The Solana network briefly surpassed Ethereum in total staked value of their respective native tokens, SOL and ETH, sparking debate over whether it is actually bullish or bearish for Solana.ย
More than $53.9 billion worth of SOL is now staked on the Solana network from 505,938 unique wallet holders, who are making an 8.31% annualized return, blockchain data shows.
The figure briefly overtook the staked ETH market cap on April 20, which now has $53.93 billion worth of value secured from 34.7 million staked tokens, Beaconcha.in data shows.
A contributing factor behind the flippening has been SOLโs strong price performance relative to ETH over the last two years, which has seen the SOL/ETH price ratio rise nearly tenfold from 0.0088 to 0.0866 since June 12, 2023, CoinGecko data shows.
High SOL staking return is stifling Solana DeFi, pundits say
However, the โrisk-freeโ 8.31% return for SOL stakers at the network level โ significantly higher than ETHโs 2.98% โ may be attracting Solana users away from DeFi activities, such as providing liquidity to automated market makers and lending protocols in exchange for token rewards.
โSolana having 65% of its marketcap staked means there’s no other use of it’s token, itโs actually bearish,โ Builda Protocol developer and X user โJCโ said.
DefiLlama data shows that there are $21.5 billion worth of liquid staked ETH tokens on Ethereum compared to just $7.22 billion of liquid staked SOL on Solana.
Multicoin Capital managing partner Tushar Jain previously said that Solana DeFi has been stifled because itโs not rational to make an investment in something that produces a lower return than the โrisk-freeโ investment.
โIt doesnโt make sense for you to provide liquidity on a SOL/USDC AMM when that might earn you 5% but staking earns you 7%.โ
Ethereum also dominates in terms of DeFi total value locked at $50.4 million compared to Solanaโs $8.85 billion.
Industry pundits also pointed out that there are still far more validators securing the Ethereum network at 1.06 million compared to Solanaโs 1,243.
Solana staking isnโt really staking, Ethereum researcher argues
One Ethereum researcher said Solana staking isnโt really securing the Solana network because there isnโt a mechanism to penalize bad actors for malicious behavior.
โIt’s very ironic to call it โstakingโ when there is no slashing. What’s at stake?โ Dankrad Feist said in an April 20 X post.ย
โSolana has close to zero economic security at the moment.โ
Solana Labs said slashing is already possible, but itโs not automatic, and the attackerโs assets can only be slashed by restarting the entire network.
Related: Ethereum price in โcursedโ downtrend which could continue well into 2025 โ Analyst
Solana is looking to roll out a more comprehensive slashing solution later this year, according to Multicoin Capital Managing Partner Kyle Samani.
Solana Labs CEO Anatoly Yakovenko said heโs pushing for a โcorrelated slashingโ mechanism, where the penalty would be equal to the square of the difference between a validatorโs faulty stake in an epoch and the median network staked validator.
Meanwhile, Ethereum developers and researchers have been exploring ways to decentralize Ethereum staking.ย
Many Ethereum stakers have resorted to liquid staking protocols over the last few years due to the high 32 ETH ($50,750) minimum needed to run an independent validator.ย
However, this shift has led to the Lido protocol capturing an 88% share in Ethereumโs liquid staking market, adding another layer to Ethereumโs staking centralization concerns.
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