Solana’s Liquid staking ecosystem flourishes amidst increased adoption

Solana, currently the fifth-largest cryptocurrency by market cap, has experienced a notable jump in its liquid staking ratio, rising by 1.76% quarter-over-quarter.

The number of Liquid Staking Tokens (LSTs) on Solana has doubled, and the market is becoming more diversified. Meanwhile, the dominance of the top three liquid staking providers has dropped from 93% to 68.7%, indicating a broader range of participants and options.

According to DefiLlama, over $54 billion worth of crypto assets are currently staked across various liquid staking platforms. Unlike traditional staking, liquid staking allows users to earn additional yield while maintaining liquidity through derivative tokens for defi activities.

Data from Dune Analytics reveals that over 23 million SOL, valued at more than $3.6 billion, are staked on liquid staking platforms.

Solana boasts a higher staking ratio compared to Ethereum, with around 60% of SOL staked, but only 6% of this is involved in liquid staking. This suggests significant untapped potential and growth opportunities in Solana’s liquid staking market.

Tom Wan, a researcher and analyst, provided insights into the driving forces behind these trends. Wan noted that the airdrop from Jito Labs marked a turning point, increasing the liquid staking ratio by 2% from Q4 2023 to Q1 2024.

He also highlighted the launch of the Sanctum Router and Sanctum Reserve as foundational for further growth.

“Liquid Staking is Booming on Solana,” Wan tweeted, reflecting on the sector’s expansion.

The number of Liquid Staking Tokens (LSTs) has grown to 53, nearly doubling from the previous quarter. This growth, though still in its early stages, indicates a significant shift in Solana’s ecosystem.

Platforms like Sanctum have simplified the development and scaling of LSTs. Meanwhile, Jito Labs, which serves around 91,000 Solana investors and offers an annual percentage rate (APR) of over 8%, exemplifies this area’s growth.

Wan also noted that the introduction of new technologies and incentives has been crucial for this expansion.

The launch of the Sanctum Router and Sanctum Reserve has facilitated market entry, laying the groundwork for what he described as a ‘Cambrian explosion’ in Solana’s liquid staking sector.

Meanwhile, new high-quality projects from entities like Helius Labs, Solana Compass, and Drift Protocol are emerging, challenging the existing market leaders and contributing to a more diversified market.

Notably, Jupiter Exchange’s jupSOL has made significant advances. It recently surpassed bSOL in market capitalization, reaching a total value locked (TVL) of $329 million.

Over the past 30 days, jupSOL has seen a 22% increase in TVL, partly due to its integration with Kamino Finance.

JupSOL is now the most deposited LST on Kamino, with $220 million, and it offers the highest annual percentage yield (APY) at 21%.