DeFi
DeFi protocol Marinade seeks to reclaim share of $51 billion Solana staking market as competition heats up – DL News
- Competition in the Solana staking market is intensifying.
- Marinade plans to launch a new auction marketplace for validators and stakers.
- The market could help it compete with rival staking protocol Jito.
There is a war going on in the Solana Stake.
Marinade, the first Solana staking protocol to launch in 2021, once dominated the market with over $2 billion in deposits.
But in recent months, rival staking protocol Jito has been eating Marinade’s lunch. Marinade’s deposits fell by almost 50%, while Jito’s high rewards helped it reach over $1.5 billion, according to DefiLlama. data.
Now Marinade is fighting back.
This involves creating a participating auction market, or SAM. This will give running validators the opportunity to share additional revenue with stakers and bid on each other to provide stakers with better returns.
Solana’s staking software does not allow providers to use other revenue streams to increase the returns they provide to stakers. Many are forced to offer punters 0% commission with no other way to compete.
“Over 400 validators charge 0% commission on inflation rewards,” said Michael Repetny, one of Marinade’s top contributors. DL News. “We expect there to be an additional $8 million in demand for the Marinade auction system.”
The new stakes market could increase staking rewards to 9% – in line with what Jito is proposing – and create more competition between validators in charge.
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The hope is that Marinade’s stake auction marketplace will attract independent validators from elsewhere in the Solana ecosystem, giving them a platform to compete against each other, as well as established providers like Jito.
The Solana Staking Market
Staking Solana is a big deal.
More than 81% of all SOLs on the network – some $51 billion – is at stake, compared to only 27% of ETH at its rival Ethereum.
Although there are over 50 different Solana staking providers and hundreds of independent validators, the market is dominated by two players: Marinade and Jito.
Staking providers run validators, software instances that process transactions on blockchains, allow Solana users to stake their SOL to help secure the network and earn rewards.
The Solana network currently rewards stakers with an annual return of 7.5% on their staked tokens paid in SOL – called inflation rewards.
Although validators can take a commission on these inflationary rewards, many do not do so to remain competitive.
Share MEV rewards
Validators also make money in other ways, such as running MEV Strategies.
MEV, or maximum extractable value, refers to the reorganization of blocks of transactions for profit. While some forms of EVMs, such as Sandwich attacks, harm users, other types help keep markets efficient.
Marinade’s Repetny said validators earn 1.5% more per year from other revenue sources like MEV, but it is not shared with stakeholders by default.
The new stake auction marketplace will allow validators to share MEV rewards with stakers.
“Validators cannot go negative with inflation-linked reward commissions,” Repetny said. “SAM is the only way for them to remain competitive beyond setting a 0% commission. »
But Marinade won’t be the first staking provider to share MEV profits with stakers.
Jito already allows its validators to share such rewards with stakers, which is why it was able to offer higher rewards than Marinade.
Rank validators
Marinade’s equity market will operate similarly to the so-called cost-per-mile model used in advertising.
The model works by charging advertisers a certain amount for the number of times an ad appears.
Repetny said validators can set their bid and the maximum amount of SOL desired.
“Based on this offer and the inflation fee charged, validators will be ranked based on the expected return for punters and the best ones who have been awarded the stake delegation,” he said.
The system will operate via permissionless smart contracts controlled by the Marinade DAO board and community voting.
Income shake-up
Currently, one of the ways Marinade generates revenue is through its liquid staking token, mSOL, which charges users a 6% commission on inflation rewards. Marinade’s native staking currently has no fees in place.
After the launch of Marinade’s stake market, this commission will disappear, Repetny said. Instead, Marinade will make money from small fees charged on the stake market.
“The Stake Auction Marketplace will take a DAO discount on the value of the bid stream,” he said.
Repetny did not reveal the scale of the reduction and said it would be decided by a vote of Marinade token holders.
Switching to this new pricing model could be risky.
Currently, mSOL is the second biggest Liquid staking token Solana with $734 million staked and brings in around $200,000 in fees per day.
Marinade will waive these fees and there is no guarantee that its new staking market will be successful.
With rival Jito ahead of Marinade by some $800 million in deposits, such a risk might be necessary if Marinade is to reclaim its lost market share.
Repetny said the marketplace would be launched in stages and he expects the first parts, the delegation strategy and distribution of bids, to go live later this year.
Tim Craig is a DeFi correspondent at DL News. Do you have any advice? Send him an email to tim@dlnews.com.