Marinade Finance: The Base-Layer for Solana DeFi

Marinade Finance is a liquid staking solution for Solana’s native SOL taken was born out of two Hackathon contestants. After placing third in the February 2021 Solana DeFi Hackathon, the original Marinade team decided to combine their efforts with fellow liquid staking contestants Lucio Tato and Marco Broeken from Smart Pool, and together the core team set out to refine and launch Solana’s first liquid staking platform.

On August 2, 2021 Marinade launched with no outside funding or paid marketing efforts and a goal of delegating 100,000 SOL. Marinade reached its security cap goal in less than 36 hours and after increasing the safety limit two weeks later, hit $23 million TVL with over 300,000 SOL delegated to more than 145 validators. As of May 11, 2022, Marinade has grown to a TVL of ~$367 million delegating 6.7 million SOL across 475 non-security group validators.

Liquid Staking

Proof-of-stake (PoS) blockchains generally require staking or delegating the native token to secure the network's sovereignty by reducing its risk of a hostile network takeover. Running a validator can be a complex and relatively expensive process for the average crypto user, and delegating tokens limits liquidity, increasing the opportunity cost of staking.

Liquid staking, which was first introduced by Lido on Ethereum, created a new asset class of liquid staking derivative tokens (LSDs). These LSDs allow users to deposit into a protocol who in turn delegates the tokens to an approved validator. In the case of Marinade, mSOL remains a liquid composable token that can be used in DeFi even as they are locked into the PoS network. mSOL can be staked on other protocols, lent (or borrowed) or simply sold for instant liquidity.

Solana Liquid Staking

With 86.7% of total liquid staked SOL, Marinade and Lido overwhelmingly control liquid staking on Solana. While impressive, the most eye-catching metric is that currently only ~3% of total staked SOL is held on a liquid staking platform. Whereas ETH staking is only a small amount of total issuance as the chain still uses a proof-of-work PoW consensus layer until the Merge, staking on Solana and other PoS chains typically have a greater percentage staked as the revenue generated by validators is directly linked to the stake size. It would appear that the  growth potential, especially for the market leader(s), is huge, with 97% of staking up for grabs.