Solana's Liquid Staking Landscape

Solana's staking sector continues to be one of the most lively parts of the network.

Staking, locking up capital for network security in return for yield, is a vital part of DeFi and one of the strongest sectors of the onchain economy. Staking requirements vary by chain; Ethereum requires 32 ETH for native staking on a personal node, or users can opt for liquid staking providers like Lido or Rocket Pool. On Solana, anyone can stake natively through its delegated Proof-of-Stake system by delegating to validators instead of running their own node.

This ease of staking may explain the large gap between Solana and Ethereum in terms of total staked versus liquid staked assets. Solana has $61B in staked capital, surpassing Ethereum, but lags in liquid staking. Ethereum has 65% of its staked ETH in liquid form, whereas only 6.5% of Solana's staked SOL is in liquid staking tokens (LSTs), indicating a significant growth opportunity for Solana.

In this article, we’ll explore the current arena of SOL liquid staking, examining key players as well as the protocols innovating and tackling this opportunity. Let’s begin! 👇

💦 Solana's Top LSTs

Jito, Marinade Finance, and Jupiter dominate Solana liquid staking, holding 80% of all SOL in LSTs. Let's check out what makes each protocol unique and how they're aiming to increase their share of the staking pie.

◼️ Jito's JitoSOL

Not only is JitoSOL the largest LST – holding 48% of liquid staked SOL, valued at $1.7B – but Jito is the largest protocol on Solana.

Jito, well-known for its massive airdrop, allows users to stake SOL and receive JitoSOL to use across the network in DeFi.

Jito’s standout feature comes from its unique approach to MEV, which gives users better returns while keeping the network healthy. Jito supports special validators that optimize block space and include transactions fairly, avoiding harmful tactics like sandwich attacks or front-running. As a result, this helps MEV behave more positively, enabling JitoSOL holders to earn about 15% more.

As the largest LST on the network, JitoSOL is deeply engrained in DeFi. It’s a popular asset for lending and borrowing across protocols like Solend, Drift, and Marginfi and can be leveraged on Kamino for higher yields. These integrations have created a liquidity flywheel positioning JitoSOL as the most productive and efficient LST, increasing the demand for the asset. Finally, Jito's impact on the Solana network is more than just boosting staking rewards. Through StakeNet, a decentralized system for optimizing validators, Jito improves performance and fairly distributes rewards, making the network more efficient and secure for all participants.

🟩 Marinade Finance’s mSOL

Marinade Finance holds second place with 22% of the total LST market share.

Launched in August 2021, Marinade's mSOL functions like JitoSOL, appreciating over time with staking rewards. In July 2023, Marinade launched Marinade Native, allowing direct SOL staking with rewards every epoch, avoiding smart contract risk while retaining control of SOL. Further, Marinade's Protected Staking Rewards ensure stakers don't lose rewards from validator performance issues by requiring validators to provide a bond.

Once the largest LST, Marinade lost its position to Jito, yet still remains the second largest protocol on Solana overall. Its TVL continues to bleed, though, with it losing stake not to Jito but to Sanctum, a protocol for creating, launching, and unifying liquidity for LSTs. 

🟩 Jupiter’s JupSOL

In third place is JupSOL, with 10% of all SOL staked in LSTs, launched by Jupiter and Sanctum.

Released in April, JupSOL has quickly captured market share, offering an instantly liquid version of SOL staked with Jupiter’s validator. On top of staking rewards and MEV kickbacks, JupSOL offers high yields, boosted by 100K of SOL delegated by the Jupiter team. JupSOL also increases Jupiter's inclusion rate by boosting the stake of its validator. Validators with more stake have higher transaction processing priority on Solana. Consequently, Jupiter's validator can process more transactions, even during busy periods. Thus, transactions on platforms like Jupiter and Sanctum, using Jupiter's validator, are more likely to be completed quickly and successfully. Holding JupSOL makes Jupiter's validator more influential, improving transaction efficiency and success rates on these platforms.

What is Sanctum?

Originally launched in February 2021, Sanctum allows whitelisted validators to create and launch their own liquid staking tokens while unifying liquidity for these derivatives.

Sanctum's custom LSTs serve various purposes, from increased yields to enabling NFT whitelist spots or subscription services. Sanctum addresses key liquid staking issues, unifying fragmented liquidity and expanding limited LST options through three core functions. The Sanctum Router enables seamless LST conversions, and the Sanctum Reserve offers instant liquidity for unstaking. Sanctum's Infinity Pool, a multi-LST liquidity pool, supports an unlimited number of LSTs natively, unlike traditional pools supporting only a few assets. It ensures fair LST prices and adjusts swap fees dynamically to optimize returns and maintain the right balance of each LST in the pool. Depositing LSTs or SOL into the Infinity Pool yields Sanctum's LST, INF, usable in DeFi protocols like Kamino and Meteora.

Sanctum’s vision extends beyond just liquid staking. Ahead of its token launch this Thursday, Sanctum’s FP Lee outlined a vision centered around three core products.

Overall, Sanctum's approach enhances liquidity, expands LST use cases, and supports the most fundamental onchain economy through Launchpad, Profiles V2, and Pay. These developments could significantly impact the Solana ecosystem by improving liquidity, creating new LST launch paths, and offering novel LST use cases.

♻️ Restaking on Solana

Beyond liquid staking, Solana is seeing increased development of restaking protocols, leveraging the activity of this cycle’s main chain to expand its use cases.

Early-stage protocols Cambrian, Picasso, and Solayer aim to add restaking to Solana’s modular expansion.

• Solayer: Restaking provider Solayer aims to create a network of appchains secured by Solana’s economic security. Utilizing Solana’s architecture for multitasking and fast transactions, Solayer can improve workload distribution and service customization. This extends Solana's capabilities, offering better consensus and blockspace customization for developers — especially useful given the recent momentum of Solana L2s. Solayer's May soft launch hit a $20M deposit cap for SOL and LSTs in 45 minutes, showing strong demand that has continued and grown its TVL to ~$127M.
• Cambrian: Cambrian is developing a modular restaking layer for Solana to reduce costs and enhance resource allocation, benefiting decentralized oracles and AI processors. Their model allows protocols to rent security from Solana, lowering native solution costs and positioning it as an onchain alternative to cloud providers like AWS. Its testnet is expected this summer.

• Picasso: Initially focused on bridging Solana and Cosmos, Picasso has evolved into a restaking hub supporting other Solana projects like Mantis, an upcoming restaked L2. Using the Cosmos SDK framework, Picasso connects IBC-enabled chains, enhancing their utility and security. Picasso’s Generalized Restaking Layer and IBC secure applications needing temporary or permanent security. This enables SOL and its LSTs to be restaked, providing new staking options and facilitating liquidity exchange.

🌱 Primed for Growth

Solana stands to benefit immensely from the expansion of its staking economy. 

With a low percentage of SOL staked in LSTs compared to SOL staked overall, protocols like Jito, Marinade Finance, and Jupiter will continue to thrive as the ecosystem evolves. Sanctum plays a crucial role in this evolution, addressing liquidity fragmentation. Moreover, while the development of restaking on Solana may be premature given the state of restaking on Ethereum, it does tie into the momentum around modular development we see with SVM L2s and appchains, meaning protocols such as Cambrian, Solayer, and Picasso could expand the chain’s primary functions and further fuel LST growth. 

Overall, Solana's staking economy looks primed for significant growth, driven by innovative protocols, competitive yields, and the potential expansion of the role LSTs can play onchain in developing and enabling new economies.