Marinade Finance: A Deep Dive into Solana’s Premier Liquid Staking Platform

Positioned as the first non-custodial liquid staking protocol on Solana, Marinade Finance’s mission is to create a user-friendly liquid staking system that bolsters Solana’s decentralization efforts.

14 min readAug 19, 2023

As the Solana Liquid Staking trend heats up this summer, it’s clear that DeFi and liquid staking on Solana are gaining momentum. The Total Value Locked in Solana DeFi is currently $307 million. Among the standout projects in this space is Marinade Finance, which offers a fresh perspective on liquid staking and governance. With a focus on challenging conventions, Marinade Finance embodies a unique ethos centered on decentralization, fair funding, and community-driven progress. In this article, we’ll cover:

An Introduction to Marinade Finance,
Exploring Marinade’s ethos and funding approach,
Understanding its governance structure and control,
Unveiling its long-term mission,
Diving into unique innovative features like liquid staking, Marinade NativeV2, directed stake, and DAO governance on Realms,
Highlighting the risks of single validator staking,
Showcasing its exceptional stake delegation strategy,
Comparing Marinade Finance with Competitors and
Emphasizing its commitment to open-source development and transparency.

Introduction to Marinade Finance

Staking is the lifeblood of Proof-of-Stake blockchains like Solana. Democratizing access to staking is vital to ensuring the proper security, consensus, and decentralization of blockchains like Solana. Before Marinade Finance was developed, those wishing to stake the Solana token $SOL natively with multiple network validators required multiple transactions and constant performance monitoring. Liquid staking circumvents native staking by enabling staking through pools to multiple validators; however, it carries smart contract risk through an on-chain program. This has made staking unattractive to many institutional investors, who could not tolerate either the smart contract risk of liquid staking or the high concentration risk of relying on the performance of one validator. Native staking comes with its own issues, which include:

Commission Pitfalls: Watch out for commission-related scams.
Offline Concerns: Validators might go offline temporarily.
Server Suspensions: Instances where servers are suspended and stakers lose out on rewards.
Forked Validators: Validators follow different paths during network forks.
Smart Contract Exposure: Risk of exposure to liquid staking via smart contracts.
Centralized Platforms: Staking through centralized platforms can pose issues with a central point of failure or central cyberattacks.
Unflexible Staking Phases Simplified: Warm-up, Validate, Cool-down

Warm-up: The user deposits Solana tokens ($SOL), which are locked for days to weeks before PoH validation starts; no rewards yet.
Validation: Staked $SOL locked for months to a year, earning rewards; no early withdrawal.
Cool-down: After ‘withdrawal,’ $SOL remains locked, rewards build-up, and initial deposit returns.

Marinade’s Ethos and Funding

Marinade Finance’s journey began with a commitment to decentralization and inclusivity. In March 2021, Marinade Finance participated in the Solana x Serum DeFi hackathon to build the prototype of a liquid staking solution for Solana ($SOL) tokens. The development of this prototype prompted Marinade Finance to get a grant of $80,000, which is its only funding source to date, making it a self-funded community-driven, self-sufficient, decentralized Web3 project.

Unlike many projects that rely on venture capital or private funding, Marinade embraced a fair launch. Marinade Finance is self-funded with the help of grants from the Solana Foundation and Serum.

This approach enabled a wider community to contribute to its growth from the onset, aligning with the principles of decentralization by ensuring that power and influence were not concentrated within a limited group. This fair launch ethos reflects the project’s commitment to transparency and grassroots participation. Marinade Finance launched the first liquid staking protocol on Solana on the mainnet on August 2, 2021, hitting a $100 million+ TVL in about a month and $300+ million in two months, currently at $162 million TVL.

Liquid Staking

Liquid staking is one of Marinade Finance’s flagship innovations. Traditional staking involves locking assets in a protocol for a set period, rendering them illiquid and inaccessible. However, liquid staking transforms this paradigm by creating a bridge between staked assets and the DeFi ecosystem.

Simply put, if you have Solana tokens, you can contribute to the security of the Solana network by staking them without actively losing custody of them.

Marinade Native

Marinade Native allows users to stake SOL directly with over 130 network validators in one click and in a non-custodial manner with no smart contract risk.

Marinade Native is the embodiment of liquid staking within the Marinade Finance ecosystem. In Marinade’s context, liquid staking is facilitated through the creation of “Marinade Native” mSOL tokens. Let’s say the user stakes 100 Solana (SOL) tokens via Marinade Finance and gets 100 mSOL tokens in return. These mSOL tokens are liquid and can serve other purposes in DeFi or remain in your custody.

Marinade Finance streamlines Solana $SOL staking by pooling users’ deposits, optimizing validator selection for rewards and decentralization, and then expertly delegating tokens. Currently, over 97% of all staked SOL (370 million SOL) is staked natively with individual validators, translating to an $8.8 billion opportunity for Marinade Native. Here’s how Marinade Native works:

Immediate Earnings: Unlike the usual warmup period, Marinade starts rewarding you instantly with mSOL tokens upon staking. These tokens grow in value from rewards, offering an instant head start.
More Value, Less Wait: Unstaking mSOL later grants you more SOL than initially deposited — no waiting around.
Swap with Ease: Swap between SOL and mSOL anytime for instant liquidity and control over your tokens. No more lock-up times.
DeFi Freedom: Trade mSOL tokens in Marinade’s AMM pool or explore Solana’s DeFi world with the gateway they provide.

Experience the power of Marinade Finance, where staking meets flexibility, rewards, and DeFi possibilities. Marinade Finance currently leads Solana liquid staking with a 62% share, followed by Lido Finance with 27% and Jito with 7%.

Source: https://twitter.com/markus_bit/status/1691049393993003008?s=20

You can view the current statistics here.

What’s so special about Marinade Native?

A fully non-custodial solution where you conserve ownership of your SOL tokens at all times
No smart contract risk; this solution does not use any smart contracts
Automatically managed and rebalanced staking positions for no fee
Open-sourced, permissionless delegation formula with more than 150 validators
Stake and delayed unstake with no charge
Native Solana community and contributor-driven governance

In response to Ethereum’s liquid staking Shangai upgrade and the DeFi liquidity crisis that ensued after the FTX crash, Marinade Finance has prioritized the development of new features to enhance DeFi capabilities and optimize the liquid staking of Solana tokens.

You can directly explore Marinade Finance from wallet applications like Ultimate Wallet.

Marinade Native v2

Version 2 of Marinade Native would have a few key features, including:

Stake Pool Delegation strategy updates
Staking 360: All-encompassing stake product
DAO Governance enhancements
MNDE token design

Unveiling Marinade v2’s Stake Pool Delegation Strategy

In Marinade V2, delegation is now divided as follows:

Performance-based (60%): Top 100 validators picked based on the Marinade score combining yield and decentralization powered by Marinade V2.
veMNDE (20%): MNDE holders can vote to direct stake to trusted validators, ensuring high mSOL performance.
Directed Stake (20%): mSOL holders and protocols can vote for specific validators meeting eligibility.

Benefits of “Directed Stake”: The concept of directed stake introduces a new dimension to stake delegation. Instead of delegating to a validator solely for rewards, users can direct their staked assets towards specific projects or initiatives they believe in. This targeted approach allows users to contribute directly to the growth of projects that align with their interests and values, as well as the goal of Marinade Finance, which is complete decentralization. Marinade Native v2 would transparently track validator performance using its system and Validator Dashboard. This identifies robust validators and swiftly catches malicious ones.

Unique Stake Delegation Strategy: Marinade Finance’s stake delegation strategy stands out due to its diversification approach. Instead of relying on a single validator, Marinade distributes staked assets across multiple validators. This strategy mitigates risks associated with single points of failure, enhances security, and promotes network stability.

Introducing Staking 360: Your Comprehensive Solution

The Validator Dashboard, delegation strategy, directed stake, and Decentralizer merge into Staking 360. With Solana Snapshots and a website revamp, this ultimate tool would let you stake SOL how you want: native or liquid, to one or multiple validators, using the best transparent tools available.

Algorithmic Native Staking: Easily link to 100+ top validators; no contract risks. Stakers can check validator performance on the new v2 dashboard, allowing them to stay in control and opt-out anytime.
Unstake Pool Upgrade: Stakers would be able to make instant seamless swaps powered by Jupiter and manage their accounts with Marinade v2.
More Liquid Staking: Marinade v2 would allow users to enjoy freedom with unlocked mSOL and discover extensive mSOL integrations across DeFi, serving as a hub for the top mSOL use cases, from collateral to liquidity. Awesome right? Yes.

DAO Governance Enhancements

Marinade V2 will operate under the following governance system:

The DAO will control the treasury, main contract, and council membership.
MNDE holders will lock their MNDE in the governance system to gain veMNDE voting power.
The Marinade Council would have a limited scope of control by the DAO, allowing it to operate day-to-day using the budget.

MNDE Token: Simplified Design for Maximum Benefits

Marinade v2 brings exciting changes to the MNDE token, focusing on allocation and incentives with a buyback policy in place as the protocol's revenue grows. In short, MNDE’s new design means clarity, growth, and community power. Get ready to be part of shaping Marinade Finance and Solana’s future.

Control and Long-Term Mission

The protocol’s governance structure is a manifestation of its decentralized ethos. Marinade Finance is controlled by its community of token holders, ensuring that decisions are made collectively and that no single entity dominates the protocol’s trajectory. This democratized approach to controlling the protocol fosters innovation and prevents centralized decision-making.

Marinade Finance’s long-term mission extends beyond being just a DeFi platform. It seeks to redefine how staking is approached by introducing novel concepts that enhance the liquidity, utility, and flexibility of staked assets. This mission underscores the project’s ambition to create an ecosystem that empowers users while encouraging active community participation.

In a bid to promote decentralization, Marinade Finance took part in the Solana x Serum Riptide Hackathon as a judge and sponsor, giving out $30,000 in rewards for teams developing the most effective ways Marinade can grow its TVL and thus further secure and decentralize Solana through integrations across Solana DeFi and DAOs. This prize was won by Trdelnik.

Commitment to Open-Source and Transparent Building

Marinade Finance’s commitment to open-source development and transparent governance is evident in its practices. All codes and decisions are open for scrutiny by the community, fostering trust and accountability. This approach aligns seamlessly with the blockchain ethos of transparency and collaboration.

The Marinade Finance code has been audited by both community members and blockchain audit companies: Kudelski Security, Ackee Blockchain, and Neodyme. Their audit report and code review can be seen here.

Code modification within the Marinade Finance smart contract demands approval from a multisig wallet — a safeguard against unilateral changes and single control over the protocol.

This multisig wallet, consisting of key Solana ecosystem players, ensures unanimity in code alterations and daily protocol operations. Most of these powers will transition to the Marinade DAO with the upcoming v2. The current multisig system can be viewed here.

Marinade Finance DAO Governance on Realms

DAO governance on Realms introduces a modular approach to decision-making. It allows different aspects of the protocol to be managed by individual DAOs, creating a more scalable and efficient governance structure. Each Realm specializes in specific functionalities, fostering specialization and innovation within the broader Marinade ecosystem. You can participate in DAO governance here or view how Marinade Finance DAO governance works on Realms here.

Competition Analysis

Marinade Finance differentiates itself from its competitors through its focus on liquid staking, directed stake, and modular governance. While there are other projects addressing staking and governance challenges, Marinade’s emphasis on community engagement, transparency, and innovative features positions it as a leading player in the space. Here are a few competitive advantages of Marinade Finance:

Liquid Flexibility: Marinade pioneers liquid staking on Solana, letting you use staked assets while earning rewards.
Unique Native Token: Marinade Native unlocks DeFi opportunities for staked tokens, enhancing utility.
Directed Stake: Engage directly with projects you support, aligning interests.
Decentralized Governance: Community-driven decisions amplify user influence.
Transparent Building: Open-source approach fosters trust and accountability.
Innovative DAO Realms: Efficient modular governance structure for specialized decisions.

Some direct competitors of Marinade Finance are Raydium, which offers liquidity pools and yield farming on Solana; Orca, a decentralized exchange and liquidity provider on Solana; Larix, which enables trustless staking and token swaps on Solana; Synthetify, which creates synthetic assets and trading on Solana; and Solrise Finance, which focuses on yield optimization and farming on Solana.

While a few of these protocols still actively take part in liquid staking on Solana, Marinade Finance serves as the all-in-one platform for liquid staking and DeFi exposure on Solana.

How to use Marinade Native

Access Marinade Finance: Begin by visiting the Marinade Finance website.
Launch the App: Locate the “Launch App” option at the top right corner of the page and click on it.
Connect Your Wallet: Initiate the process by clicking on the Connect Wallet icon.
Accept Terms and Conditions: Review and accept the provided terms and conditions.
Choose Your Wallet: Select your preferred wallet that holds your Solana tokens.
Authorize Interaction: Allow the application to interact with your wallet by accepting the pop-up connection.
Start Earning SOL: Click on “Start earning SOL now!” to initiate the staking process.
Input Staking Amount: On the stake board, input the number of Solana tokens you intend to stake.
Select Delegation: Choose your staking delegation approach: either “Automated” or “Manual.”
Choose Staking Mode: Opt for your desired staking mode — “Liquid” or “Native.”
Stake Your Tokens: Click the “Stake” button to kick off the staking process.
Transaction Approval: Within your wallet, approve the transaction associated with staking. Your mSOL would be in your wallet immediately if you opted for the Liquid stake mode.
Estimate Staking Rewards: Explore the app’s new Marinade staking rewards estimator to gauge the anticipated accrual of rewards for your SOL tokens over time.

How to use mSOL in Solana DeFi with Single-sided Staking or Farming

If you’re aiming to maximize your earnings beyond your stake account, the next logical step is to consider single-sided staking or farming options that accept mSOL. This is where the remarkable aspect of Marinade Native comes into play, opening doors to a world of possibilities in the DeFi realm, all accessible through your liquid mSOL tokens.

Here’s how you can embark on this journey:

Step into Marinade Finance’s Realm: Start by visiting Marinade Finance’s platform.
Discover the DeFi Tab: Once there, navigate to the DeFi tab. This is where your exploration begins.
Stake or Farm with mSOL: Within the DeFi section, you’ll find the option to stake or farm using mSOL to earn MNDE tokens.
Explore Diverse Protocols: Marinade Native isn’t confined to one protocol. It collaborates with prominent platforms like Raydium, Orca, Larix, and Synthetify, each offering unique opportunities to farm mSOL for their native Solana ecosystem tokens.
Customize Your Journey: You have the power to sort the columns in the DeFi section — Pair, TVL, APY, and Provider. This sorting feature helps you find the pools that align with your positions and goals.
Choose Your Adventure: Once you’ve identified a pool or DeFi opportunity that resonates with your strategy, go ahead and select it.
Begin Your Exploration: Dive into your chosen pool or opportunity and start your exploration. The Marinade Native Ecosystem is brimming with possibilities waiting to be uncovered.

By leveraging the Marinade Native feature, you’re not just staking or farming; you’re entering a realm of potential DeFi gains powered by your liquid mSOL tokens. So take the plunge, embark on this journey, and discover the diverse opportunities that await you.

You can Earn Yield in DeFi by Liquidity Pooling with mSOL pairs, following the same guide as above, but instead of selecting single pools, go for the liquidity pairs.

How to liquid unstake your SOL stake

Step onto the Marinade Staking Page: Begin by visiting the Marinade Staking page.
Connect Your Wallet: Once there, connect your wallet to the platform. This enables secure access to your assets.
Unveil the “Unstake” Option: Once in the app, you’ll see your stake positions.
Toggle from mSOL to SOL: If you possess an eligible SOL stake account ready for unstaking, a dropdown menu will appear. This dropdown allows you to effortlessly switch from mSOL to your SOL stake accounts.
Choose Your Stake Account: Select the specific stake account you intend to unstake. This is a crucial decision in the process.
Approve the Transaction: With your choice made, proceed to approve the transaction. It’s worth noting that this step incurs SOL gas fees, along with the same 0.3% transaction fee applicable to liquid unstaking mSOL.
Witness the Magic: In a matter of seconds, your SOL stake will be fully unstaked. Your assets will be safely returned to your wallet, instantly available for any purpose you desire.

For Ledger wallet users, you can learn how to interact with the Marinade Finance app here.

Unstaking with Marinade is designed to be swift and hassle-free. In a few clicks, your assets are back in your control, ready for your next move. So take advantage of this user-friendly process and make the most of your unstaked assets!

Risks of Single Validator Staking

Staking on a single validator carries inherent risks. Validators might experience downtime, security breaches, or mismanagement of funds. In such scenarios, stakers can face losses. Marinade Finance recognizes these risks and has developed a strategic approach to minimize potential downsides.

Risks of Impermanent Loss

Providing liquidity to an AMM pool across a pair of assets can also be subject to impermanent loss. Large price swings can cause liquidity providers to lose money, and you should take care to understand the balance of LP rewards vs. impermanent loss potential over time.

Do not implement any of these strategies until you have a firm understanding of them and the risks associated with them. DYOR!

Conclusion

In conclusion, Marinade Finance stands as an exemplar of innovation and community-driven development in the cryptocurrency domain. Its ethos of decentralization, fair funding, and active engagement sets a precedent for transparent and forward-thinking protocols. Through its groundbreaking features and commitment to openness, Marinade Finance is poised to reshape staking and governance, empowering users while fostering a robust and inclusive ecosystem.