Liquid staking is building momentum on Solana, say Bruder and Meegan

Unlike Ethereum, Solana has allowed staked withdrawals since “day one”

article-image

Sergey Tinyakov/Shutterstock modified by Blockworks

share

“The more broken a staking model and design is,” Chorus One chief information officer Xavier Meegan says, “the more urgent a liquid staking solution is needed for that network.”

“Necessity is the mother of invention” might be a nicer way to put it.

A key reason for the success of liquid staking on Ethereum, Meegan says, is that staked ether (ETH) was locked up and inaccessible until the long-awaited Shapella upgrade. This makes liquid staking an effective escape for eager DeFi users. 

Read more: How did ether price predictions fare after Shapella upgrade?

On the Bell Curve podcast (Spotify/Apple), Jito Labs CEO Lucas Bruder says this has never been the case on Solana, where new liquid staking innovations might offer opportunities on the nimble network.

Whereas staked ETH might have been locked up for as long as two years, providing a strong value proposition for liquid staking tokens, Bruder notes that Solana has allowed for withdrawals “from day one.”

During the DeFi summer of 2020, Ethereum users witnessed a boom in protocols popping up, Bruder says, solving the chicken-egg problem for the network — “I have liquid staking tokens, but where am I gonna use them?”

Solana isn’t quite there yet, Bruder says, with far fewer DeFi applications in the wild. The chicken-egg problem persists: As DeFi protocol builders look at network’s lower liquid staking activity and total-value-locked (TVL) statistics, they may be dissuaded from launching on Solana at all.

But Bruder is optimistic. “I think we’ll see that change, especially when you look at what happened with MarginFi and Jito.” He says the MarginFi borrowing and lending service, along with Jito, saw “a massive growth of TVL during the month of July.”

“I think we doubled TVL in terms of SOL,” he says. Bruder expects many protocol builders might find the network more attractive following the recent boost. “Liquid staking tokens (LSTs) are one of the strongest base assets that you can have in a DeFi ecosystem,” he says. “We’ll see more protocols start to cater towards that.”

Building trust takes time

According to Bruder, one issue that’s holding things back is trust in Solana as a secure DeFi ecosystem, but he expects that will come with time. “The more TVL these ecosystems have and the more battle-tested they are,” he says, “the more people trust in them.”

Solana is “finally rounding the turn,” Bruder says, with more protocols increasing their TVL. He adds that protocols “are taking security very, very seriously.”

“As we see protocols taking security more seriously, some of these TVL numbers rise and these protocols get more adoption,” Bruder explains. “As we see some larger institutions start to deposit more SOL into LSTs, I think a lot of that will get this thing kick-started.”

Meegan notes that branding is critical in the “liquid staking arena,” noting that Jito Labs is building “cutting edge protocols in Solana,” focused on MEV and liquid staking. “These are really at the core of security of any network,” he says.

“If there’s a team building there that you trust anyway, you trust that they have the best interests at heart.”

“Lucas and his team at Jito have a bunch of experience running validators and speaking with validators like us as well,” Meegan continues. “That really gives an element of trust with not just validators and node operators, but also delegators.”

“As Solana gets past this phase of the network that it’s in right now, as performance gets better,” Meegan says, “people will be more willing to provide liquidity into the network.”


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Top Icon.png

Research

Osmosis thrived in H2 2023 on the back of increased DeFi activity deriving from recently launched Cosmos-related projects and better market conditions. With new value accrual mechanisms for the native token, Osmosis is well-positioned to continue its strong performance in 2024.

/

article-image

Celestia had the first mover advantage. EigenDA has staked ether. What sets Avail apart?

article-image

Bitcoin moved 1% higher Monday morning in New York, Matrixport analysts say $62,000 could happen next month

article-image

It’s hard to believe right now that crypto — even with all of its flexibility and massive capabilities — could ever be like cash on the internet

article-image

Michael Saylor announced Monday morning that MicroStrategy bought 3k more bitcoin after the X account was compromised over the weekend

article-image

Plus, Pudgy Penguins grows its brand and a group of Autoglyphs sell for $14.5 million

article-image

Plus, funds go to a platform making development on Solana easier