Solana Liquid Staking: Driving Solana to the Next Phase of Mass Adoption

Key Highlights:

This curated Bybit report examines the current state of liquid staking on Solana, particularly exchange-launched liquid-staked SOL, including Bybit’s bbSOL. Key takeaways include

• Innovative Growth: Solana's liquid staking model enhances traditional staking by providing flexibility and liquidity, allowing users to earn rewards while maintaining access to their assets.

• Market Potential: With a current liquid staking ratio of only 6.5%, there is significant room for growth, with projections estimating the market could reach $6-10 billion soon.

• Memecoin Influence: The rise of memecoins on Solana is attracting retail investors, creating interest in the blockchain's DeFi capabilities and potentially driving liquid staking adoption.

• Challenges Ahead: User education and addressing smart contract risks are crucial for increasing participation in liquid staking and ensuring sustainable growth within the ecosystem.

Introduction to Liquid Staking

Solana, a leading blockchain in the proof of stake (PoS) arena, is witnessing a transformative shift toward liquid staking. This innovative approach enhances the traditional staking model by allowing users to earn rewards while maintaining liquidity. On Solana, users stake their SOL tokens by delegating them to validators. This process secures the network and yields an average return of 6–7%. However, liquid staking elevates this experience by enabling SOL to be pooled across multiple validators, which not only increases decentralization but also provides participants with liquid staking tokens (LSTs). These tokens serve as on-chain receipts for staked assets, which can then be utilized across various decentralized finance (DeFi) protocols, allowing users to trade or to earn additional yields.

Despite Solana's impressive staking ratio of 68%, liquid staking adoption remains relatively low, with only 6.5% of SOL staked through this method. This presents a significant growth opportunity, especially when compared to Ethereum, where nearly one-third of staked assets are through liquid staking. As the DeFi landscape expands, Solana's liquid staking market is projected to grow significantly, potentially reaching a size of $6-10 billion in the near future.

Bybit's bbSOL

Bybit is poised to make a significant impact on Solana's liquid staking landscape with its launch of Bybit Staked SOL (bbSOL). 

As the first exchange to introduce its own Solana LST, Bybit aims to bridge the gap between casual retail investors and the broader DeFi ecosystem. bbSOL will provide users with a seamless liquid staking experience, allowing them to easily swap SOL for bbSOL and earn staking rewards of up to 7% APY.

The Potential for Growth

The rapid rise of memecoins on Solana has not only attracted retail investors but also sparked broader interest in the blockchain's DeFi capabilities. With over $57 billion worth of SOL staked, Solana is outpacing Ethereum in native staking participation. Yet, the liquid staking segment remains largely untapped. Bybit's upcoming liquid staking solutions could play a pivotal role in bridging this gap, offering user-friendly platforms that help onboard retail investors into the burgeoning liquid staking market.

Market estimates suggest that if Solana's liquid staking ratio increases to match Ethereum's, the market size could reach as high as $18 billion. This growth is underpinned by a favorable environment for DeFi applications, driven by increased transaction volumes and user engagement. The introduction of products like Bybit’s bbSOL is expected to facilitate this transition, providing users with easy access to liquid staking benefits and enhancing their participation in Solana’s DeFi ecosystem.

Key Players in the Liquid Staking Market

Several key players are shaping the liquid staking landscape on Solana, each one offering unique features and benefits.

Jito: Currently dominating the market with nearly $1.8 billion in SOL staked, Jito's MEV-focused stake pool enhances staking rewards by distributing SOL across a network of validators. Its jitoSOL token offers an attractive APY of 8.4%.

Marinade: As Solana's first liquid staking provider, Marinade has over $580 million in market cap. It optimizes staking rewards by automatically delegating staked SOL to the best validators, and offers an APY of 7.4%.

BlazeStake: Known for its focus on decentralization, BlazeStake has a large validator set and offers a Custom Liquid Staking protocol. Its bSOL token provides an APY of 7.36%, along with potential airdrops from other Solana ecosystem tokens.

Sanctum: Innovating with its multi–LST pool concept, Sanctum allows seamless swaps between different LSTs, increasing liquidity options within the ecosystem.

The above players are pivotal in driving the adoption and development of liquid staking on Solana, each one contributing to a diverse and evolving marketplace.