Solana stands as one of the most high-performance blockchains in the crypto ecosystem, renowned for its speed, scalability, and low transaction costs. With over 70% of SOL tokens staked, the network demonstrates strong participation in securing its proof-of-stake (PoS) consensus. Yet, despite this impressive staking rate, less than 3% of staked SOL is funneled into liquid staking protocols—a stark contrast to Ethereum, where nearly 40% of staked ETH flows through liquid staking derivatives (LSDs). This raises a critical question: Why hasn’t Solana leveraged liquid staking to unlock its full DeFi potential?
Liquid staking allows users to stake their tokens while receiving a liquid derivative (like mSOL or jitoSOL) that can be used across decentralized finance (DeFi) applications. This dual utility—earning staking rewards while maintaining liquidity—has fueled explosive growth on Ethereum. But on Solana, adoption remains minimal. To understand this gap, we need to explore structural, behavioral, and ecosystem-level factors.
The Promise of Liquid Staking on Solana
In proof-of-stake blockchains like Solana and Ethereum, validators secure the network by locking up native tokens. In return, they earn staking rewards—approximately 7% APY for SOL and 5% for ETH. However, traditional staking locks up capital, limiting its utility.
Liquid staking protocols solve this by issuing 1:1 redeemable tokens (e.g., mSOL from Marinade, jitoSOL from Jito) that represent staked assets. These liquid staking tokens (LSTs) can be used in lending markets, yield farms, and other DeFi strategies—effectively enabling yield stacking.
Ben Chow, founder of Solana protocols Meteora and Jupiter, emphasized the opportunity:
“Over $9 billion worth of SOL is staked, but only 3% is in LSTs. Unlocking this capital could dramatically boost TVL and trading volume across Solana DeFi.”
Lucas Bruder, CEO of Jito Labs, echoed this sentiment:
“There’s a massive untapped potential in unlocking the remaining 97% of staked SOL. No LST protocol has cracked the right narrative or product-market fit yet—but we’re aiming to change that.”
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Why Adoption Remains Low: Risk vs. Reward
Despite the clear benefits, most Solana stakers stick with native staking. Two primary reasons explain this inertia: perceived risk and lack of compelling incentives.
1. Smart Contract Risk Deters Conservative Stakers
Unlike Ethereum, where native staking involves significant friction (minimum 32 ETH, long withdrawal periods), Solana makes staking simple and accessible. Users can stake any amount and withdraw within 48 hours—compared to Ethereum’s ~14-day unstaking period.
Alex Cerba, core contributor at Marinade (Solana’s largest liquid staking protocol), noted a key insight from user surveys:
“Many users see no reason to take on smart contract risk for an extra 2% yield when they can safely earn 7% with native staking.”
This sentiment reflects a rational cost-benefit analysis. For conservative holders—especially large institutions or long-term investors—the added complexity and counterparty risk of third-party protocols aren’t justified by marginal gains.
2. Tax Uncertainty Around LSTs
Another barrier is regulatory ambiguity. When a user deposits SOL and receives mSOL or jitoSOL in return, does that constitute a taxable event? How are staking rewards treated for tax purposes?
Without clear guidance from tax authorities, many users avoid LSTs altogether. This uncertainty disproportionately affects high-net-worth individuals and institutional players who prioritize compliance.
Ecosystem Readiness: A Chicken-and-Egg Problem
Even if more users embraced liquid staking, Solana’s DeFi ecosystem currently lacks sufficient depth to absorb billions in new liquidity.
As Cerba pointed out:
“People assume more capital automatically means growth. But where do you put it? There aren’t enough high-quality DeFi venues on Solana to deploy large amounts of capital yet.”
This creates a classic bootstrapping dilemma:
- DeFi protocols need capital to grow.
- Capital won’t flow in without robust use cases.
Ethereum has an edge here. Its mature DeFi landscape—including Aave, Curve, and Lido—provides multiple avenues for LSTs to generate yield beyond basic staking. On Solana, such infrastructure is still emerging.
However, progress is visible. Protocols like MarginFi, a fast-growing lending platform, have become major destinations for jitoSOL. This integration has driven recent spikes in Jito’s market share—proof that demand exists when compelling utility is offered.
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The Role of Innovation and Incentives
Recent growth in Solana’s LST space isn’t purely organic—it’s been catalyzed by airdrop farming and protocol incentives.
Jito’s rise coincided with expectations of a future token airdrop, motivating users to stake with them to qualify. Similarly, BlazeStake saw rapid adoption during the summer of 2025 due to aggressive incentive programs.
But beyond speculation, real utility is forming. jitoSOL now enjoys higher utilization in DeFi than any other LST on Solana—used in leveraged yield farming, collateralized borrowing, and cross-protocol composability.
Kel Eleje, research analyst at Messari, observes:
“Native Solana staking feels like a lower-risk version of liquid staking already—free validators, fast withdrawals. That makes the value proposition harder for LSTs to crack.”
To overcome this, projects like Marinade have launched Marinade Native, blending the safety of first-party staking with the eventual path to liquidity—a hybrid approach designed to ease users into full DeFi participation.
Core Keywords Driving Discovery
- Solana liquid staking
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- proof-of-stake blockchain growth
- liquid staking derivatives (LSD)
- unlocking staked crypto assets
These terms reflect high-intent search queries from investors, developers, and DeFi users exploring yield optimization strategies on high-performance chains.
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Frequently Asked Questions (FAQ)
Why is so little SOL used in liquid staking?
Despite over 70% of SOL being staked, less than 3% flows into liquid staking protocols due to low perceived benefits relative to risk. Native staking on Solana is already fast, free, and low-risk—making it hard for LSTs to justify the switch.
Is liquid staking safe on Solana?
While protocols like Marinade and Jito are well-audited and widely used, they introduce smart contract and centralization risks not present in native staking. Users must weigh these against potential yield gains.
What is the difference between mSOL and jitoSOL?
Both are liquid staking tokens. mSOL is issued by Marinade Finance and offers automated validator delegation and auto-compounding rewards. jitoSOL comes from Jito Labs and emphasizes MEV (Maximal Extractable Value) capture for higher yields.
Can I earn more with liquid staking than native staking?
Potentially yes. While native SOL staking yields ~7% APY, liquid staking can push returns closer to 9–12% when combined with DeFi strategies like lending or leveraged farming—but with added risk.
Will more capital flow into Solana’s LSTs in the future?
Yes—if DeFi use cases expand and trusted infrastructure matures. Increased integration with lending platforms, stablecoins, and derivatives will make LSTs more attractive as yield vehicles.
How do I start liquid staking SOL?
You can stake SOL via platforms like Jito or Marinade directly through wallets like Phantom or Backpack. Always research risks and consider starting with small amounts.
Solana’s journey with liquid staking is still in its early chapters. While structural advantages reduce urgency for adoption, growing DeFi innovation—and rising demand for capital efficiency—will continue pushing the ecosystem toward broader LST integration. The foundation is strong; now it’s about building compelling reasons for millions in idle staked SOL to go to work.