Update on Marinade Finance and Liquid Staking Solana
Welcome to week 46 of Muttley’s.
This week we are going to follow up on an article we wrote at the end of November 2022 on Marinade Finance. As a refresher, Marinade allows users to stake their Solana with Marinade using automated staking strategies and in turn receive staked SOL tokens known as mSOL. mSOL can then be staked on its own to earn yield on top of the yield you earn for staking your original SOL. We are touching base on Marinade again because they recently came out with some noteworthy announcements. In preparation for this article were able to get the thoughts of @BrandonTucker, who leads communications for Marinade, on what these developments mean for Marinade and Solana.
Let’s start by going over the Marinade collaboration with Hadeswap which allows users of Hadeswap to purchase NFTs using mSOL. Many have waited for the day, when they can take their Solana, stake it to earn some yield, and then put the mSOL they receive in exchange to buy NFTs. This collaboration simply put, drives capital efficiency. From Marinade’s point of view, seeing the success and innovation of Solana’s NFT community despite a downturn in DeFi activity throughout 2022 made it obvious to them that mSOL should play as large a role as possible in the NFT space. Per Brandon, “The fact is that even though SOL is the “Currency” of Solana, nearly 70% of it is locked in stake. If that stake were liquid it would fuel not only DeFi but NFT liquidity as well. NFTs are so exciting on Solana and continually creating a utility that blends it with DeFi protocols. Ultimately, we feel that mSOL creates a win-win-win because the user, protocol, and ecosystem at large are all benefiting from mSOL’s existence in the marketplace thanks to the underlying staking rewards and decentralizing delegation strategy that improves the network we’re all on.”
One of the more important facets of this integration is that there exists a discrepancy between the mSOL and SOL price (which will widen over time) making user experience complex for NFT marketplaces. The reason for the growing divergence between mSOL and SOL prices is due to the accumulation of staking rewards into the mSOL price after each epoch. Brandon is hopeful though, that “innovation in the space can make liquid staking tokens more seamless for all users.”
Wanting to not just be integrated into marketplaces but also lending platforms, Marinade has also integrated mSOL loans on Rain.Fi. “Collateral that naturally grows vs. the price of SOL over time seems like a no-brainer vs. simply supplying or borrowing SOL,” opined Brandon.
Of note, In February 2023, Marinade launched the Open Doors program to foster innovations and new use cases for mSOL and reward projects with ownership in Marinade through the MNDE token. Thanks to Hadeswap and Rain.FI it appears we are about to see many more use cases for mSOL.
The second piece of news released by Marinade recently has to do with the amendment they made to re-align incentives for their own team and the ripple effects to MNDE tokenomics. The gist of the announcement is that the Marinade team has done away with time based vesting of their MNDE allocation in favor of TVL based milestones. Core contributors won’t receive vesting until mSOL adoption grows. This change is expected to reduce MNDE token emissions. Per Brandon, “Ultimately we think the primary goal of the MNDE token is to be in the hands of ecosystem leaders (protocols, validators especially) so they can have a say in what is an important ecosystem infrastructure protocol that has been community run as a public good since its founding via grant money in April 2021.”
Looking forward, the big news per Brandon is that “Marinade is currently building on Realms governance tooling that will not only supercharge Marinade DAO governance but all these tools will be a public good available to all ecosystem DAOs who use Realms. The team is wrapping up its work and has hired an auditor to check the work and then we should be ready to share it with the world.
Governance tooling is still nascent on Solana compared to older chains and it’s time to use the value prop and communities on Solana to create the best governance tooling in crypto.”
The final piece of news we want to touch on is the announcement from Lifinity (a project we have written about in the past) saying they have converted the SOL portion of their treasury (~20k SOL) into mSOL and staked it for MNDE rewards. When Brandon was asked to comment on this development, he said “I like Lifinity a lot because they share a lot of Marinade’s values as we’re both primarily DeFi projects that have also embraced NFT culture and created our own collections that come with DeFi utility. Lifinity has also really made use of Marinade’s products and utility of MNDE and mSOL. It really started when mDAO provided Lifinity a grant to supply mSOL market liquidity and since Lifinity has started up a validator and they are also staking their treasury’s SOL for mSOL. They were the subject of a contentious couple of votes in 2022 they ended up being on the losing end of, but have nevertheless remained engaged with Marinade and continuing to work together which speaks volumes to their community and commitment to Solana. Lifinity really embodies the Web3 ethos to me.” Lifinity is also a part of Marinade’s aforementioned Open Doors program.
To sum up, if you are a fan of not letting your SOL sit idle, look into liquid staking and Marinade. Currently, only 2–3% of all SOL that is staked is liquid. This amounts to a gigantic amount of SOL that is currently locked up and not available for DeFi or even NFTs. As the cries for yield and increasing SOL liquidity grow, projects like Marinade and mSOL will only garner more attention and demand. DeFi needs more liquidity right now to truly put the FTX-Alameda crash in the rear view. One way of doing this is liquid staking. Get on board as this train is about to leave the station.
