Bankless: An Overview of Liquid Staking on Solana

Author: David C, Bankless; Translator: Deng Tong, Golden Finance

Solana’s staking remains one of the most active parts of the network.

Staking, the act of locking up capital in exchange for network security and thereby earning a yield, is an important component of DeFi and one of the most powerful sectors of the on-chain economy. Staking requirements vary by chain; Ethereum requires 32 ETH of native staking on an individual node, or users can choose a liquid staking provider like Lido or Rocket Pool. On Solana, anyone can stake natively through its delegated proof-of-stake system by delegating to a validator rather than running their own node.

This ease of staking may explain the huge gap between Solana and Ethereum in terms of total staked assets versus liquid staked assets. Solana has $61 billion in staked capital, surpassing Ethereum, but lags behind in terms of liquid stake. With 65% of Ethereum’s staked ETH in liquid form, only 6.5% of Solana’s staked SOL is in Liquid Staking Tokens (LST), indicating a massive growth opportunity for Solana.

In this article, we’ll explore the current landscape of SOL liquid staking, examining the key players and protocols innovating and addressing this opportunity. Let’s get started!

Solana’s Top LSTs

Jito, Marinade Finance, and Jupiter dominate Solana liquid staking, holding 80% of SOL in LST. Let’s take a look at what’s unique about each protocol and how they can grow their staked share.

Jito’s JitoSOL

JitoSOL is not only the largest LST (holding 48% of liquid staked SOL, worth $1.7 billion), but Jito is also the largest protocol on Solana.

Jito is known for its massive airdrops, which allow users to stake SOL and receive JitoSOL to use in the DeFi network.

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

As the largest LST on the network, JitoSOL is deeply rooted in DeFi. It is a popular asset for lending across protocols like Solend, Drift, and Marginfi, and can be leveraged on Kamino for higher yields. These integrations create a liquidity flywheel that positions JitoSOL as the most efficient and effective LST, increasing demand for the asset. In the end, Jito’s impact on the Solana network goes beyond just increasing staking rewards. Through StakeNet, a decentralized system for optimizing validators, Jito improves performance and distributes rewards fairly, making the network more efficient and secure for all participants.

Marinade Finance's mSOL

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

Launched in August 2021, Marinade's mSOL functions similarly to JitoSOL, with staking rewards appreciating over time. In July 2023, Marinade launched Marinade Native, which allows SOL to be directly staked and receive rewards at each stage, avoiding smart contract risks while retaining control over SOL. Additionally, Marinade’s protected staking rewards ensure that stakers do not lose rewards due to validator performance issues by requiring validators to post a security deposit.

Marinade was once the largest LST before losing ground to Jito, but overall it remains the second-largest protocol on Solana. However, its TVL continues to bleed, and it is not losing share to Jito, but to Sanctum, a protocol for creating, launching, and unifying LST liquidity.

Jupiter’s JupSOL

Ranked third is JupSOL, with 10% of its SOL staked in LST launched by Jupiter and Sanctum.

JupSOL was released in April and quickly captured market share, offering an instantly liquid version of SOL staked by Jupiter validators. In addition to staking rewards and MEV rebates, JupSOL also offers high yields thanks to the 100,000 SOL entrusted by the Jupiter team. JupSOL also increases Jupiter's inclusion rate by increasing the stake of its validators. Validators with more stake have higher transaction processing priority on Solana. As a result, Jupiter's validators can process more transactions even during busy periods. As a result, transactions on platforms such as Jupiter and Sanctum that use Jupiter validators are more likely to complete successfully and quickly. Holding JupSOL makes Jupiter's validators more influential, thereby increasing the efficiency and success rate of transactions on these platforms.

What is Sanctum?

Initially launched in February 2021, Sanctum allows whitelisted validators to create and launch their own liquidity staking tokens while unifying the liquidity of these derivatives.

Sanctum's custom LST can be used for a variety of purposes, from improving yields to enabling NFT whitelist positions or subscription services. Sanctum solves key liquidity staking problems through three core features, unifying fragmented liquidity and expanding limited LST options. Sanctum Router enables seamless LST conversions, and Sanctum Reserve provides instant liquidity to unstake. Sanctum's Infinity Pool is a multi-LST liquidity pool that natively supports an unlimited number of LSTs, while traditional pools only support a few assets. It ensures a fair LST price and dynamically adjusts swap fees to optimize returns and maintain the correct balance for each LST in the pool. Depositing LST or SOL into the Infinity Pool generates Sanctum's LST, INF, which can be used in DeFi protocols such as Kamino and Meteora.

Sanctum's vision is not limited to liquidity staking. Ahead of the 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 basic on-chain economy through Launchpad, Profiles V2, and Pay. These developments are likely to have a significant impact on the Solana ecosystem by improving liquidity, creating new LST issuance paths, and providing novel LST use cases.

Restaking on Solana

In addition to liquidity staking, Solana has also seen the continued development of the restaking protocol, leveraging the activity of the main chain this cycle to expand its use cases.

Early 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 the Solana economy. Leveraging Solana’s multi-tasking and fast transaction architecture, Solayer enables improved workload distribution and service customization. This expands Solana’s capabilities, providing developers with better consensus and blockspace customization — especially useful given Solana L2s’ recent momentum. Solayer’s May soft launch reached its $20M deposit cap for SOL and LST in 45 minutes, demonstrating strong demand that has continued to grow, with its TVL growing 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, reducing the cost of local solutions and positioning it as an on-chain alternative to cloud providers such as AWS. Its testnet is expected to launch this summer.

Picasso: Originally focused on connecting Solana and Cosmos, Picasso has evolved into a restaking hub supporting other Solana projects such as the upcoming restaking L2 Mantis. Using the Cosmos SDK framework, Picasso connects IBC-enabled chains, enhancing their utility and security. Picasso's universal restaking layer and IBC protect applications that require temporary or permanent security. This enables restaking of SOL and its LST, providing new staking options and facilitating liquidity exchange.

Preparing for Growth

Solana will benefit greatly from the expansion of its staking economy.

With a lower percentage of SOL staked in LST compared to overall staked SOL, protocols like Jito, Marinade Finance, and Jupiter will continue to thrive as the ecosystem grows. Sanctum plays a vital role in this evolution, solving the liquidity fragmentation problem. Additionally, while it may be premature to develop restaking on Solana given the state of restaking on Ethereum, it does align with the modular development momentum we’ve seen in SVM L2 and AppChains, meaning protocols like Cambrian, Solayer, and Picasso can extend the primary functionality of the chain and further drive growth for LST.

Overall, Solana’s staking economy appears poised for significant growth, driven by innovative protocols, competitive yields, and the potential expansion of the role LST can play on-chain in developing and supporting new economies.