- Solana is benefiting from the growing popularity of liquid staking, with the new platform Super Stake SOL offering additional earning potential for risk-tolerant traders.
- The use of derivatives, such as mSOL from Marinade Finance, in the staking process amplifies potential returns but also exposes traders to the risk of liquidation.
Solana, known as the “fastest blockchain in the world,” is currently enjoying a renewed surge in the staking business. The buzz around Liquid-Staking-Token-Finance (LSTfi) is injecting fresh momentum into the ecosystem. One platform garnering attention is Super Stake SOL, developed by Drift Protocol. This platform allows adventurous traders to earn up to ten percent additional yield by leveraging their Solana staking derivatives.
In this case, the derivative of choice is Marinade-SOL (mSOL) from Marinade Finance. Super Stake SOL uses mSOL tokens as collateral to borrow and stake additional SOL tokens in a loop, multiplying potential returns up to three times depending on the user’s chosen leverage. A similar concept has been implemented by Ethereum’s DeFi giant MakerDAO with stETH Yield Multiple Staking via Aave.
However, the fun comes with risks, especially when the price difference between “real” SOL tokens and derived SOL tokens starts to widen. If the mSOL price dramatically falls compared to the underlying asset, traders may face liquidation. The turbulence experienced by other platforms on Solana, such as during the FTX collapse in November 2022, serves as an instructive example.
Demand and Risks
Despite the risks involved, demand among Solana traders remains high. The protocol is nearing its maximum capacity in just a few days. Super Stake SOL appears to be a much-needed catalyst in the struggling DeFi ecosystem of the high-speed blockchain. The booming NFT market also contributes to the push. Despite the SEC drama and the rising dominance of Bitcoin, the SOL coin has experienced an impressive rally of 25 percent in the past 14 days.
Solana is now eyeing price levels from before its classification as a security by the SEC, which caused significant drops last month. The project received a boost from Ethereum founder Vitalik Buterin, who recently criticized the SEC’s actions against the perceived competitor as unfair. Solana has experienced the positive impact of Buterin’s statements before, as a supportive tweet from him in December 2022 helped lift the community and the SOL price.
While Solana’s momentum is encouraging, traders should remain vigilant about the risks associated with liquid staking and derivative-based staking platforms. The potential for amplified returns also entails the possibility of significant losses. As the Solana ecosystem continues to evolve, it is crucial for participants to assess the risks and rewards before engaging in such staking activities.