Staking Ecosystem: Solana VS Ethereum
Research on the liquid staking sector, landscape, and opportunity analysis.
Last updated
Research on the liquid staking sector, landscape, and opportunity analysis.
Last updated
The differences in staking dynamics between Solana and Ethereum are stark.
Ethereum (ETH):
Total ETH Supply: 120.4 million ETH
Staked ETH: 34.1 million ETH (27.9%)
Liquid Staked Rate: 11.5%
Solana (SOL):
Total SOL Supply: 582.1 million SOL
Staked SOL: 394.3 million SOL (67.7%)
Liquid Staked Rate: 4.2%
Solana's staking participation rate stands at a remarkable 67.7% of its total supply, compared to Ethereum’s 27.9%. Additionally, Solana's lower liquid staking rate of 4.2%, compared to Ethereum’s 11.5%, indicates higher staking demand and reduced liquidity, signaling investor confidence and potential for higher rewards.
The blockchain landscape has been undergoing significant shifts, with Ethereum and Solana emerging as two of the most prominent networks in the space. Both networks offer staking opportunities, but the dynamics of staking on these platforms differ significantly. In this article, we’ll explore how Ethereum’s transition to Proof-of-Stake (PoS) and Solana’s high-performance blockchain design create distinct staking ecosystems, and why Solana currently offers a more compelling staking opportunity.
Ethereum Staking: Post-Merge Landscape
Ethereum's transition to a PoS consensus mechanism, known as "The Merge," marked a major milestone in September 2022. This shift replaced Ethereum’s previous energy-intensive Proof-of-Work (PoW) model with a more eco-friendly PoS model. With PoS, Ethereum staking now involves multiple methods, each catering to different levels of expertise and risk tolerance.
Solo Staking: Requires a minimum of 32 ETH (approximately $70,000) to run a validator node. Validators independently verify transactions and propose new blocks. However, the high entry cost and the risk of slashing—losing a portion of staked ETH due to validator misconduct—pose significant barriers to participation.
Staking as a Service: For those unwilling to run a validator, staking services allow users to delegate their ETH to professional operators. While this mitigates the operational burden, users must trust the service provider's performance, and custodial risks still exist.
Centralized Staking: Centralized exchanges (CEXs) offer staking services with lower technical requirements but often at the cost of reduced yields and increased custodial risk.
Liquid Staking: Liquid staking protocols like Lido provide stakers with derivative tokens (e.g., stETH) that can be used within the DeFi ecosystem. This offers flexibility and liquidity, allowing users to stake ETH while still participating in other financial activities.
Solana Staking: High-Performance and Decentralized
Solana, in contrast, was designed from the ground up with staking in mind. Its consensus mechanism emphasizes speed, efficiency, and accessibility, which is reflected in its staking options.
Validator Operations: Solana validators require robust hardware due to the blockchain's high throughput. Unlike Ethereum, Solana doesn’t employ slashing, reducing the risk of penalty for validators. There’s also no strict minimum SOL requirement, though economic viability typically needs around 6,000-7,000 SOL.
Native Staking: SOL holders can easily delegate their tokens to validators through compatible wallets. The staking process is straightforward, with minimal fees and flexible participation options, making it accessible to a wide range of users.
Liquid Staking Pools: These tokens provide additional utility, allowing users to remain liquid while participating in staking rewards. Moreover, Solana’s staking pools automatically distribute staked SOL across multiple validators, minimizing risks associated with individual validator performance.
Centralized Staking: Similar to Ethereum, centralized exchanges offer staking services for Solana, but with lower APYs. However, these platforms also support conversion to liquid staking tokens, enabling broader DeFi participation.
Static vs. Dynamic Security: A Key Difference
A critical distinction between Ethereum and Solana's staking mechanisms lies in their approaches to network security.
Ethereum's Static Security: Ethereum imposes stringent requirements on validators, such as a high minimum staking amount and the risk of slashing. This approach, while enhancing the quality of the validator set, raises barriers to entry, potentially limiting decentralization.
Solana's Dynamic Security: Solana prioritizes expanding its validator set by lowering barriers to entry. There is no minimum staking amount, and the lock-up period is just 2-3 days, encouraging more participants to join the network. This strategy not only broadens the validator base but also reduces the risk of centralization, contributing to overall network resilience and security.
Performance and Market Behavior
When comparing the staking mechanisms of Solana and Ethereum, several key metrics highlight Solana’s advantages:
Staking Rewards and Liquidity: Solana offers shorter lock-up periods (1-3 days), improving liquidity and reducing the risks associated with long-term token lock-ups. Solana's liquid staking tokens (LSTs), such as mSOL and stSOL, have demonstrated strong performance, maintaining price stability even during market disruptions like the FTX collapse. This is largely due to the ability to unstake SOL relatively quickly, unlike Ethereum’s previously indefinite lock-up period before the Shanghai upgrade.
Transaction Speed and Cost Efficiency:
Solana consistently outperforms Ethereum in terms of transaction speed and cost. Before Ethereum’s merge, Solana processed an average of 42.4 million transactions per day, far surpassing Ethereum’s 1 million. Even after a slowdown, Solana still processes 22 million transactions daily, at fees as low as $0.0008 per transaction—significantly lower than Ethereum's post-merge fees, which remain above $1.70 per transaction.
Enter Toby Network, a cutting-edge protocol designed to unlock the full potential of Solana’s staking ecosystem. Toby is set to address the current gaps in the Solana staking market by offering innovative solutions that enhance both yield and flexibility for stakers.
Opportunities Unlocked by Toby Network
Maximizing Unlocked Value: With over $45 billion, or 94% of staked Solana not currently in liquid staking tokens, Toby aims to tap into this vast market by offering $tSOL, a liquid staking token. This will allow stakers to maintain liquidity while earning staking rewards, significantly increasing the efficiency and attractiveness of staking on Solana.
Enhancing MEV Searcher Efficiency: Toby addresses the issue of latency that affects over 50% of MEV searchers. By optimizing relayer performance, Toby not only increases the number of available relayers in the market but also improves searcher profitability by reducing network distance issues.
Reopening the MEV Free Market: Toby’s decentralized MEV marketplace promises to restore and even surpass previous MEV yields, which were 15% higher before recent market constraints. This creates a more open and competitive environment, benefiting both stakers and searchers.
Solving Critical Problems
Toby addresses two key problems that have hindered the growth of Solana’s staking ecosystem:
Restoring MEV-Boosted Yield: Before market regression, MEV-boosted staking yields were on average 15% more profitable. Toby seeks to restore and enhance this profitability by providing a more efficient and open marketplace for MEV opportunities.
Introducing Alternatives in the MEV Marketplace: MEV searchers are in dire need of more marketplaces to operate, and Toby offers exactly that—a decentralized alternative that opens up new avenues for profit and participation.
Toby Network is poised to disrupt the Solana staking ecosystem in several ways:
True Decentralization: By reopening the MEV free market on Solana, Toby ensures a truly decentralized approach to staking and MEV searcher participation. This not only increases yields for stakers but also provides more choices for searchers, fostering a more vibrant and competitive ecosystem.
Improved Latency for MEV Searchers: Toby’s network optimization reduces latency for searchers, allowing them to operate more efficiently and profitably within the Solana ecosystem.
Empowering Stakers with $tSOL and future tokens: Toby’s liquid staking token ($tSOL) and future tokens empower stakers by providing both liquidity and a voice in the network’s governance. This model ensures that users have both flexibility and influence in the evolving staking landscape.
As Solana continues to solidify its position as a leader in the blockchain space, Toby Network emerges as a key player in revolutionizing its staking ecosystem. By addressing critical gaps and introducing innovative solutions, Toby not only enhances yield opportunities for stakers but also opens up the MEV marketplace, creating a more dynamic and profitable environment for all participants.
Toby Network is more than just a staking protocol—it’s a movement towards a more decentralized, efficient, and user-friendly Solana ecosystem.
