Solana's liquidity staking landscape is about to change

In the liquidity staking market of the PoS chain, the mainstream narrative tends to depict a monopoly-style ending, that is, one or two dominant liquidity staking solutions will eventually win and surpass the others. All competitors. This monopoly or winner-take-all characteristic can be seen in Lido on Ethereum and the Jito and Marinade protocols on Solana. These market leaders have generated strong network effects due to their competitive advantages, thereby raising the threshold for other players to enter the liquidity staking market and further consolidating the existing market competition. However, not all liquidity staking mechanisms are created equal, and in the case of Solana, there are some design nuances that could lead to an interesting change. This article will deeply explore the evolution and current situation of liquidity staking on Solana, and focus on how it gradually breaks away from the traditional monopoly model and shows different development trends.

Liquidity staking on Solana currently accounts for only 5.3% of all staking supply

##mSOL1.7%##bSOLmrgnLST##0.0%72,5460.0%0.0%

LST

% Pledge percentage

Pledge quantity

Total Stake (Native LST)

100.0%

##380,242,188

Native Stake

94.7%

360,222,250

jitoSOL

2.5%

9,592,064

##6,334,947

0.7%

2,751,086

0.2 %

722,218

##jSOL

0.1%

336,781

stSOL

0.0%

133,798

compassSOL

##jucySOL

47,921

bonkSOL

12,907

来源：https://dune.com/ilemi/solana-staking

Compared to Ethereum, liquidity staking is currently not widely used on Solana, mainly due to fundamental differences in their staking mechanisms and the value proposition of liquidity-staking assets. On Ethereum, since the pledged ETH will be completely locked before the Shanghai upgrade, and the need to queue up to unlock and withdraw money after the merger, these factors have created a demand for liquidity staking so that investors can use these locked assets for transactions. In addition, faced with the 32 ETH minimum stake required by Ethereum and the risk of reductions caused by poor-performing validators, the stake pool has become a safe and necessary option for many users. In contrast, Solana's delegated PoS model supports instant liquidity, with only about two days of waiting time for staking to be released, no minimum staking amount and no reduction penalty. These features reduce the need for liquidity staking. Solana’s users can choose validators effortlessly and without taking significant risks, thus relying significantly less on staking pools. While platforms such as Jito and Marinade attempt to provide better services by optimizing validator selection, complex delegation strategies do not bring significant advantages due to the deterministic nature of Solana’s validator performance. Although Solana’s staking pool provides features such as tokenization of staked assets and monitoring of validators, the appeal of these features is gradually waning as more and more solutions that are more tailored to user needs appear on the market.

Why the winner-take-all pattern frequently appears in the liquidity staking field

In the past, on various blockchains including Solana, the liquidity staking field often showed a winner-take-all pattern. , this is largely due to the fragmentation of liquidity between different pools and platforms. Every staking pool, operating on platforms like Saber, Raydium or Orca, competes fiercely for liquidity, seeing it as a critical moat to defeat their opponents. The competition is fierce and reminiscent of the Curve War on Ethereum, with protocols like Marinade and Lido investing huge sums of money into their weekly token releases to incentivize users to deposit into liquidity pools. This situation has greatly increased the difficulty of competition for small liquidity staking protocols, because in order for them to enter this competition, they must have sufficient liquidity to prevent their tokens from de-anchoring, which essentially drains the flow of validators with potential. Marginalizing the pledge agreement.

The winner-take-all phenomenon in the liquidity staking space is further reinforced by strong network effects that favor established liquidity staking solutions and platforms. Network effects specifically include a focus on security—users tend to choose platforms with a history of stable operations, audited protocols, and a low risk of smart contract vulnerabilities or security breaches. At the same time, liquidity also plays a key role - deep trading liquidity means that users can quickly adjust positions without significantly affecting market prices, which is crucial to the practicality of LST in token trading and other aspects. At the same time, the degree of integration of LST with other protocols will also affect its appeal. Users want to freely use their assets on different DeFi platforms. But small liquidity staking solutions often fall short in this regard and have limited appeal. Finally, the "currency" of LST is also a key factor - LST tokens such as stETH actually play the role of currency. Brand value and the Lindy Effect (the expected future life of a technology or idea is directly proportional to its current existence) play an important role in this process. Over time, these factors have accumulated, favoring solutions that excel in security, liquidity, and integration, resulting in a winner-take-all situation in the liquidity staking space.

Long tail LST is about to emerge in large numbers

The introduction of long tail LST has brought many benefits to the blockchain ecosystem, as evidenced by Solana’s recent exploration of validator LST (validator LST) . It cleverly combines the advantages of native staking (such as zero commissions and the freedom to choose validators) with the unique advantages of liquidity staking (such as instant liquidity and the ease of using staked assets in the Solana ecosystem). This combination not only greatly optimizes the traditional native staking method, but also provides a practical alternative to traditional staking pools. But the value of LST doesn’t stop there. It can also be used as an innovative tool to provide holders with additional income opportunities, allowing the project to provide LST holders with an annualized yield (APY) that far exceeds that of native staking.

For example, a single validator can distribute block rewards, MEV income, and priority fees to LST holders—significantly increasing APY, thereby attracting more pledged funds.

In addition, LST brings unprecedented opportunities within the ecosystem, such as giving holders the privilege to participate in exclusive NFT minting activities, or becoming the key to access advanced service passes such as private communities. This versatility and practicality demonstrates the unlimited potential of LST and marks a new chapter in blockchain network participation and reward mechanisms.

Ultimately, the diversification of LST has greatly pushed Solana towards deeper decentralization. By adding more diverse LST options, we ensure that power and influence within the network are more evenly distributed among validators and projects. This democratization process can inspire a healthier competitive atmosphere, prompting validators and project parties to continuously improve service quality, strengthen security, and introduce more attractive incentives to win and retain user loyalty. Therefore, such competition not only reduces the risk of over-centralization and enhances the security and resilience of the network, but also spawns innovation, bringing users a wider range of choices and better returns on pledged assets.

Why the project team wants to launch its own LST

Under the quality of service (QoS) mechanism based on the pledge amount adopted by Solana, validators have strong incentives to increase their total pledge amount , thereby increasing their transaction processing priority. This mechanism ensures that validators with larger pledge amounts can enjoy priority in the processing queue, effectively reducing transaction delays and improving operational efficiency. This priority mechanism is particularly critical during periods of network congestion, allowing validators to maintain a high level of performance and stability for their clients. By increasing the amount of stake, validators can not only increase their own transaction throughput, but also attract users and applications looking for fast and reliable transaction processing. This in turn can increase validator rewards and build a stronger reputation within the Solana ecosystem, fostering a positive feedback that incentivizes validators to continually increase their staking investment. This development trend has become more significant as well-known protocols on Solana such as Jupiter, Drift, and Margin have launched their own LST to attract more pledges.

How to solve the liquidity problem

To ensure the survival of long-tail LST, the key is to solve the liquidity problem. The Sanctum protocol on Solana is an example. By building the underlying infrastructure, it aims to break the barriers of the monopoly market and create an ecosystem more friendly to long-tail LST.

Sanctum has launched innovative solutions to solve the liquidity challenges faced by long-tail LSTs on Solana. These solutions not only lower the entry barrier for new LSTs, but also improve their usability in the DeFi ecosystem. As a universal liquidity provider, its reserve pool allows any LST to be converted to SOL instantly, regardless of the size of the LST, ensuring that even smaller LST can provide instant liquidity to its holders, making it a DeFi protocol integration A viable option for collateral. The Sanctum router, co-developed with Jupiter, is a key infrastructure component that enables seamless transitions between different LSTs, even in the absence of a direct liquidity path. This connectivity leverages the liquidity of large LSTs and enhances the liquidity of small LSTs. In addition, Infinity, a multi-LST liquidity pool, breaks through the traditional restriction of only two asset transactions and improves capital efficiency by supporting transactions between any LST in the pool. It relies on on-chain oracles to conduct real-time LST value evaluation, ensuring accurate and secure transactions in an infinite array of LSTs. Together, these mechanisms ensure that emerging and small LSTs continue to develop in Solana’s DeFi ecosystem by providing necessary liquidity and interoperability.

Examples of emerging LST

#Name	Introduction	APY	Total pledge amount
CompassSOL	Solana Compass is a single validator that has been operating independently since 2021 from a data center in Madrid, Spain, outside of the active staking area. The liquidity staking service they launched through compassSOL not only waives any commission fees, but also shares priority fees, MEV income and staking rewards, providing users with an annualized rate of return of 14.62%	14.62%	72,546.22 SOL
BonkSOL	BonkSOL passed BONK tokens reward its supporters and are supported by BONK validators. The rewards from validators are used to reduce the supply of BONK to increase the value of the token. At the same time, bonkSOL is planning to achieve closer integration within the ecosystem, which heralds possible future new uses and partnerships that will enhance its value and usefulness to users	9.08%	12,907.74 SOL
laineSOL	Laine是Solana质押领域最早期和最杰出的先锋之一，也是第一个单一验证者LST。他们能够通过在质押奖励和MEV收入的基础上，再分红所有区块奖励和优先费用的10%，为投资者提供有吸引力的高年化收益率	11.1%	148,642.12 SOL
jucySOL	Juicy每个纪元将所有区块奖励和优先费用中的50%以SOL形式分发到用户的钱包，并限时额外赠送BSKT来提供高额的年化收益率	9.4%	47,921.72 SOL
LST	LST是由Solana上最著名的DeFi平台之一，marginfi所发行，它专门委托给那些运行Jito MEV客户端、零佣金且收益最大化的mrgn验证者。除此之外，持有LST还有可能获得额外的空投奖励	9.67%	722,218.28 SOL

来源：https://app.sanctum.so/lsts

结论

随着用户参与度的显著增长以及Solana独有的质押权重QoS机制，可以预见，Solana上的各大项目都将迫切需要增加质押量，并很可能通过推出具有自己特色的LST来实现这一目标。在这种新兴范式中，LST市场的整体规模预计将远超目前的所有质押SOL的5.3%。与以太坊中的赢者通吃的范式不同，我们很可能会在Solana看到一种更加多样化的LST生态格局。在这种情况下，像Sanctum这样的项目来帮助统一Solana生态系统中LST的流动性将显得尤为重要。

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