Unveiling Marinade: A Deep Dive into Liquid Staking and Innovative Stake Delegation

Swankyrichworld
10 min readAug 17, 2023

--

Stake on Marinade

In the ever-evolving landscape of blockchain and decentralized finance (DeFi), Marinade emerges as a shining example of innovation and progress. Founded on a robust ethos, Marinade has garnered attention for its unique approach to liquid staking and stake delegation. In this article, we will explore the intricate workings of Marinade, from its inception to its cutting-edge stake delegation strategy, while highlighting its commitment to transparency and open-source development.

Exploring Marinade’s Ethos and Funding 🔍

Marinade.Finance, a pioneering staking protocol anchored on the Solana blockchain, offers a sophisticated avenue for SOL token holders to maximize their assets.

The protocol introduces an automated staking strategy meticulously crafted by the Marinade core team, drawing insights from both MNDE and mSOL stakeholders.

Users of Marinade can opt for either native or liquid staking, both converging within a shared pool comprising over 100 high-performing Solana validators.

In the realm of native staking with Marinade, a distinctive facet emerges – the absence of smart contract interaction.

Conversely, the avenue of liquid staking ushers in a unique opportunity, yielding an equivalent value in "marinated SOL" tokens, denoted as mSOL.

These mSOL tokens hold utility within the domain of decentralized finance (DeFi).

A noteworthy development as of July 2023 is the extended application of Marinade's native functionality. Users can now seamlessly integrate the automated delegation strategy into their natively staked SOL, obviating the necessity for smart contract utilization.

Marinade’s inception traces back to its emergence from Solana ecosystem grants during the 2021 Solana Hackathon.

The protocol launched its liquid staking protocol and mSOL liquid staking token on mainnet in the ensuing August.

Notably, the MNDE governance token, minted on November 7, 2021, epitomizes a fair-launch token, eschewing the conventional route of an Initial Coin Offering (ICO).

Commencing in April 2022, Marinade embraced on-chain DAO governance, signifying a pivotal shift in decision-making pertaining to the treasury.

Notably, all matters concerning the treasury have been subject to on-chain voting procedures. A transformative milestone arrived in July 2023, with the DAO’s migration of its governance framework to Realms.

This progression empowers MNDE holders with direct oversight over the treasury and pivotal protocol determinations.

In addition to the dynamic DAO structure, the Marinade Council emerges as a formidable entity, entrusted with the authority to orchestrate liquidity mining endeavors and operational multisigs.

The council’s role assumes prominence in further shaping Marinade’s operational landscape.

Ways to Utilize Marinade:

  • Stake SOL tokens and have the flexibility to unstake whenever desired.
  • Engage as a liquidity provider in the SOL-mSOL pool, opening opportunities for decentralized finance (DeFi) yields.
  • Leverage tokenized stake positions for accessing added DeFi yields through staking.
  • Attain a role within the Marinade DAO and contribute to decision-making through the utilization of Marinade.

Liquid Staking Demystified:

Liquid staking is a process that allows holders of a particular blockchain’s native tokens to maintain ownership of their tokens while still participating in staking activities. Staking typically involves locking up tokens to support the network’s operations and security in exchange for rewards. However, locked tokens are illiquid and cannot be easily used for other purposes.

At the core of Marinade’s offering lies the concept of liquid staking. Traditional staking involves locking up assets to secure a blockchain network, limiting their utility.

Marinade’s innovation lies in allowing users to retain the benefits of staking while having the flexibility to use their staked assets in various DeFi applications. This is achieved through a process known as liquid staking, which involves tokenizing staked assets into liquid equivalents.

This groundbreaking approach ensures that stakers no longer need to choose between participating in staking and accessing the broader DeFi ecosystem.

What is Marinade Native🤔?

Marinade Native stands as an innovative solution for the management and optimization of your staked SOL through Marinade’s delegation strategy.

It offers an alternative approach to liquid staking, providing users with the opportunity to leverage an automated delegation strategy without the need for smart contracts.

Here are some key distinctions that set Marinade Native apart:

1. Native Solana Functionality: Marinade Native operates distinctively by harnessing the inherent capabilities of Solana, without relying on a smart contract.

2. Maintaining Custody: When you opt for Marinade Native, you retain full custody over your SOL, maintaining exclusive control to initiate withdrawals at your discretion.

3. Fee Structure: Marinade Native eliminates user fees entirely. This includes the absence of deposit fees, ongoing management fees, and the ability to exit without incurring charges by adhering to the cooldown period. Should you choose to expedite your exit from the Marinade native staking position, a nominal fee applies based on prevailing liquidity.

4. Non-mSOL Rewards: Marinade Native operates by creating Solana stake accounts within your personal wallet, subsequently entrusting Marinade with the management of these accounts. Consequently, you do not receive mSOL.

5. Direct Rewards Distribution: Embracing a native staking approach, Marinade Native ensures that rewards are directly disbursed to each of your stake accounts at the conclusion of every epoch, which typically occurs every 2-3 days.

6. Open-sourced, permissionless delegation formula with more than 150 validators

By offering these unique features, Marinade Native provides a distinctive and secure method for optimizing your staked SOL holdings while offering greater control and flexibility over your investment.

How to use Marinade Native?

Source:Marinade

Here are the steps to use Marinade Native:

1. Click on "Stake" for your SOL.
2. Select the "Automated" and "Native" options.
3. Confirm the transaction.

To redelegate existing stake accounts:

1. Open Marinade's dApp.
2. Choose the stake account you want to redelegate.
3. Select "Native."
4. Confirm the transaction.

Marinade Empowering Directed Stake:

Marinade's initial stake distribution was based on a delegation strategy focused on high-performing validators that contribute to network decentralization, resulting in a strong score.

The introduction of MNDE Directed stake now enables MNDE holders to select validators for reasons beyond just the score. Many valuable validators may not receive sufficient stake due to competition and the score-based approach.

MNDE Directed stake empowers holders to choose validators for reasons such as shared communities, useful Web3 tools, personal assistance, participation in the same DAO, or advocacy for Solana. This feature enhances the MNDE token's value by granting more utility and influence. It also provides validators with more stable growth prospects, potentially leading to improved APY for users and encouraging validators to adjust their commissions for better user benefits.

This fine-grained control provides a higher degree of security and customization, minimizing the risks associated with traditional single-validator staking.

Marinade DAO Governance on Realms:

Marinade's governance model operates through a mechanism called Realms, which enables MND holders to actively participate in protocol decisions. Through a decentralized autonomous organization (DAO), stakeholders collectively influence the protocol's development, upgrades, and adjustments, creating a dynamic and responsive ecosystem.

Engagement in DAO governance requires MNDE holders to secure their tokens on Marinade's Realms governance platform. These locked tokens undergo a 30-day unlocking period that commences upon initiation. During this unlocking phase, MNDE holders are ineligible to cast votes. Individuals possessing locked MNDE have the ability to submit proposals on the blockchain and execute them upon successful approval.

The MNDE Token and Its Function:

Marinade's MNDE token provides holders with the opportunity to engage in the governance of the protocol. This encompasses decision-making authority over aspects such as DAO fees, the treasury, and the selection of validators eligible to receive the SOL stake from the pool.

Key MNDE Token Details:

- Total Supply: 1,000,000,000 MNDE
- Circulating Supply: To be determined based on DAO votes
- Issuance Date: October 7, 2021
- Fully Issued Date: Not determined (distribution through DAO votes)
- Mint Address: Not specified
- Minting: Currently disabled

Utility and Revenue Generation:

The Marinade protocol generates revenue through several avenues, including:

  • Management fees in mSOL from the liquid staking pool
  • Instant unstaking fees from the SOL liquidity pool
  • Yield derived from active positions in Solana DeFi
    Additionally, Marinade is in the process of testing an MEV bandwidth marketplace called mTransaction, which welcomes validator participation.

Incentives and Mission:

Established as a public good for Solana, Marinade aims to contribute to a decentralized and high-performing Solana blockchain. Its primary objective is to distribute MNDE tokens to like-minded ecosystem builders, empowering them to influence protocol parameters and treasury management through governance. Notably, Marinade boasts the highest Total Value Locked (TVL) among Solana protocols, with over 6.6M SOL staked through its liquid and native staking protocol.

Allocation of MNDE Tokens:

A portion of MNDE tokens (75M, equivalent to 7.5%) is earmarked for initial contributors. As of August 2023, only 4.8M MNDE remains to be vested, with a monthly vesting average of 807,000 MNDE, expected to conclude by January 2024. The majority of the MNDE treasury (786M) is overseen by the DAO, which holds the authority to propose and vote on token distribution. Noteworthy allocations include:

1. A budget of up to 6M MNDE for Marketing expenses spanning September 2022 to September 2023.

2. A budget of up to 160M MNDE for the Open Door program, aligned with Marinade's TVL growth.

3. A 46M milestone budget distributed to the team and advisors, dedicated to TVL objectives. In situations where operational expenses exceed protocol revenue, MNDE is sourced from this budget to support contributor compensation.

Source: Marinade
Source: Marinade

Where to get the MNDE Token

MNDE is available for trading on leading Solana DEX’s. MNDE is also available on central exchanges like Coinbase and Gate.

  • Trade MNDE on Raydium
  • Trade MNDE on Orca
  • Trade MNDE on Jupiter
  • View MNDE on Coingecko
  • View MNDE on CoinMarketCap
    https://app.realms.today/dao/MNDE/token-stats

Some ways that staking to a single validator may be risky:

Staking to a single validator can carry certain risks due to potential vulnerabilities and uncertainties within the validator's operation. Some risks include:

  • Downtime: If a validator experiences technical issues, maintenance, or downtime, your staked assets might not earn rewards during that period.
  • Security Breaches: A single validator becoming compromised or falling victim to a cyberattack could result in the loss of staked assets.
  • Performance Fluctuations: A validator’s performance can vary over time, impacting your staking rewards and overall yield.
  • Validator Misbehavior: Malicious or dishonest behavior by a validator could lead to slashing of staked funds, resulting in a partial loss of your holdings.
  • Centralization: Relying on a single validator can contribute to network centralization, which may undermine the decentralized nature of the blockchain.
  • Lack of Diversification: By staking exclusively with one validator, you miss out on potential rewards from other validators and fail to spread risk.
  • Validator Exit: If a validator unexpectedly exits the network, your staked assets might be locked for a period until you can switch to another validator.
  • Protocol Changes: Changes in the underlying blockchain protocol or validator rules might affect the performance or rewards of a single validator.
  • Incentive Alignment: Validators might change their behavior based on their own incentives, which might not always align with the best interests of stakers.
  • Long-Term Viability: A single validator’s long-term viability might be uncertain, making it important to consider the validator’s reputation and commitment.

Marinade addresses this concern by allowing users to distribute their stakes across multiple validators, thereby mitigating the risks associated with relying solely on one entity.

Why is Marinade’s Stake Delegation Strategy Unique?

Marinade sets itself apart with a sophisticated stake delegation strategy. By enabling users to choose multiple validators and seamlessly switch between them, Marinade optimizes yield potential and security, providing a comprehensive solution that prioritizes the needs of its users.

Pros and Cons of Using Marinade

  • Pros
  1. Directed skate is possible
  2. You have total control over you tokens and associated accounts.
  3. Zero deposit fee
  4. Open-source and permissionless
  5. Stake and unstake at will
  6. User friendly platform
  7. Community-driven

Cons

  1. No high yield on staked tokens
  2. Instant unstake has a 0.1% to 9% fee.
  3. There is a delay to get back tokens without fee.

Comparative Analysis and Future Outlook

In a landscape filled with competition, Marinade stands out for its innovative liquid staking approach, robust governance, and commitment to transparency. While competition exists, Marinade’s unique features offer a compelling advantage, allowing its users to maximize their staking rewards without compromising security.

Embracing Open-Source and Transparent Governance

Marinade’s commitment to open-source development and transparent governance is evident in its codebase and decision-making processes. This commitment fosters community engagement, ensuring that the protocol’s evolution is driven by collective insights and expertise.

Conclusion

Marinade has emerged as a trailblazer in the world of liquid staking and stake delegation. Its ethos of decentralization, innovative liquid staking model, commitment to community-driven governance, and dedication to transparency make it a standout player in the DeFi arena. As Marinade continues to shape the future of staking, its contributions to the broader blockchain ecosystem remain both inspiring and transformative.

References:

  • https://docs.marinade.finance
  • https://docs.marinade.finance/getting-started/what-is-marinade-native
  • https://docs.marinade.finance/the-mnde-token
  • https://docs.marinade.finance/the-mnde-token/mnde-directed-stake

--

--