Hold onto your hats, crypto fans—Solana has momentarily surpassed Ethereum in staking market cap. Yes, you read that right. The once-quiet Solana network briefly overtook Ethereum’s staked value, and, as expected, the crypto world exploded into a frenzy of hot takes and conflicting opinions. Is this a bullish sign for Solana, or is it just another fleeting moment of glory in the ever-chaotic world of crypto?
As of April 20, Solana’s total staked value reached a cool $53.9 billion. Not bad for a blockchain that’s still trying to shake off its reputation for instability. This whopping amount comes from 505,938 unique wallet holders, each raking in a sweet 8.31% annualized return. Not too shabby, right?
But don’t get too excited just yet. Ethereum’s market cap for staked ETH isn’t exactly slouching either, sitting at $53.93 billion. That’s secured by a mere 34.7 million staked tokens. Who’s counting, right? Oh wait, we are. Someone’s got to.
It seems that Solana’s strong price performance compared to Ethereum over the past two years played a role in this “flippening.” The SOL/ETH price ratio skyrocketed almost tenfold, from 0.0088 to 0.0866 since June 2023. So, Solana’s been working out. Meanwhile, Ethereum’s been busy doing… whatever it does.
High SOL Staking Return: A Double-Edged Sword?
But here’s the kicker. The 8.31% return for SOL stakers is so high that it might actually be hurting Solana’s DeFi ecosystem. Apparently, users are too busy stacking SOL to bother with DeFi activities like providing liquidity to automated market makers or participating in lending protocols. Who needs that when you’re earning “free money” for just locking up your tokens, right?
“Solana having 65% of its market cap staked means there’s no other use for its token. It’s actually bearish,” said “JC,” a developer at Builda Protocol and casual X user. Sounds like a fun guy to be around at parties.
Looking at the numbers, DefiLlama reveals that Ethereum has $21.5 billion worth of liquid staked ETH, compared to Solana’s measly $7.22 billion in liquid staked SOL. So, if you’re wondering where all the DeFi action is, you’re not likely to find it in Solana’s corner.
Even Tushar Jain from Multicoin Capital weighed in, explaining that Solana’s high staking return is making it “irrational” to invest in anything else. If you can earn 7% just for locking up your tokens, why bother with a 5% return from providing liquidity? That’s math I can get behind.
“It doesn’t make sense for you to provide liquidity on a SOL/USDC AMM when that might earn you 5%, but staking earns you 7%.”
On the other hand, Ethereum still leads the DeFi race with a $50.4 billion TVL, leaving Solana’s humble $8.85 billion in the dust. But hey, at least Solana’s trying!
And then there’s the validator count. Ethereum is practically swimming in validators—1.06 million of them—while Solana’s sitting at a modest 1,243. A bit of a difference, don’t you think?
Is Solana Staking Even Staking?
Now, here’s where things get spicy. Some Ethereum researchers are calling Solana’s staking system, well, a bit of a joke. Why? Because there’s no penalty system for bad actors. As Ethereum researcher Dankrad Feist put it, “It’s very ironic to call it ‘staking’ when there is no slashing. What’s at stake?”
“Solana has close to zero economic security at the moment.”
Solana Labs is aware of this concern and has promised to roll out a more comprehensive slashing solution later this year. Apparently, if you’re bad, the entire network has to restart before they can penalize you. Seems efficient.
But don’t worry, Solana’s CEO Anatoly Yakovenko is on the case, pushing for a “correlated slashing” mechanism. The penalty would be equal to the square of the difference between a validator’s faulty stake and the median network staked validator. Yeah, that sounds totally straightforward and easy to implement.
Meanwhile, Ethereum’s been busy decentralizing its staking process. Thanks to high entry barriers like the 32 ETH minimum needed to run an independent validator, many stakers have flocked to liquid staking protocols. But this has led to concerns about centralization, as the Lido protocol now controls 88% of Ethereum’s liquid staking market. So, yeah, decentralization… kind of a work in progress.
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2025-04-21 07:08