Solana, the fifth-largest cryptocurrency asset and third-largest proof-of-stake (POS) network by market size, saw its liquidity staking ratio increase by 1.76% quarter-on-quarter.
According to DeFiRama, over $54 billion in cryptocurrency assets are staked on the liquid staking platform. Unlike traditional staking, liquidity staking allows users to earn additional returns and maintain liquidity with derivative tokens for decentralized finance.
The Rise of Liquid Staking on Solana
According to data from Dune Analytics, more than 23 million SOLs, worth more than $3.6 billion, are staked on the liquidity staking platform. Solana has a higher staking ratio than Ethereum at around 60%, but only 6% of staked SOL is included in Liquid Staking. This represents untapped potential and potential growth opportunities in Solana’s liquidity staking segment.
Read more: What is Liquid Staking in Cryptocurrency ?
Solana’s two-day unbonding period, which is shorter than other blockchains, may also impact the popularity of liquidity staking. Konstantin Boyko-Romanovsky, founder and CEO of Allnode, explains how this could be an advantage over other blockchains such as Polkadot or Ethereum .
“Solana’s unbonding period is only two days, so liquidity staking may not be as popular compared to blockchains with unbonding periods of 2-3 weeks. In the context of staking, the unbonding period is the period during which staked assets are unlocked and available for use after a user decides to unstake,” Boyko-Romanovsky told BeInCrypto.
Platforms like Sanctum and Zito Labs are also driving the liquidity staking boom on Solana. According to researcher and analyst Tom Wan , Sanctum is lowering the barrier to entry and helping projects build and scale their own Liquidity Staking Tokens (LSTs).
Zito currently has approximately 91,000 Solana investors staking on the platform, with an APR of over 8% and over 10.6 million SOL staked.
“The Sanctum can carry a torch. “The launch of INF, Sanctum Router, and Sanctum Reserve lowers the barrier to entry, setting the stage for the explosive growth of the liquidity staking segment on Solana,” Wan said in the post.
Boyko-Romanovski also demonstrates the impact that new trends, such as re-staking, can have on the growth of liquid staking on Solana.
“New technologies such as restaking could potentially impact the development and adoption of liquidity staking on Solana and similar blockchains. Re-staking provides ongoing liquidity, increases profit opportunities, and provides greater flexibility, making liquidity staking more attractive even for platforms with short unbonding periods like Solana. However, ensuring the security and reliability of these technologies, along with effective market and liquidity management, will be critical for their success and widespread adoption,” said Boyko-Romanovski.
Read More: Solana (SOL) Price Prediction 2024/2025/2030
As liquidity staking continues to grow in popularity, Solana will benefit from increased user engagement and enhanced network security. So far, two major applications for the Solana ETF have been made in the United States. If liquid staking continues to grow in popularity, Solana will be able to gain a competitive advantage and attract investors.
