Disclaimer: The protocols mentioned in this article are very new and therefore carry a relatively high risk. This is not financial advice.
The issue with staking
If you’ve got the conviction to hold any tokens on a PoS network, you’ll probably want to stake a portion of them. For the most part, it’s a win-win: you get to help make the network more secure, but also earn some tidy staking rewards in return.
The main issue here is that staked tokens can’t be spent, sent, or put to work in any of the fantastic protocols out there until they’re unstaked. For most networks this can take a couple of days, which adds to the overall opportunity cost. In the case of ETH, there’s an even larger opportunity cost as this can’t be unstaked until ETH2 goes live.
Enter liquid staking.
What is liquid staking?
It allows users to reap the rewards of staking a token, while also being able to trade or invest a derivative of the underlying asset.
When you stake your tokens in a liquid staking protocol, you get an equivalent amount of proxy tokens that are pegged to the original asset’s price. From here, you can put them to work in various DeFi strategies and earn extra yield on top of your staking rewards.
Lido Finance have done this successfully on Ethereum 2.0 and Terra, with Solana staking on the roadmap too. For context, there’s currently a whopping $6.25B in TVL on Lido – which looks to be going “up only”.
Liquid staking on Solana with Marinade Finance
Getting started with Marinade is pretty straightforward and intuitive process.
It’s a matter of simply connecting your wallet, entering the amount of SOL you’d like to stake, hit the magical green button, then approve the transaction. An equivalent amount of mSOL should appear in your wallet, and you’ll start earning the ~6.2% APY straight away!
One of the main criticisms of Solana is that it’s not as decentralized as other chains. By staking with Marinade vs through your wallet (and just choosing the validator with the highest APY), you’re helping to increase decentralization. As Marinade state on their site:
“We choose as many validators as possible to make the system more robust, secure and decentralised.”
Make your SOL work harder with Marinade and Saber
To make the most of your staked SOL, you’ve got to put your mSOL to work.
This guide will allow you to generate 6-7% APY from staking, plus 8-12% from farming on Saber, (plus an optional 150%+ APY using Sunny if you’re feeling extra degenerate)
If you’re new to Solana, you can follow the steps below to get started.
Feel free to skip ahead otherwise!
1. Set up a Solana wallet
If your SOL is being stored on an exchange and you don’t plan on panic-dumping it after an inevitable dip, it’s best to store it in an actual wallet. The “not your keys, not your coins” mantra also applies here.
Based on my experience, Phantom is the best wallet on Solana.
The UX blows the others out of the water, and everything just seems to work seamlessly. More importantly though, your NFTs will be showcased nicely when you inevitably ape into a random NFT project on Solana.
Withdraw your SOL from the exchange to your Phantom wallet address and you’re ready to go.
2. Stake your SOL on Marinade
Firstly, work out how much SOL you would like to stake.
mSOL can’t be used for transaction fees, so allocating 100% of your funds isn’t a wise choice unless you’ve got no interest in participating in the ecosystem. If you’re planning on buying NFTs or trading on Serum, you’ll probably want a decent amount of liquid SOL sitting in your wallet.
Head to Marinade Finance, enter the amount you decided on, approve the transaction, and check your wallet for mSOL to magically appear.
3. Deposit into Saber
Saber is basically the Curve equivalent for Solana, allowing for “low slippage trading, even at large volumes, while maintaining high capital efficiency for liquidity providers”.
In other words, it’s a new stablecoin exchange.
In less than a month after launching, Saber has already racked up a massive $900M+ in TVL; the 2nd highest on Solana at the time of writing.
To get started, head to https://app.saber.so and connect your wallet.
To deposit, hit to the Pools tab and select the mSOL-SOL pool.
From there, you want to deposit an equal amount of each token.
Staking 30-40% of your SOL is optimal for this method, as it allows you to place the other 30-40% in the Saber pool and leave 20-40% as liquid SOL in your wallet. Feel free to tinker with the ratios, but ensure that you’re keeping the pools balanced.
Once you hit deposit and approve the transaction, you’ll receive an equivalent amount of LP tokens.
4a. Stake your Saber LP tokens on Saber
Head to the Farms tab on Saber and select Stake on the mSOL-SOL farm.
Stake the maximum amount of LP tokens you have, as these are pretty useless when unstaked.
You should then see an expected SBR rewards per day figure (equivalent to ~8% APY at the time of writing)
Whenever you want to redeem your SBR rewards, simply click Claim and approve the transaction.
4B. Stake your LP tokens using Sunny Aggregator
Since writing this, the Sunny Aggregator protocol launched on August 27th and is offering some insane APYs for staking your Saber LP tokens.
Sunny is a new cross-chain de-fi yield aggregator, attracting ~$200M in TVL after only a couple of days of being live. While it does have the backing from the Saber team, the project has not been fully audited yet and is therefore a very risky option. If you’re a true degen, it could be a fantastic opportunity.
The mSOL-SOL returns were sitting at ~3000%+ APY in the opening days but have since dropped. While a 160% APY without the risk of impermanent loss sounds incredible, I would advise that you proceed with caution.
If you’re a SOL holder, I hope this provides a clear enough overview on how to get more yield out of your bag. We’ll definitely be seeing more and more projects pop up in this space, particularly after the recent price surge of Solana and the upcoming Ignition hackathon – so be sure to keep an eye out.
But again, don’t go putting more money into any protocols that you can afford to lose.
Massive Defi yields are nice, but not getting rug pulled is nicer.