Opinion The potential of liquidity staking on Solana is gradually emerging.

Liquidity staking potential on Solana is emerging.

Author: Darren Kleine, Blockworks Translation: Shan Ouba, LianGuai

Xavier Meegan, Chief Information Officer of Chorus One, said: The more imperfect the staking model and design, the more urgently the network needs a liquidity staking solution. “Demand is the catalyst for innovation” may be more appropriate.

One important reason why Ethereum successfully launched liquidity staking is that the staked Ethereum (ETH) is locked and cannot be used due to the long-awaited Shapella upgrade not yet arrived. This makes liquidity staking an effective way for users who want to participate in DeFi.

Lucas Brued, CEO of Jito Labs, said in the Bell Curve podcast (Spotify / Apple) that Solana has never encountered this situation, and new innovations in liquidity staking may find opportunities on this flexible network.

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Although staked ETH may be locked for up to two years, providing a strong case for liquidity staking tokens, Brued pointed out that Solana allows withdrawals from day one. In the DeFi frenzy of 2020, Ethereum users witnessed the flourishing development of protocols, solving the chicken-and-egg problem – I have liquidity staking tokens, but where can I use them?

Solana has not yet fully achieved this goal, and there are relatively few existing DeFi applications. The problem still exists: when creators of DeFi protocols consider low staking activity and total locked value (TVL) in the network, they may not launch projects on Solana at all.

But Brued is optimistic about this. I think we will see this happen, especially considering the cases of MarginFi and Jito. He mentioned the case of MarginFi’s lending service and Jito’s significant increase in TVL in July.

“I think we will double the TVL of SOL,” he said. Brued predicts that many creators of protocols may find Solana more attractive due to recent pushes. Liquidity staking tokens (LST) are one of the most powerful underlying assets in the DeFi ecosystem, and we will see more protocols starting to adapt to this.

Building trust takes time

One problem that hinders progress is people’s trust in Solana as a secure DeFi ecosystem, but he expects it to gradually establish over time. The more TVL these ecosystems have and the more tests they undergo, the more people trust them.

Solana has “finally ushered in a transformation,” and more protocols are increasing TVL, and the protocols attach great importance to security.

As protocols pay more attention to security, the TVL of some of these protocols will rise, and these protocols will be more widely adopted, Brued explained. When we see larger institutions start to deposit more SOL into LST, I think many of them will drive this process.

Branding is crucial in the field of “Liquidity Staking,” and Jito Labs is building a cutting-edge protocol for Solana, focusing on MEV and liquidity staking. These are indeed the core of any network security.

If there is a team you trust in building, you will believe that they will prioritize the maximum benefit. Lucas and his team at Jito have extensive experience in operating validation nodes and communicating with validation nodes like us. This not only provides trust for validation nodes and node operators but also for delegators.

As Solana passes through the current stage of the network and improves its performance, people will be more willing to provide liquidity to the network.

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