Solana stands as one of the most high-performance blockchains in the crypto ecosystem, known for its speed, scalability, and low transaction fees. With over 70% of all SOL tokens staked, the network demonstrates strong participation in its proof-of-stake (PoS) consensus mechanism. Yet, despite this impressive staking rate, less than 3% of staked SOL is utilized through liquid staking protocols—a stark contrast to Ethereum’s DeFi landscape, where liquid staking dominates.
This discrepancy raises a critical question: Why hasn’t Solana leveraged its high staking adoption to fuel explosive growth in decentralized finance (DeFi) via liquid staking?
Understanding Liquid Staking and Its Potential
Liquid staking allows users to stake their tokens while receiving a derivative token—such as mSOL or jitoSOL—that represents their staked assets and accrued yield. These liquid staking tokens (LSTs) can then be used across DeFi applications for lending, borrowing, or yield farming, effectively unlocking capital that would otherwise be locked.
In Ethereum’s ecosystem, liquid staking has become a cornerstone of DeFi. Protocols like Lido have driven mass adoption, with nearly 40% of all ETH supply now deposited into liquid staking solutions. This integration has significantly boosted total value locked (TVL), liquidity, and composability across Ethereum-based protocols.
On Solana, however, the story is different.
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The Solana Staking Paradox: High Participation, Low Liquidity
While Solana boasts over $9 billion worth of SOL staked, only a tiny fraction—around 3%—flows into liquid staking protocols like Marinade, Jito, or BlazeStake. According to data from Solana Compass and Spire, out of 1,651 large-scale stakers holding at least 5,000 SOL, only 152 hold any form of LST.
Ben Chow, founder of Solana protocols Meteora and Jupiter, emphasizes the untapped potential:
“We’ve done a lot to push LST adoption and unlock this capital—it could massively boost TVL and trading volume.”
Lucas Bruder, CEO of Jito Labs, echoes this sentiment:
“There’s a huge opportunity to unlock the other 97% of staked SOL. No LST protocol has yet cracked the right narrative or go-to-market strategy.”
The implications of wider LST adoption are clear: increased capital efficiency, deeper liquidity pools, and a more vibrant DeFi ecosystem on Solana.
Why Adoption Remains Low: Risk vs. Reward
Despite the benefits, many SOL holders remain hesitant to adopt liquid staking. Two primary factors contribute to this inertia.
1. Tax Uncertainty Around Staking Rewards
A major concern identified by Alex Cerba, core contributor at Marinade, is tax treatment. When users deposit SOL and receive mSOL in return, does this count as a taxable event? When should staking rewards be reported for tax purposes?
This lack of regulatory clarity makes institutions and cautious investors reluctant to engage with LSTs, especially given the potential for retroactive tax liabilities.
2. Perceived Risk vs. Marginal Yield Gains
Solana’s native staking is already fast, simple, and secure. Users earn around 7% annual yield with minimal effort and virtually no smart contract risk.
In contrast, using a liquid staking protocol introduces counterparty and protocol risk. To earn slightly higher yields—say 9% with mSOL—users must trust third-party code and infrastructure.
As Cerba notes:
“I don’t get enough extra yield in DeFi to justify taking on additional smart contract risk. I can get 7% safely by just staking directly.”
This calculus makes sense: why add complexity and risk for only a 2% incremental return?
Solana’s Built-In Advantages Reduce Need for Liquid Staking
Another reason for slow LST adoption lies in Solana’s design advantages.
Unlike Ethereum, where unstaking can take weeks due to validator queue delays, Solana allows users to unstake their tokens in under 48 hours. This fast withdrawal window reduces the need for liquidity abstraction—because users aren’t “locked in” for long periods.
Kel Eleje, research analyst at Messari, puts it succinctly:
“Solana’s fast unstaking makes native staking feel like low-risk liquid staking already.”
Moreover, many validators on Solana offer zero-commission staking, removing financial incentives to seek yield elsewhere. This combination of speed, safety, and cost-efficiency creates a strong status quo that’s hard for LST protocols to disrupt.
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Recent Momentum: Jito, BlazeStake, and the Rise of LST Innovation
Despite slow overall adoption, there are signs of change.
This summer saw rapid growth in new liquid staking protocols like Jito and BlazeStake. Jito’s jitoSOL has gained traction not just as a staking tool but as a key asset in DeFi—particularly on platforms like MarginFi, a rising lending protocol where jitoSOL is widely used as collateral.
Bruder attributes part of this growth to innovation:
“When you look at how jitoSOL is being used in DeFi, its utilization far exceeds other LSTs.”
Jito has also introduced unique features like priority fee sharing, where stakers earn a portion of transaction tips—a novel incentive not available in traditional staking.
Marinade has responded with Marinade Native, a non-custodial staking solution designed to bridge the gap between simple staking and full liquid staking. The goal is to gradually migrate users toward using mSOL in DeFi without overwhelming them with risk or complexity.
The Chicken-and-Egg Problem in Solana DeFi
Even if more users begin adopting LSTs, a deeper challenge remains: Where do they use these tokens?
Cerba highlights a critical bottleneck:
“People see this influx of capital as an opportunity—but right now, there aren’t enough places on Solana to meaningfully deploy large amounts of DeFi capital.”
This creates a classic chicken-and-egg problem:
- Developers won’t build complex DeFi applications without sufficient liquidity.
- Liquidity won’t flow in without compelling use cases.
Ethereum solved this over years through iterative development, strong developer support, and network effects. Solana is catching up fast—but still lags in protocol diversity and depth.
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Frequently Asked Questions (FAQ)
Q: What percentage of SOL is currently used in liquid staking?
A: Less than 3% of all staked SOL is deposited into liquid staking protocols like Marinade or Jito.
Q: How does Solana’s native staking compare to liquid staking?
A: Native staking offers ~7% APY with no smart contract risk and fast unstaking (under 48 hours), making it attractive compared to riskier LST options.
Q: Why is liquid staking more popular on Ethereum than Solana?
A: Ethereum’s long validator exit queues make liquidity crucial, while its mature DeFi ecosystem offers many use cases for LSTs—conditions that are still developing on Solana.
Q: What are the risks of using liquid staking tokens (LSTs)?
A: Risks include smart contract vulnerabilities, protocol insolvency, custodial concerns, and uncertain tax treatment upon token receipt or redemption.
Q: Can I use LSTs like jitoSOL or mSOL for yield farming?
A: Yes—jitoSOL is widely used on platforms like MarginFi for lending and borrowing. mSOL can be used across various Solana DeFi apps to generate additional yield.
Q: Will liquid staking grow on Solana in 2025?
A: Likely—growing protocol innovation, improved user incentives, and expanding DeFi use cases suggest increasing LST adoption if trust and utility continue to rise.
With over 70% of SOL already staked, the foundation for a thriving liquid staking economy exists. The next phase depends on building compelling DeFi primitives that make locking up LSTs not just safe—but irresistible.