Liquid staking will propel ETH and SOL this year

Brandon Tucker, growth lead at Marinade Finance, Solana’s No.1 project by TVL, says:

“While it’s encouraging to see the crypto community at large growing more excited about liquid staking with the news of the upcoming Shanghai upgrade on Ethereum, for those of us on Solana, liquid staking is old news.

In the new Proof of Stake (PoS) blockchain world, staking involves depositing and locking a blockchain’s native token, be it ETH or SOL, in order to help a validator run a node that powers the network. You can do this directly or, as has been the case on Solana since August 2021 when Marinade launched, holders of the native token can use a stake pool that delegates their tokens across an array of validators.

Liquid staking takes this to another level in that, in return for staking the native token, a user is given a derivative token that they can then deploy through that blockchain’s ecosystem to earn yield or other rewards. And as “liquid“ would suggest, they are able to unstake this at any time. In 2022, Marinade’s mSOL token traded over $7 Billion in volume, and mSOL became the first ever third-party liquid staking derivative to be offered for trading on Coinbase (on any chain).

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As is being rightly observed in relation to the Ethereum Shanghai upgrade, this is a really fantastic functionality. Liquid staking enables the liquidity of staked tokens, so you don’t have to choose between decentralization and pursuing opportunities in DeFi.

With more liquidity, we can have more transactions, more protocols, more trading, more volume, more activity, more investment – the list goes on. As such, many investors are getting very excited about ETH this year now that withdrawals are on the horizon, as they should be about SOL.

It will be interesting to see how quickly liquid staking takes off on Ethereum since liquid staking on Solana still has lots of room to grow. While over 70% of SOL in circulation is staked, only 2-3% is liquid staked. Part of this is because a lot of early VCs received locked SOL allocation prior to the introduction of liquid staking on the network.

But with those tokens set to be unlocked over time, combined with the maturity of DeFi protocols, this means there is a huge opportunity to grow Solana’s DeFi network, and indeed the entire chain, through liquid staking.

Hopefully, 2023 will be the year we start to see some really significant growth in both Ethereum and Solana liquid staking derivatives because of this key functionality.”