Solana-based liquid staking has the potential to increase more than fivefold due to sustained growth in retail adoption.
Liquid staking creates more capital efficiency for investors by offering an equivalent of the initial staked token that can be deployed in other decentralized finance (DeFi) applications.
Bybit Research suggests that the enhanced capital efficiency in DeFi could lead to a more than fivefold growth in liquid staking on Solana.
Bybit Research told Cointelegraph:
“In our view, Solana has a huge potential for liquid staking due to its active staking community. Based on Ethereum’s LST market statistics, Solana’s LST market could potentially grow to $18 billion.”
Solana liquid staking TVL, all-time chart. Source: DeFiLlama.com
At publication time, Solana-based liquid staking is worth over $3.8 billion in cumulative total value locked (TVL), according to DefiLlama, which means a nearly five-fold increase if it manages to surpass $18 billion.
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No Lido-like centralization concerns for Solana liquid staking
Liquid staking is already the largest protocol category on Ethereum, with a combined TVL of over $39.5 billion, compared to the lending market’s cumulative $30.9 billion.
Largest protocol categories on Ethereum. Source: DeFiLlama.com
The growing market segment caused increasing centralization concerns, considering that Lido’s $22.9 billion TVL accounts for over 57% of Ethereum’s liquid staking market.
However, these types of centralization risks aren’t necessarily a concern for Solana-based liquid staking, according to Bybit Research:
“In our view, the outsized concentration from a single party from Ethereum won't repeat in Solana because there are many players currently as highlighted in the report. Lido's success was attributed to its first mover advantage.”
Staking ratios on Solana and Ethereum. Source: Bybit
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Will retail investors catalyze Solana-based liquid staking growth?
According to a report by Bybit shared with Cointelegraph, retail investors may hold the key to driving nearly fivefold growth in the Solana-based liquid staking market through liquid staked tokens (LSTs).
The report said:
“Mainstream exchange-backed LSTs will break down barriers and become the de-facto bridge between casual users and the DeFi opportunities in Solana. Bybit is first-in-market having recently launched bbSOL, the world’s first exchange to launch a LST on Solana.”
Retail will likely be attracted by the increased flexibility and liquidity within liquid staking, compared to regular staking, where the locked tokens can’t be redeployed in other DeFi applications, it added.
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