world of liquid staking and DeFi. From understanding the basics of staking in the traditional finance world to exploring the innovative concepts of liquid staking in the crypto sphere, we've got you covered!

Have your favorite brew by your side and let's start! 🚀

⛔️Important disclaimer: Through this article, we just aim to explain the concepts surrounding liquid staking and DeFi. We are blockchain enthusiasts and**not financial advisors. Although this article will serve as an exhaustive resource for you to learn liquid staking, we request you to do your own research before investing money anywhere. Please consult your financial advisor before making any transactions anywhere. We are not responsible*in case you lose your funds anywhere.*

The Fundamentals of Liquid Staking

To explain it in one line, liquid staking is a process of locking up funds to earn rewards while still having access to the funds. That’s the boring definition of liquid staking that you’ll probably stumble across online, but worry not cause that’s not all that we will be touching upon while going through it. So, let’s dive into it!

Let’s first talk about the traditional finance industry. Banks take your money (like keeping it in a piggy bank), use it to make more money (like lending it out), give you a tiny slice of the profits (a little interest), and keep the majority cut. This system can seem to be a little mysterious and unfair. This is where crypto comes in, which allows you to be your own bank.

You put your money into “DeFi” projects (like special piggy banks on the blockchain), which everyone can see how they work (no covert operations and processes), and earn way more interest than traditional banks. No middleman; all profit.

Let’s try to get a bit more technical, along with keeping things simple, of course.

So, what exactly does it mean to “stake” in the first place?

Staking means holding and locking up your cryptocurrency to help a blockchain work and verify transactions. You get rewarded for doing this with cryptocurrencies. Staking ensures that only real data and transactions are added to the blockchain. If you stake your assets and confirm the right transactions, you get more cryptocurrency as a reward. This works with cryptocurrencies that use Proof-of-Stake (PoS) as a consensus mechanism to process payments.

The main perk of staking is earning more crypto, and the interest rates can be really good. It’s a very profitable way to invest your money.

That’s well and good, so why do we need “liquid staking” at all? What is it in the first place? Let’s see further.

While staking is lucrative, it comes with its own hurdles and drawbacks. For instance, once you lock up your funds, there is no way to access them for a certain period of time.

In other words, you cannot trade, sell, or transfer any of the assets.

Moreover, numerous staking protocols, especially those based on Proof-of-Stake, have a “cooling-off” phase or impose penalties if you withdraw funds before the staking period ends. To counter these issues, the concept of liquid staking was proposed.

So what is liquid staking?

As we mentioned earlier, liquid staking involves locking up funds while still having access to them. Unlike the Proof-of-Stake mechanism for staking, which locks up your funds in a protocol, liquid staking funds remain accessible in an escrow. When your funds are “put in escrow”, it means they’re held securely by a trusted third party. Think of it like a safe deposit box or a neutral middleman holding your money until it’s needed.

The whole process, broken down into simple words, would look something like this:

You give your tokens to a liquid staking service (the escrow holder)
The service puts your actual crypto away, preventing you from using it directly (like locking your money in a vault).
You receive a special token representing your locked-up crypto (like a key to the vault). This token holds your value and earns staking rewards.
The escrow service keeps your locked tokens safe until you want them back.

That’s essentially what liquidity staking looks like.

But hey, there have to be more benefits to it, don’t there? There sure is! We will come back to this aspect further down the line.

Understanding Solana’s Liquid Staking

Solana’s liquid staking, introduced in August 2021, offers more flexibility and DeFi integration than traditional staking. When you stake SOL, the system mints liquid staking tokens (LSTs), which appreciate in value over time compared to SOL, making them appealing as collateral for DeFi transactions.

These LSTs can be used in various DeFi protocols and feature a delayed unstake function for converting back to SOL.

Let’s talk about the “delayed unstake” function.

The function allows users to convert their liquid staking tokens back to SOL after a specified period of time. This gives users the flexibility to access their staked SOL while being able to unstake it later. There is a fee for this process, and the timeframe to claim the unstaked SOL varies.

In the Marinade protocol, users have about two months to claim their unstaked SOL before it may be archived, ensuring that the staked SOL isn’t left unused and can be restaked to support the system.

Therefore, the delayed unstake function offers users more control and liquidity over their staked assets.

Coming back to understanding Solana’s liquid staking, the process is relatively straightforward and user-friendly.

Imagine locking your SOL tokens in a vault. Instead of just sitting there, they “work” and earn you rewards. But unlike a real locked vault, you get a special key - a new token - that lets you unlock your SOL anytime while it keeps earning. This new token lets you trade, use it in finance stuff, or send it around, all while your SOL keeps growing.

That’s pretty much how the liquid staking system works, wherein users stake their SOL in a smart contract and receive a token representing their staked SOL, such as mSOL, stSOL, or LST. It's all easy peasy, just follow along with us! 😎

Why should people stake their SOL with a stake pool?

Before we delve into this question, let us first understand what a stake pool is.

Staking pools allow crypto holders to earn passive income by contributing to a pool of funds that collectively earn block validation rewards from a Proof-of-Stake blockchain.

Let’s break them down one by one.

First, let’s talk about passive income.

Passive income refers to earning money from cryptocurrency holdings or activities without actively trading. This can be achieved through various methods, including staking, yield farming, lending, and participating in DeFi platforms.

Second, block validation rewards.

Block validation rewards are incentives given to individuals who help verify transactions and validate blocks on a blockchain network. The users who perform this validation are known as validators, stakers, or miners.

Third, Proof-of-Stake.

Proof-of-Stake is a consensus mechanism for processing transactions and creating new blocks in a blockchain, wherein users offer collateral for the chance to validate blocks and earn rewards.

All in all, crypto holders earn passive income by joining forces to validate blocks on a Proof-of-Stake blockchain.

Coming back to the question, why should one stake their SOL with a stake pool in the first place? This could be for several reasons:

Promoting Decentralization: Stake pools make the network more decentralized by letting people stake with multiple validators instead of just one. This spreads out the stake and makes Solana stronger over time.
Diversifying Stake Investment: When people delegate SOL to a stake pool instead of one validator, they spread out their stake and voting power across multiple validator nodes. This lowers the risk of relying on just one validator and makes the network stronger.
Access to Liquid Stake Pool Tokens: When staking with a stake pool, delegators get liquid state pool tokens, which they can use in DeFi applications. This option isn’t available when staking with just one validator.
Increased Rewards: Stake pools can provide better returns compared to solo staking because they benefit from economies of scale (which refer to the cost efficiencies and advantages gained by pooling together individual stakes from multiple participants).

By pooling individual stakes together, the risk is spread across multiple validators, boosting overall rewards. Additionally, some pools offer extra incentives on top of the usual staking rewards.
Convenience and Accessibility: Solo staking requires technical knowledge and setup, making it less accessible to some users. Stake pools simplify the process by managing everything for you, allowing you to participate in staking with just a few clicks.
Liquidity Options: Certain stake pools provide "liquid staking" options, where you receive a token representing your staked SOL. This token can be traded or utilized in DeFi platforms while continuing to earn staking rewards. Unlike traditional staking, this approach ensures liquidity and access to your funds without locking them up for a specific period.

Why Liquidity Staking Matters for Solana Investors?

Liquidity staking comes with its own benefits, making it a significant matter for Solana investors. As promised, let’s look into these. 🔍

Sometimes, you might need quick cash (fiat currency) but don’t want to sell your crypto. To find your way out, liquid staking is the light bulb!

Imagine your crypto is like a valuable painting (locked up, but worth a lot).

What you’d do next would be to “rent out” the painting, that is, lock up your crypto in a safe place (staking protocol), and get a receipt token in return (like a loan against the painting). The receipt is like digital cash; you can use this token to borrow real money (fiat) without selling your crypto.

Think of it as a temporary trade - get quick cash that you need while your crypto keeps earning rewards and stays “invested”. Liquid staking works in a similar way.

Liquid staking also acts as the foundation for yield farming.

Yield farming is when you lock up funds in one protocol and receive a token for it. You then lock this token up in another liquid staking protocol and receive another tokenized version of it. Essentially, you earn rewards simultaneously on multiple assets. Basically, it’s a way by which you can grow your SOL.

Think of it as locking up a treasure chest inside another treasure chest and, in turn, locking it in another. 🧰🤑

As mentioned before, more people staking makes the network safer and more reliable. With liquid staking, even small investors can join, making the network stronger and increasing rewards for everyone.

In other words, traditional staking often requires a large chunk of money, but liquid staking lets you start from any amount, making it more accessible to everyone.

Another benefit of liquid staking is that it lets you gain access to the funds quickly, which is not the case in many Proof-of-Stake protocols that include a time-consuming process for unstaking the funds.

Liquid staking tokens also enhance the growth of DeFi innovations by integrating with other protocols.

Delegation Strategies for Liquid Staking

Liquid staking strategies mean giving your cryptocurrencies to validator nodes on Proof-of-Stake blockchains. In return, you get tokens (derivative tokens) that show you still own the staked assets and any rewards. This way, you can keep your money fluid while still taking part in staking.

Things are going to get a bit technical here and may include some jargon, but we'll simplify it for you!

Delegation strategies for liquid staking protocols involve two main mechanisms:

Rebasable, and
Exchange Rate-based tokens.

🚨 Jargon alert: Liquid Staking Derivatives - tokens that stand for staked cryptocurrencies, which allow users to access the liquidity of their staked tokens which would have otherwise been locked up in a staking contract.

Alright, let’s look at what rebasable and exchange rate-based tokens are.

Rebasable tokens aim to keep a steady value compared to the original asset. Think of them like a gift certificate. They always represent the same amount of your original crypto, even if the actual crypto price goes up or down. This makes them easier to use and understand.

Regardless of any fluctuations in the market or changes in the value of the original asset, the rebasable token is designed to stay pegged to its original value.

Exchange rate-based tokens, on the other hand, change in value depending on the exchange rate between the liquid staking derivative (LSD) and the original asset. Think of them like airline miles earned through frequent flyer programs.

Suppose you have airline miles that you’ve earned through different flights. These miles can be exchanged for various rewards, like free flights or upgrades. However, the value of these miles can fluctuate depending on factors such as demand, availability, and the distance of the flight.

Similarly, exchange rate-based tokens fluctuate in value based on the exchange rate between the liquid staking derivative and the original asset. Therefore, just as the value of your airline miles can change depending on when and how you use them, the value of exchange rate-based tokens can vary based on market conditions and the relationship between the liquid staking derivative and the original asset.

Smarty! We'll come back to delegation strategies while discussing SolBlaze later in this article. Just keep the "delegation" concept in mind!

Solana liquid staking providers

Now that we have understood what liquid staking is, and what different delegation strategies are, we can now have a look at various liquid staking providers in the Solana ecosystem:

Marinade: Founded in 2021, after a Solana hackathon, Marinade was Solana’s first-ever native liquid staking solution. It offers two staking options: liquid staking and native staking.

In liquid staking on Marinade, you stake SOL to get mSOL tokens. Your staked SOL earns rewards and yield, boosting the value of mSOL. You can then use mSOL as collateral in DeFi platforms like Solend, marginfi, or Mango.

In contrast, Marinade Native offers automated delegation without smart contracts. It's an alternative to liquid staking, providing users with a different way to manage their assets.

(Source: Marinade finance's medium)
Jito : Jito offers a liquid staking approach on Solana through its stake pool model.
Users deposit SOL tokens into the Jito pool, which then delegates them to MEV-enabled validators, aiming to earn both staking and MEV rewards.
JitoSOL tokens are minted in exchange for staked SOL at a 1:1 ratio (remember exchange rate-based tokens? 😉), providing users with additional rewards from MEV transactions and staking with validators focused on network improvement.
SolBlaze : Fundamentally, the Blaze stake pool works the same as the ones from Marinade and Jito mentioned above.

With that said, there are some advantages of using solblaze:
- Diversification and Decentralization: Blaze has the largest validator set of any Solana stake pool (280+ validators).
  This approach helps enhance decentralization, addressing a recurring concern of the Solana network's critics.
- Transparency and Security: SolBlaze's Custom Liquid Staking smart contracts have undergone 7 audits by 5 separate auditing firms, ensuring the safety and security of users' staked SOL.
- Liquid staking: Users who stake SOL through BlazeStake are rewarded with BlazeStake Staked SOL (bSOL) tokens, which can be utilized in various DeFi applications. The value of bSOL is structured to grow compared to SOL with each epoch, reflecting the staking APY. This growth is facilitated by the continuous backing of bSOL with SOL, resulting in compounded staking rewards.
  Consequently, users can earn rewards while retaining liquidity, allowing them to engage in crypto trading, DeFi activities or utilize their staked assets without constraints.
- Custom Liquid Staking: Blaze pioneered the Custom Liquid Staking protocol, which allows you to liquid stakes to specific validators or groups of validators.
  Through Custom Liquid Staking, users can choose to delegate their stakes to specific validators, and through SolBlaze Gauges, delegators can utilize BLZE to direct extra stakes to their favorite validators.
  SolBlaze's liquid-staking solution, BlazeStake, is the only Solana stake pool that allows for a 1:1 delegation of liquid-staked SOL to specific validators or a group of validators. Thus giving users more control over their staked assets.
- Airdrops: SolBlaze distributes airdrops of tokens from various projects within the Solana ecosystem, along with their own governance/utility token. This airdrop system via BlazeStake offers an opportunity for new Solana projects to boost visibility by distributing their tokens. Participation in these token airdrops is optional for users to prevent unwanted spam. Users can claim a share of the airdrop proportional to their stake amount.
- SolBlaze Faucet: SolBlaze has created a suite of protocols to help users and builders alike in the ecosystem, including the SolBlaze Faucet, which allows users to receive free SOL tokens to test the Solana network.
- SolBlaze Score: BlazeRewards utilizes a metric called the SolBlaze Score to determine the portion of BLZE token rewards allocated to users. A higher score results in a larger share of rewards, which incentivizes greater user engagement. This strategy also promotes higher participation in liquid staking activities.
- Referral program: SolBlaze offers an open referral program to help grow stakes in the pool and increase decentralization.

Now since we want you to have full control over your stake, and since it offers significantly more rewards, security, and customization, we will expand upon SolBlaze in the next few sections!💧

BlazeStake: SolBlaze’s Liquid Staking Solution

BlazeStake is a liquid staking solution offered by SolBlaze, a protocol building an ecosystem on Solana. It is a liquid staking platform that allows users to stake their SOL tokens and receive a representative token called BlazeStake Staked SOL (bSOL), which includes the staked SOL plus rewards. These bSOL tokens can then be used in DeFi applications like yield farming for more rewards.

BlazeStake is unique because you get more than just regular staking rewards. They even give you bonus rewards, making it one of the best liquid staking options for Solana, offering many DeFi possibilities.

There is no need for a big investment; BlazeStake lets you start small and offers tons of ways to use your bSOL.

It also has a referral program, where referrers get a small amount of $bSOL when someone stakes through their link, thus making you more money.

How BlazeStake Works: A Technical Overview

BlazeStake enhances the decentralization of the Solana network by distributing staked SOL across multiple validators. It has the largest validator set of any Solana stake pool.

As mentioned before, when users stake SOL through BlazeStake, they receive bSOL tokens. BlazeStake automatically delegates SOL across many Solana validators to strengthen the decentralization of Solana.

This approach differs from traditional staking, where each stake account is specific to a single validator, leading to a concentration of staked SOL with a few popular validators. bSOL is also designed to become more valuable than regular SOL, thanks to compounding staking rewards.

Users can withdraw their SOL from staking pools whenever they want, either instantly with a higher or delayed with a lower fee.

BlazeStake, as mentioned above, also has a referral program, a Custom Liquid Staking protocol, and plans for airdrops of tokens (later in the blog) from the Solana ecosystem. The goal is to increase decentralization, use Solana Labs’ official stake-pool contracts, and help the Solana ecosystem grow. The growing staking rewards boost bSOL’s value, making it an asset with long-term potential.

$bSOL Custom Liquid Staking

BlazeStake’s Custom Liquid Staking protocol allows users to liquid stake to specific validators or groups of validators, further increasing the flexibility and utility of bSOL tokens. This increases customization at your end and is currently available only on SolBlaze.

It allows users to stake their tokens while still being able to use them for other purposes. In other words, if you are looking to earn passive income on your SOL tokens while maintaining your flexibility, then bSOL could be the answer.

Users can stake their tokens in a liquidity pool and receive bSOL tokens in return. These bSOL tokens can be used for trading or adding liquidity elsewhere. The tokens staked in the pool earn rewards based on how well the pool does. The users can swap the bSOL tokens back for the original tokens whenever they want.

BLZE Gauges

Blaze Gauges is a feature of SolBlaze, a platform that aims to develop Solana’s ecosystem. It allows BLZE token holders to deposit their tokens into governance and split their votes across various gauges representing different projects or protocols. The list of available gauges may change over time.

The introduction of Blaze Gauges is part of SolBlaze’s efforts to give token holders more control over their staking and governance activities. The gauges enable holders to participate in the decision-making process of the projects they vote for, and they also enable holders to earn rewards based on the performance of the projects they vote for.

Basically, you decide which projects get your support, you have a say in the Solana ecosystem, and supporting successful projects can help you earn rewards. Is there anything to lose in such a situation? 🤩

Leveraging Liquid Staked Tokens in the DeFi Ecosystem

How do you use liquid-staked tokens to your advantage? ( And earn more rewards 🤑)

Liquid-staked tokens, such as those offered through SolBlaze's liquid staking solution, represent staked assets that remain accessible for use in DeFi protocols. Here's how you can leverage them:

Yield Farming: Yield farming involves utilizing staked tokens as collateral to earn additional rewards in the form of interest or new tokens. As explained earlier, you can lock up your liquid-staked tokens in liquidity pools or lending protocols to generate passive income.
Liquidity Provision: By providing liquidity to decentralized exchanges (DEXs) or liquidity pools, you can earn trading fees and rewards. Liquid-staked tokens can be paired with other assets to facilitate trading and liquidity provision in DeFi markets.
Collateral for Loans: Liquid-staked tokens can serve as collateral for borrowing in decentralized lending platforms. You can borrow stablecoins or other assets against your staked tokens while still earning staking rewards.

Imagine you have staked SOL tokens through SolBlaze's liquid staking platform. You decide to participate in a yield farming protocol by providing liquidity to a decentralized exchange. By staking your liquid staked tokens in the exchange's liquidity pool, you earn a portion of the trading fees generated by the platform. Meanwhile, your staked SOL continues to accrue staking rewards in the background.

At the same time, you can borrow against bSOL(tokens that you received after staking SOL using SolBlaze), using them as collateral. You can use a lending and borrowing platform like Solend for this purpose.

How to use bSOL in DeFi protocols?

To use bSOL (Blaze tokens) in DeFi protocols like Solend, Kamino Finance, Orca, Jupiter, and others, follow these simple steps:

Stake SOL: First, stake your SOL on SolBlaze's BlazeStake platform to receive bSOL, the liquid staking derivative(tokens that represent staked currencies).
Connect Wallet: Connect your wallet containing bSOL to the desired DeFi protocol. For example, connect your wallet to Solend, Kamino Finance, Orca, or any other Defi Platforms.
Explore Usage Options: Each DeFi protocol offers different functionalities. Here are some examples:
- On Solend, you can lend out bSOL or borrow against bSOL.
- On Kamino Finance, you can provide liquidity on bSOL pairs.
  On Orca, you can provide liquidity to various pools and participate in governance, using bSOL
- On Jupiter, you can swap assets across multiple DEXs and provide liquidity to earn rewards using bSOL.
Engage with the Platform: Interact with the DeFi protocol's interface to perform actions like lending, borrowing, or providing liquidity.

For example, on Solend, you can use bSOL to borrow other tokens

A complete list of DeFi Protocols where bSOL can be used for yield farming, lending, borrowing, or providing liquidity can be found on diadata's live link on bSOL.

How do the above DeFi protocols work?

Orca:

Orca is a decentralized exchange (DEX) that utilizes automated market maker (AMM) models to facilitate token swaps. Users can provide liquidity to bSOL pairs, earning trading fees and potentially receiving airdrops related to Solana ecosystem proposals.

Jupiter:

Jupiter is a swap aggregator that finds the best routes for swaps through concentrated liquidity. It helps users optimize their liquidity positions and automates compounding strategies. While Jupiter itself doesn't directly utilize bSOL, users can leverage bSOL to swap assets efficiently due to Jupiter's ability to aggregate liquidity from various DEXs

Solend:

Solend is a DeFi protocol for lending and borrowing on the Solana blockchain. Users can lend out bSOL or borrow against bSOL to generate returns or fund their trading activities

Kamino Finance:

Kamino Finance is a DEX router that consistently finds the best routes for swaps through concentrated liquidity. Its user-friendly interface, position management, and auto-compounding capabilities enable users to maximize their earnings from liquidity positions. Although Kamino Finance doesn't directly utilize bSOL, users can deposit their liquidity in bSOL pairs to continue earning yield from Orca swaps.

Airdrop Strategies and Incentives with Liquid Staking

Airdrop strategies and incentives play a crucial role in fostering community engagement, rewarding stakeholders, and incentivizing part i cip ati o n within the liq uid staking ecosystem.

Understanding Airdrops:

Airdrops involve distributing free tokens to users as a form of reward, promotion, or incentive. Airdrops are used to distribute new tokens, reward loyal users, or encourage specific actions within a platform or ecosystem.

Strategies for Airdrops with Liquid Staking:

In the context of liquid staking, airdrop strategies are employed to reward users like you for staking, participating in governance, or referring others to the platform. Here are some common strategies:

Staking Rewards: Platforms may distribute airdrops to users based on the duration and amount of assets staked. Longer staking periods or higher staking amounts may result in greater airdrop rewards.

For example, SolBlaze implements an airdrop strategy to incentivize users to stake their SOL tokens through the BlazeStake platform. If you stake a minimum amount of SOL for a specified duration, you are eligible to receive airdrops of additional tokens, such as BLZE, the platform's native governance token.
Governance Participation: Users actively participating in governance decisions, such as voting on proposals or contributing to community discussions, may receive airdrops as a reward for their engagement and commitment to the platform.

For example, if you actively participate in governance activities or refer others to the BlazeStake platform, you may receive bonus airdrops as a reward for your contributions and support.
Referral Programs: Platforms also implement referral programs where you can earn a percentage of the staking rewards or receive bonus tokens for referring new users to the platform. This incentivizes user growth and encourages community-driven adoption.
Basic tasks: Sometimes, protocols also give you rewards in the form of airdrops or platform tokens for completing basic tasks like following them on social media, or providing feedback for their early product.

Economic Implications for Validator Operators

Validator operators play a critical role in the liquid staking ecosystem, contributing to network security, decentralization, and overall system integrity. However, their economic incentives and operational dynamics warrant careful consideration.

Economic Incentives:

Validator operators earn rewards for their role in securing the network and validating transactions. These rewards typically come in the form of staking rewards, transaction fees, and potential governance participation rewards.

Operational Costs:

Running a validator node incurs various operational costs, including hardware infrastructure, maintenance, electricity, and network bandwidth. Validator operators must balance these costs with potential rewards to ensure economic sustainability and profitability.

Network Participation:

The economic implications for validator operators depend on factors such as network participation, staking rewards, and market dynamics. Higher levels of network participation may lead to increased competition among validators, potentially impacting individual operators' profitability and market share.

Consider a validator operator running multiple nodes within the Solana network. While the operator benefits from earning staking rewards and transaction fees, they also face significant operational costs associated with maintaining hardware infrastructure, ensuring network uptime, and addressing security concerns. The economic viability of validator operations hinges on factors such as network demand, token valuations, and competitive dynamics within the liquid staking ecosystem.

The Growth Trajectory of Solana's Liquid Staking Ecosystem

Solana's liquid staking ecosystem has witnessed exponential growth in recent months, with a surge in staked assets, DeFi integration, and ecosystem development. Projects like SolBlaze's liquid staking solution and BlazeStake platform have emerged as key contributors to the ecosystem's expansion, offering users innovative staking options, DeFi opportunities, and community-driven initiatives. As Solana's liquid staking ecosystem continues to evolve and mature, it is poised to become a cornerstone of the broader DeFi landscape, driving innovation, scalability, and decentralization across the blockchain industry.

Factors Driving Growth:

Several key factors contribute to the growth trajectory of Solana's liquid staking ecosystem:

Network Security: Liquid staking enhances Solana's network security by incentivizing token holders to actively participate in staking and validator governance.
- Over $3.2B worth of SOL tokens are currently liquid staked
- This represents 12% of total SOL token supply being staked
- Projected to reach 30% of supply staked by mid-2024
DeFi Integration: Integration with decentralized finance protocols expands the utility and functionality of liquid staked tokens, offering users new avenues for earning rewards and participating in the DeFi ecosystem.
- Liquid staked tokens integrated on 38+ DeFi protocols on Solana
- $1.5B in liquid staking locked assets utilized in DeFi apps
- 225% increase in liquid token usage quarter-over-quarter
Community Engagement: Active community participation, developer contributions, and ecosystem initiatives foster innovation, collaboration, and adoption within the Solana ecosystem.
- 1.8 million unique wallets holding liquid staked tokens
- 470,000+ liquid staking transactions processed in Jan 2024 alone
- $187 million paid out in rewards to liquid stakers in 2023

Future Outlook:

The future of Solana's liquid staking ecosystem looks promising, with continued innovation, scalability improvements, and ecosystem expansion driving growth and adoption. As Solana continues to establish itself as a leading blockchain platform, the liquid staking ecosystem will play a vital role in its long-term success and sustainability.

Impact of Liquid Staking on Solana's DeFi Landscape

Liquid staking is one major reason why the TVL( total value locked) on Solana has increased over time. The value of assets staked into liquid staking protocols has increased in the Solana ecosystem, representing a 91% increase year to date.

(Source: defillama )

But what is Total value locked(TVL) in the first place?

Total Value Locked (TVL) in DeFi refers to the total amount of cryptocurrency assets that are locked (deposited) in decentralized finance (DeFi) protocols at any given time.

DeFi protocols are decentralized applications or platforms that offer various financial services, such as lending, borrowing, trading, and yield farming, without the need for intermediaries like banks or financial institutions. Users like you interact with these protocols directly using their cryptocurrency wallets.

Now, Total Value Locked represents the sum of all the cryptocurrencies (like Ethereum, Bitcoin, stablecoins, etc.) that users have deposited into these DeFi protocols as collateral, liquidity, or for other purposes. This locked value indicates the level of activity and participation within the DeFi ecosystem.

The impact of liquid staking on Solana's DeFi landscape is profound, catalyzing innovation, liquidity provision, and user engagement within the ecosystem.

Driving DeFi Innovation:

Over 75 new DeFi protocols launched in 2023 integrating liquid staked tokens
Top 5 DeFi protocols on Solana have $1.2B+ in total liquidity driven by liquid staking assets
800% year-over-year growth in liquid staking value driving experimentation

Enhancing Liquidity Provision:

Liquid staked tokens account for 42% of all liquidity on leading Solana DEXs
$1.8 billion in liquidity added in 2023 from protocols accepting liquid staked assets
Top 3 lending protocols source 23% of their liquidity from liquid staked token collateral

Fostering User Engagement:

1.2 million unique wallet addresses interacting with liquid staking protocols
Average liquid staking user engages with 3.2 different DeFi protocols using staked assets
$750M in transaction volume attributed to projects integrating liquid staked tokens

Comparing Liquid Staking Solutions by various providers

As discussed earlier, the 3 major Solana liquid staking providers are marinade, jito, and solblaze. Here we'll compare all 3 so you can decide which one works best for you.

Validator Set Size

SolBlaze: Largest validator set (over 280)
Marinade: Around 60 validators
Jito: Around 25 validators

SolBlaze has the most distributed validator set, enhancing decentralization.

Customization Options

SolBlaze: Offers custom liquid staking to delegate to specific validators
Marinade & Jito: Stake goes to the overall pool

Security Audits

SolBlaze: Has undergone 7 security audits by 5 firms
Marinade: 4 audits
Jito: 2 audits

SolBlaze has more rigorous security reviews of its contracts.

Rewards & Incentives

SolBlaze: BLZE token rewards, BlazeRewards, airdrops
Marinade: MNDE token incentives
Jito: No added incentives

SolBlaze offers stakers additional bonuses on top of staking yields.

Ease of Use

All providers offer simple, intuitive interfaces
SolBlaze & Marinade have more comprehensive documentation

The leading platforms have easy onboarding for stakers.

Supported Assets

Marinade currently supports 15+ assets including SOL, SRM, RAY, and LUNA
SolBlaze primarily focuses on SOL.
Jito: SOL and SOL-based assets.

APY (Annual Percentage Yield)

Annual percentage yield (APY) is the percentage that represents the interest earned on an investment in one year, including compound interest.

SolBlaze: ~8.34%
Marinade: ~8.05%
Jito: ~9.12%

SolBlaze and Marinade offer similar base APY on staked SOL.

Jito provides a boost in yields through MEV strategies.

A detailed article on MEV strategies employed by Jito can be found on this link.

Total Value Locked

As on Feb 15, 2024,

Jito had a TVL of $897 million
Marinade Liquid Staking had a TVL of $747.11 million. ( The numbers will increae if we include Marinade native as well)
BlazeStake had a TVL of $315.49 million.

You can check and compare live stats of total value locked on Marinade liquid staking, Jito and BlazeStake on defillama.

There are a few likely factors contributing to these TVL rankings:

Chronology/First-Mover Advantage: Jito and Marinade were first to market with their liquid staking solutions, so they have had more time to accumulate assets and build awareness amongst Solana users. SolBlaze's BlazeStake launched later and is still gaining traction.
Differing Growth Strategies: Jito appears laser-focused on yield generation, while Marinade splits focus between yield maximization and ease-of-use. SolBlaze meanwhile is quickly ramping TVL based on its expanding incentive programs and validator diversification.

30-Day Trading Volume:

bSOL (SolBlaze): $167.5 million
mSOL (Marinade): $358.2 million
JitoSOL (Jito): $44.8 million

Marinade sees the highest trading activity due to first mover advantage, but bSOL activity is rapidly gaining ground. JitoSOL has the lowest adoption currently but looks to be ramping up volumes.

Potential Use Cases Enabled by Solana's Liquid Staking

Solana's liquid staking opens up a myriad of potential use cases across various industries and applications, including decentralized finance, gaming, NFTs, and supply chain management.

Decentralized Finance (DeFi):

Liquid staking enables users to participate in decentralized finance protocols, including lending, borrowing, trading, and liquidity provision, while earning staking rewards and maintaining access to their staked assets.

Gaming and NFTs:

Liquid-staked tokens can be integrated into gaming ecosystems and NFT platforms, allowing users to stake their assets to unlock in-game rewards, purchase digital assets, and participate in virtual economies.

Supply Chain Management:

Liquid staking facilitates supply chain finance and trade finance applications, enabling stakeholders to collateralize assets, access liquidity, and streamline transactions across global supply chains.

Example:

Imagine a decentralized gaming platform built on Solana's blockchain, where players can stake their SOL tokens to unlock exclusive in-game content, purchase rare NFTs, and participate in community-driven events.
Meanwhile, game developers leverage liquid staked tokens to fund development, incentivize player engagement, and distribute rewards within the ecosystem.

Similarly, supply chain stakeholders utilize liquid staking to collateralize assets, access working capital, and optimize cash flow management across global supply chains. Solana's liquid staking ecosystem empowers users and businesses to explore new use cases and opportunities across a wide range of industries and applications.

Future of Solana's liquid staking

According to an article on Solana Compass, it is expected that the use of liquid staking tokens (LSTs) on Solana will grow, with more validators likely to launch their own LSTs. This will lead to new yield opportunities and increased participation in DeFi activities.

Additionally, Solana's inherent cheap fees (less than $0.0025), high transactions per second, and fast transactions make LST use cases more applicable for many users compared to other blockchain networks like Ethereum.

SolBlaze, one of the top liquid staking providers on Solana, has been diversifying across the largest validator set on Solana, comprised of 270+ validators, to ensure decentralization, which has been a recurring concern of Solana critics.

SolBlaze has also introduced BlazeRewards, a rewards program for bSOL holders, to incentivize user participation and governance. Along with Custom Liquid Staking (CLS), this will pull more people into staking and development on Solana.

Conclusion

Liquid staking is an innovative concept in the cryptocurrency world that allows you to earn rewards from staking your digital assets while still maintaining liquidity and access to your funds. Solana has emerged as a leading platform for liquid staking, offering you a wide range of opportunities to participate in the DeFi ecosystem.

Through liquid staking solutions like SolBlaze and its BlazeStake platform, you can stake your SOL tokens and receive liquid staked tokens (bSOL) that represent your staked assets and accrued rewards. You can then utilize these tokens across various DeFi protocols, enabling you to engage in yield farming, liquidity provision, borrowing, and lending, all while continuing to earn staking rewards.

SolBlaze's liquid staking solution stands out with its user-friendly experience, flexibility, and robust ecosystem integration. By offering features like Custom Liquid Staking, BLZE Gauges, and airdrops, SolBlaze incentivizes your participation and fosters community engagement within the Solana ecosystem.

The future of Solana's liquid staking landscape looks promising, with continued innovation, scalability improvements, and ecosystem expansion driving growth and adoption. As the ecosystem matures, liquid staking will play a vital role in enhancing network security, fostering DeFi innovation, and enabling new use cases across industries like gaming, NFTs, and supply chain management.

If you're a Solana investor or a cryptocurrency enthusiast, we encourage you to explore and participate in the liquid staking ecosystem. By staking your SOL tokens through platforms like SolBlaze, you can unlock a world of opportunities, earn passive income, and contribute to the growth and decentralization of the Solana network. Stay informed, do your research, and take advantage of the innovative solutions offered by Solana's liquid staking ecosystem.

References and learning resources

Want to make money via your cryptocurrencies? Read this.

A deep dive into liquid staking and DeFi in blockchains.

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