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What is the best SOL liquid staking token? | Just Another Crypto Analyst’s | Coins | December 2023

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By Crypto Gloom
What is the best SOL liquid staking token? | Just Another Crypto Analyst’s | Coins | December 2023
Another cryptocurrency analyst
Coin Monk

SOL is in absolute tears right now. So if you have SOL or want to get some, there is an easy way to earn extra money just by holding them. One way is to stake SOL directly with validators to get ~7.5% APY, or to increase returns by staking it in Liquid Staking Tokens (LST). The thing is, there are quite a few options out there. So which one is best?

Liquid staking combines the benefits of staking, such as earning rewards for network security, with the flexibility of keeping your assets liquid. Traditional staking involves locking up your cryptocurrency for a specific period of time. This means that those assets cannot be traded, sold, or used in decentralized finance (DeFi) applications. Traditional staking, such as running your own Ethereum validator or staking SOL directly into a Phantom Wallet, locks the tokens so that no other operations can be performed.

Liquid staking tokens provide a solution to this problem. Users can stake Solana (SOL) to secure the Solana Network while receiving liquid tokens that can be freely traded and used on DeFi protocols. Let’s take a look at the top five LSTs in the SOL market.

First, we need to talk about JitoSOL, which everyone is talking about. Jito Labs airdropped its governance token a few weeks ago, giving the cryptocurrency community massive FOMO. Congratulations to the lucky few who received the airdrop. (For those of you who weren’t tracking, the minimum airdrop amount was around $20,000.) JitoSOL is actually different from Solana and all other LSTs on Ethereum. They combine traditional staking with maximum extractable value (MEV). MEV generates processing fees by optimizing how transactions are ordered within a block. MEV fees and staking rewards are combined to provide JitoSOL. You can find out more here.

  1. Produce: 6.81%¹ pension amount — second highest
  2. Market share: 37.6% — second highest
  3. danger: Louch — Jito Labs has actually been around since 2021 and has maintained LST without any issues for over a year. One can debate whether the added complexity of MEV adds risk or diversifies value generation.
  4. Liquidity: High — SOL staked using Jito is 6,486,652 SOL ($609 million). JitoSol can be staked in lending protocols (Solend, Kamino, Marginfi) or included in liquidity pools (Solend).

Marinade is a staking automation platform that stakes SOL to the best performing Solana validators. Most LST protocols spin up their own protocols to obtain additional rewards. Instead, Marinade distributes deposited SOL in bulk across 100+ validators to maximize uptime and minimize risk.

  1. Produce: 6.5%¹ pension amount – in the middle
  2. Market share: 40.1% – best
  3. danger: Louch— Because Marinade spreads risk across 100+ validators (currently 225 validators1), the risk of losing enough SOL to not be redeemed is minimal.
  4. Liquidity: Very High — There are 6,893,103 SOL ($648M) staked using the marinade. mSOL is available on the same major lending protocols and liquidity pools as JitoSOL.

bonus: By staking mSOL on Solend, you can earn an additional 1.36%APY in MNDE tokens.

Lido Finance is a leader in liquid staking. Lido is the oldest of the major LSTs. Unfortunately, Lido DAO has discontinued staking for SOL. stSOL holders will be able to unstake from October 2023 and will lose frontend access to unstake on February 4, 2023. Lido ceased staking in October 2023, but it is included on our list as stSOL has the 4th largest TVL at ~$83M.

WARNING: If you own stSOL, unstake just before you lose frontend access (you can unstake after February too, but you’ll need to know how to code for that)!

BlazeStake is a completely non-custodial Solana stake pool protocol. Similar to marinade, bSOL is staked across 201 validators to minimize risk.1

  1. Produce: 5.91%² APR – lowest
  2. Market share: 11.1% – in the middle
  3. danger: low-medium — BlazeStake offers similar risk mitigation as Marinade, but its lower Total Value Locked (TVL) slightly increases risk compared to Marinade.
  4. Liquidity: Medium-High — There are 1,932,962 SOL ($182M) staked using BlazeStake. Like JitoSOL and mSOL, bSOL can be used in most lending protocols and liquidity pools.

bonus: Blaze rewards the use of LST across DeFi. See below for more details!

Marginfi, one of the newest LSTs on the market, is Solana’s decentralized lending protocol. This protocol is completely permissionless and relies on smart contracts to function.

The reason we mention this is because we are currently running a rewards program that will potentially turn into a token airdrop. It’s always smart to invest a little, but you never know how much you’ll get!

  1. Produce: 7.1%APY – best
  2. Market share: 1.9% – lowest
  3. danger: middle — Because this is the new kid on the block with a low TVL, this protocol has moderate risk.
  4. Liquidity: Low — SOL ($33M) staked using Marginfi is 333,273. There are not many lending protocols or liquidity providers offering LST on their platforms yet.

If yield is your primary incentive and you do not want to boost your yield with liquidity pools or lending protocols, staking directly with validators is the best option at around 7.5% APY. Phantom Wallet makes this task very easy. If you want to go the extra mile, there are some additional factors to consider.

Additional yield based on lending protocol

You can earn an additional 0.5-2.5%APY by staking LST on lending protocols such as Kamino, Solend or Marginfi. Shop around for the LSTs you need to see which gives you the best results.

looping yield

Repeating the LST will give you an additional ~5%APY. This is done by depositing LST into the lending protocol, then borrowing SOL, depositing it back into the LST, and then depositing it back into the lending protocol. You can do this as much or as little as you feel comfortable with. Make sure the SOL’s borrowing rate is lower than the rate of return you will receive.

liquidity pool

Finally, you can increase your yield by depositing your LST into a liquidity pool (more information about LP can be found here). Solend is offering ~4.5% APY and Marinade is estimated to be offering 97% APY. I can’t confirm this and it seems a bit off to me so I’m a bit skeptical at the moment. If this is correct, this is by far the best option.

Marinade LP

Overall, the best choice will depend on your risk tolerance and how much extra work you are willing to do to earn additional returns. The easiest option is to stake directly with a validator. A more complex option is to repeat the LST to obtain additional rewards/airdrops if possible.

-Another cryptocurrency analyst

This is just for fun, but if you’d like to leave a tip: 0xa33aE4207466cD866D13fA587067B1F824C06d4A

source:

(1) Solana Compass. 2023. “Solana Stake Pool.” https://solanacompass.com/stake-pools

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