Introduction

Exchange staking and liquid staking are two major ways for users to stake their assets. Among them, the liquid staking track was very popular last year, with high demand in the Ethereum network. It was led by three major projects: Lido, Rocket, and Frax. In contrast, the demand for liquid staking in the Solana network is not high. Unlike Ethereum, Solana utilizes a Delegated Proof of Stake (DPOS) consensus mechanism, similar to the BNB network. In this mechanism, users can participate in the maintenance of the network and earn SOL rewards by delegating SOL to validate nodes. The main participants in the Solana ecosystem are validators, delegators, and users. When users engage in transactions on the exchange, half of the transaction fees are collected by the nodes, while the other half is burned. Delegators, on the other hand, receive SOL inflation rewards. The more SOL delegated to a validator, the higher the probability of producing blocks, resulting in increased profits for the validator.

The staking rewards of Solana are derived from the inflationary rewards of the SOL token. The inflation rate gradually decreases by 15% annually until it stabilizes at around 1.5%. The staking threshold for SOL is relatively low, and the current staking rewards are approximately 6%, which gradually decrease to 2% over time. It is evident that the staking rewards are not high. After Lido withdrew its liquid staking from the Solana network, the main staking projects in the Solana ecosystem were Marinade and Jito. Among them, Marinade is the first LSD project and currently holds the highest Total Value Locked (TVL) in the Solana ecosystem. This article will analyze the product logic behind the Marinade protocol, discuss its tokenomic model, and provide an overview of its current development status.

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

What is Marinade?

Marinade is a liquid staking protocol on the Solana network. Users can stake SOL on this platform and receive mSOL tokens, while also enjoying token liquidity. In addition to liquid staking services, Marinade also provides local staking services. The protocol’s products were launched on the mainnet in August 2021, and the token was issued in October of the same year.

Lucio Tato, co-founder of Marinade, is also a co-founder of Meta Protocol, a liquid staking protocol on the Near blockchain. The team has not yet received any funding. Despite the challenges faced during the FTX outage and Solana’s difficulties, the team continues to update their products. With the rise of the SOL token price and the recovery of the Solana ecosystem, Marinade is currently the protocol with the highest Total Value Locked (TVL) in Solana.

Liquid Stake

Users can stake SOL on the Marinade platform to receive mSOL, which serves as a staking certificate for SOL, similar to wstETH. The staking rewards increase as the value of SOL rises, allowing users to enjoy token liquidity while earning staking rewards. On the staking page, users can choose validators, selecting either the highest earning or most trusted nodes to delegate their SOL for liquid staking.

Source: https://docs.marinade.finance/getting-started/what-is-msol

Source: https://marinade.finance/app/stake/?input=SOL

Marinade also provides a liquidity pool for unlocking, which is composed of SOL deposited by users and allows mSOL holders to quickly exchange it for SOL. Quick exchange requires a certain percentage (0.1%-0.9%) of fees, and the specific percentage is determined by the amount of SOL in the pool. As shown in the following figure, the current APY of the pool is 7.05%.

Source: https://marinade.finance/app/liquidity/

Native Stake

Marinade also provides a native staking feature (Marinade Native), which only grants staking delegation rights. We know that in the Solana network, users can earn staking rewards by delegating SOL to validators without the need to run their own nodes, making it relatively easier to participate. Many users, for the sake of fund security, would choose to delegate SOL to validators instead of other liquidity-staking products that may have smart contract risks. Solana staking accounts have two authorizations (staking authorization and withdrawal authorization) that can be assigned to different addresses. However, through the Marinade platform, users who opt for native staking will only have the staking authorization functionality, while the withdrawal authorization will be used by the user to safeguard their funds.

When users click on the Stake module on the Marinade platform, they can enjoy the native staking feature by selecting “Native” in the “Automated” and “Native” options.

Source: https://marinade.finance/app/stake/?input=SOL&output=native

Marinade’s native staking service is provided free of charge and offers a certain cost advantage. The unlocking time for collateral is usually 2-4 days.

Tokenomic Model

MNDE is the native token of Marinade, which was issued by the team in October 2021 with a total supply of one billion tokens. According to the distribution plan, 7.5% of the tokens were initially allocated to the team (originally planned to be 30% for the team, but the team later relinquished 22.5% of it), and this portion of tokens will be unlocked in January 2024. As of June 2023, DAO holds 74.22% of the tokens.

Source: https://docs.marinade.finance/the-mnde-token

Currently, the allocated uses of the tokens are as follows: 16% of the tokens are used for incentive programs; 4.6% is allocated to operations and advisors; 0.6% of the tokens are used for marketing; and the remaining 71.3% will be determined by DAO through voting for allocation plans.

The main function of MNDE is currently governance and guiding staking, with governance decisions being made through the Realms platform. Users who lock MNDE tokens will be able to obtain voting rights, with a lock-up period of 30 days. At the same time, MNDE stakers will be able to vote to allocate 20% (this parameter will be determined by DAO voting) of the staked SOL tokens to selected validators, giving MNDE stakers the opportunity to receive rewards from validators.

Source: https://docs.marinade.finance/the-mnde-token

Development Status

Marinade has launched two products: liquid staking and native staking. The staked token mSOL has a rich DeFi application scenario and can be used for borrowing on Solend and Marginfi. The derivative protocol Drift also supports mSOL collateral.

With the recovery of the Solana ecosystem, the total value locked (TVL) has been steadily increasing and is currently around $880 million, making it the protocol with the highest TVL in the Solana network. There are a total of 6.35 million SOL tokens staked in the protocol, with approximately 4 million SOL staked through native staking.

Source: https://stats.marinade.finance/d/sqUQd1Onk/marinade-kpi-dashboard?orgId=1&refresh=1m

Conclusion

Marinade is the earliest liquid staking protocol on the Solana blockchain. Users can stake SOL to receive mSOL, and the staking rewards accumulate in mSOL. In addition, Marinade allows users to choose validators and engage in native staking. Despite the challenges faced during the FTX outage and Solana’s difficulties, the protocol continues to improve its products. With the resurgence of SOL prices and the popularity of the LSD track, Marinade has become the protocol with the highest Total Value Locked (TVL) in the Solana ecosystem.