Liquid Staking: Key to Mass Adoption and Growth on Solana

The Solana network is witnessing a surge of new users and a “breakthrough moment” owing to the launch of liquid staking on its blockchain.

A recent report from the prominent cryptocurrency exchange, Bybit, highlights that Solana’s liquid staking approach, particularly the exchange-launched liquid-staked SOL, is set to engage the masses and hasten the onboarding of retail users into the ecosystem.

The Current Landscape of Liquid Staking on Solana

As a proof-of-stake network, staking is vital for the security of the Solana ecosystem. This process involves users delegating their SOL to several validators, who then participate in network consensus and validate transactions for rewards. Liquid staking, however, enhances this process significantly.

Liquid staking allows for increased flexibility, liquidity, and the potential for higher returns since participants can trade their liquid staking tokens (LSTs) across various decentralized finance (DeFi) protocols while still retaining exposure to their staked assets. Additionally, users can stake their SOL through a staking pool that spreads their assets across a larger array of validators, promoting decentralization and offering additional rewards.

At present, Solana boasts a staking ratio of 68%, based on $57 billion in staked SOL, which surpasses Ethereum’s 28%. However, only 6.5% ($3.6 billion) of Solana’s staked assets are involved in liquid staking, while around one-third of Ethereum participates in this model. Bybit views this as a significant opportunity for expansion within Solana’s liquid staking framework.

Leveraging data from Ethereum’s LST market, Bybit forecasts that Solana’s LST market could expand 5x (up to $18 billion) from its current size, especially if Solana’s LST ratio approaches that of Ethereum.

Growth Potential

Bybit emphasized that the introduction of exchange-launched liquid-staked Solana tokens could enhance activity and adoption within the network, establishing a favorable environment for the development of liquid-staking solutions. The exchange has taken the lead by launching its SOL liquid staking token (bbSOL), aiming to serve as a pivotal link between retail investors and the larger ecosystem.

In the meantime, liquid staking on Solana is already demonstrating growth, with half of the network’s ten largest DeFi protocols by total value locked now providing these services.

“As Solana’s DeFi ecosystem continues to expand, we expect this growth trend to create a positive feedback loop, where the rising demand for LSTs will likely draw in more developers, protocols, and users, ultimately spurring Solana’s DeFi boom, similar to what we observed during Ethereum’s early days,” stated Bybit.