The Solana community briefly surpassed Ethereum in whole staked worth of their respective native tokens, SOL and ETH, sparking debate over whether or not it’s truly bullish or bearish for Solana.
More than $53.9 billion price of SOL is now staked on the Solana community from 505,938 distinctive pockets holders, who’re making an 8.31% annualized return, blockchain information reveals.
The determine briefly overtook the staked ETH market cap on April 20, which now has $53.93 billion price of worth secured from 34.7 million staked tokens, Beaconcha.in data reveals.
A contributing issue behind the flippening has been SOL’s strong price performance relative to ETH during the last two years, which has seen the SOL/ETH value ratio rise almost tenfold from 0.0088 to 0.0866 since June 12, 2023, CoinGecko data reveals.
High SOL staking return is stifling Solana DeFi, pundits say
However, the “risk-free” 8.31% return for SOL stakers on the community degree — considerably increased than ETH’s 2.98% — could also be attracting Solana customers away from DeFi actions, similar to offering liquidity to automated market makers and lending protocols in change for token rewards.
“Solana having 65% of its marketcap staked means there’s no other use of it’s token, it’s actually bearish,” Builda Protocol developer and X person “JC” said.
DefiLlama data reveals that there are $21.5 billion price of liquid staked ETH tokens on Ethereum in comparison with simply $7.22 billion of liquid staked SOL on Solana.
Multicoin Capital managing associate Tushar Jain beforehand said that Solana DeFi has been stifled as a result of it’s not rational to make an funding in one thing that produces a decrease return than the “risk-free” funding.
“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%.”
Ethereum additionally dominates by way of DeFi whole worth locked at $50.4 million in comparison with Solana’s $8.85 billion.
Industry pundits additionally pointed out that there are nonetheless much more validators securing the Ethereum community at 1.06 million in comparison with Solana’s 1,243.
Solana staking isn’t actually staking, Ethereum researcher argues
One Ethereum researcher mentioned Solana staking isn’t actually securing the Solana community as a result of there isn’t a mechanism to penalize bad actors for malicious habits.
“It’s very ironic to call it ‘staking’ when there is no slashing. What’s at stake?” Dankrad Feist said in an April 20 X publish.
“Solana has close to zero economic security at the moment.”
Solana Labs said slashing is already doable, but it surely’s not computerized, and the attacker’s belongings can solely be slashed by restarting the whole community.
Related: Ethereum price in ‘cursed’ downtrend which could continue well into 2025 — Analyst
Solana is trying to roll out a extra complete slashing answer later this 12 months, according to Multicoin Capital Managing Partner Kyle Samani.
Solana Labs CEO Anatoly Yakovenko said he’s pushing for a “correlated slashing” mechanism, the place the penalty can be equal to the sq. of the distinction between a validator’s defective stake in an epoch and the median community staked validator.
Meanwhile, Ethereum builders and researchers have been exploring methods to decentralize Ethereum staking.
Many Ethereum stakers have resorted to liquid staking protocols over the previous couple of years as a result of excessive 32 ETH ($50,750) minimal wanted to run an unbiased validator.
However, this shift has led to the Lido protocol capturing an 88% share in Ethereum’s liquid staking market, including one other layer to Ethereum’s staking centralization considerations.
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