The Solana network is experiencing a significant increase in users and marking a “breakthrough moment” thanks to the introduction of a liquidity staking mechanism.
According to a new report from leading cryptocurrency exchange Bybit, Solana's liquidity staking model, especially the exchange-initiated liquidity staked SOL, is expected to attract a large user base and accelerate the onboarding of retail users into the ecosystem.
Liquidity Staking Status on Solana
As a Proof of Stake (PoS) network, staking plays an essential role in ensuring the security of Solana. While users delegate their SOL to validators to participate in consensus and validate transactions, liquidity staking offers more benefits. This mechanism provides greater flexibility, liquidity, and yield opportunities, allowing participants to trade liquidity staking tokens (LSTs) on other DeFi platforms while maintaining exposure to staked positions. Additionally, users can distribute their SOL across multiple validators, increasing decentralization and earning additional rewards.
Currently, Solana's staking ratio of 68%, corresponding to $57 billion in SOL staked, far exceeds Ethereum's 28%. However, only 6.5% ($3.6 billion) of Solana is involved in liquidity staking, compared to about a third of Ethereum. Bybit sees this as a huge opportunity for the growth of liquidity staking on Solana.
Liquidity staking on Solana has room to grow. Source: Bybit, Dune
Based on Ethereum data, Bybit predicts that Solana's LST market could expand fivefold to $18 billion if Solana's LST ratio reaches the same level as Ethereum.
Growth potential
Bybit believes that the Solana liquidity tokens issued by the exchange can increase activity and application on the network, facilitating the development of liquidity solutions. The exchange became the first to issue the SOL liquidity staking token (bbSOL), anticipating that the token will serve as an important bridge between retail investors and the Solana ecosystem.
Liquidity staking on Solana has now begun to show signs of growth, with at least half of the network’s top ten DeFi protocols offering these services.
LST Market on Solana. Source: Dune
Bybit predicts that as Solana's DeFi ecosystem expands, demand for LST will increase, creating a positive feedback loop that attracts more developers, protocols, and users, further fueling Solana's DeFi boom as seen on Ethereum.
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