A deep dive into Marinade Finance: A Solana-based liquid staking protocol

9 min readAug 22, 2023

Marinade is a community-attributed success story on Solana, the fast, scalable, and low-cost blockchain platform. Funded with just a $80,000 grant from the Solana Foundation, Marinade was the first liquid staking protocol to go live on Solana in August 2021. Since then, the protocol has achieved the number 1 spot by total value locked (TVL) on Solana and grown into a fully on-chain DAO through the MNDE governance token.

In this article, we will explore the unique value proposition of Marinade through its innovative and permissionless delegation strategy that enables both native and liquid staking of SOL, combined with the community DAO power of the MNDE token.

The story behind Marinade

The Marinade story started at a Solana hackathon, where the team created a prototype of a liquid staking solution. The team chose liquid staking because it aligned perfectly with three core objectives;

To make Solana the most secure and make it more decentralized
To bring the best user experience to Solana, to make it really easy to use
To make Solana composable or capital efficient to build this utility layer not only to

Marinade saw massive growth after the hackathon. It went from zero to almost two billion total value locked in three months, making it into the top projects on Solana. And Marinade’s success is 100% attributed to the Solana community without any VC funds or private token sale.

With Marinade, users can securely stake Solana and earn rewards with mSOL, a liquid staking token. Through staking, they can participate in DeFi, and contribute to Solana’s decentralization. And it doesn’t really matter if you’re a fish, a shark, or a whale, Marinade creates an inclusive environment for anyone to participate.

Major Facts to note about Marinade

Stake SOL: Choose an amount of SOL to stake or deposit from an existing stake account using Marinade’s Liquid Staking Protocol. You can stake mSOL in various platforms like Solend, Francium, or Orca for additional yield. Consider the risks and rewards of different options before making a decision.
Receive mSOL Rewards: Earn rewards in the form of liquid mSOL, which increases in value with staking rewards. Some users suggest joining liquidity pools or borrowing against mSOL for further investment opportunities.
Participate in DeFi: Utilize your liquid mSOL in decentralized finance activities or swap it back to SOL anytime.
Marinade uses an algorithmic bot to stake with over 400 validators, enhancing returns and network safety.
Audits, multi-sig wallet, and transparent procedures ensure security and transparency.
Holding Marinade $MNDE tokens gives voting power and involvement in shaping the protocol’s future.

When deciding how to proceed with your mSOL, it’s important to consider factors such as risk tolerance, ease of use, and potential returns. Some platforms may offer higher yields but come with higher risks, while others may be more user-friendly for non-tech-savvy investors

What is liquid staking?

Liquid staking is a way of staking your crypto assets without locking them up in a contract or a validator node. Instead, you deposit your assets into a smart contract that pools them together and delegates them to a set of validators on your behalf. In return, you receive a tokenized representation of your stake, such as mSOL for SOL, that can be used in other decentralized applications (dApps) or traded on secondary markets. Liquid staking tokens also accrue staking rewards over time, increasing their value relative to the underlying asset.

Liquid staking offers several benefits over traditional staking, such as:

Liquidity: You can access your staked assets at any time without waiting for an unlocking period or paying a penalty fee.
Flexibility: You can use your liquid staking tokens in various DeFi protocols, such as lending, borrowing, swapping, or yield farming.
Security: You don’t have to worry about choosing or managing validators, as the liquid staking protocol handles that for you.
Decentralization: You can contribute to the security and performance of the network by delegating your stake to a diverse set of validators.

What is Marinade Native?

Marinade Native is a feature that allows you to stake your SOL natively on Solana without using any smart contract. This means you can enjoy the benefits of native staking, such as lower fees and higher security, while also leveraging Marinade’s automated delegation strategy and governance system. You can also convert your native stake to mSOL at any time if you want to access liquidity or participate in DeFi.

What are the benefits of “Directed Stake”?

Directed Stake is a feature that allows you to select which validators you want to delegate your stake to within Marinade’s pool. This gives you more control and customization over your staking preferences, such as risk-reward ratio, performance metrics, or social impact. You can also change your delegation choices at any time without affecting your rewards or liquidity.

How does DAO governance work on Realms?

Realms is a platform that allows you to create and manage DAOs on Solana using SPL Governance, an open-source and asset-agnostic standard for building DAOs. Realms support various types of DAOs, such as multisig wallets, NFT community DAOs, or community token DAOs. You can use Realms to create proposals, vote on them using different types of tokens or NFTs, and execute them on-chain.

Marinade uses Realms to power its DAO governance through the MNDE token. MNDE holders can propose and vote on various aspects of the protocol, such as delegation strategy, fee structure, integrations, or treasury management. MNDE holders can also stake their tokens to increase their voting power and earn rewards.

What are some ways that staking to a single validator may be risky?

Staking to a single validator may expose you to several risks, such as:

Downtime: If the validator goes offline or misses blocks due to technical issues or malicious attacks, you may lose rewards or even get slashed (penalized) for supporting an unreliable node.
Centralization: If too many people stake to the same validator or a small group of validators, they may gain too much influence or power over the network, compromising its security and decentralization.
Censorship: If the validator acts against the interests of the network or its users, they may censor or reject certain transactions or blocks, violating the network’s neutrality and openness.

What sets Marinade’s stake delegation strategy apart?

Marinade’s stake delegation strategy is designed to optimize the performance and decentralization of Solana by delegating to a large and diverse set of validators. Marinade uses a permissionless formula that selects validators based on various criteria, such as uptime, commission rate, stake concentration, hardware specifications, geographic location, social impact, and community feedback. Marinade also excludes the top 32 validators (the security group) from its pool to avoid centralizing too much stake in them. Marinade updates its delegation strategy every epoch (about two days) to reflect the changes in the validator landscape.

Marinade’s delegation strategy has proven to be effective and efficient in delivering high returns and low risks for its users. According to its performance dashboard, Marinade has achieved an average annual percentage yield (APY) of 9.5% and an average uptime of 99.9% since its launch. Marinade has also supported over 450 validators and distributed over 1.5 million SOL in rewards to its users.

How does Marinade compare to its competitors?

Marinade is not the only liquid staking protocol on Solana. There are other projects that offer similar or complementary services, such as:

Lido: Lido is a cross-chain liquid staking protocol that supports multiple assets, such as ETH, SOL, and Terra. Lido also uses a DAO governance model and issues staking derivatives, such as stSOL for SOL. However, Lido differs from Marinade in its delegation strategy, as it relies on a curated list of validators chosen by its DAO members. Lido also charges a higher fee than Marinade (10% vs 2%) and has a lower TVL on Solana ($1.2 billion vs $2.4 billion as of writing).
Socean: Socean is a decentralized staking platform that allows users to create and join staking pools with different risk-reward profiles. Socean also issues staking derivatives, such as sSOL for SOL, and integrates with DeFi protocols, such as Saber and Sunny. However, Socean differs from Marinade in its pool structure, as it requires users to lock their tokens for a fixed term (30, 90, or 180 days) and pay a penalty fee for early withdrawal. Socean also has a lower TVL than Marinade ($300 million vs $2.4 billion as of writing).
Solrise: Solrise is a non-custodial asset management platform that allows users to create and invest in portfolios of various assets, including SOL and mSOL. Solrise also offers a liquid staking service that uses Marinade’s delegation strategy and mSOL token. However, Solrise differs from Marinade in its fee structure, as it charges an additional 0.5% fee on top of Marinade’s 2% fee for its liquid staking service.

What is Marinade’s ethos and mission?

Marinade’s mission is to provide the best liquid staking experience for SOL holders and enable them to participate in the vibrant DeFi ecosystem on Solana. Marinade is also committed to supporting the growth and diversity of the Solana validator community and contributing to the open-source and transparent development of the Solana ecosystem.

Benefits of Marinade:

Unlocked Liquidity: Use mSOL while earning staking rewards.
Network Decentralization: Distribute stake to multiple validators for rewards and Solana’s decentralization.
Instant Unstake: Withdraw SOL anytime without waiting.
Open Source & Audited: Audited smart contract ensures security.
Marinade Community: Contribute to the Solana ecosystem as a validator, developer, or enthusiast through the Marinade DAO.
Marinade.Finance: Non-custodial liquid staking protocol on Solana’s blockchain.

Marinade is committed to open-source and transparent building and governance, as it believes that this is the best way to foster trust and collaboration in the decentralized ecosystem. Some of the ways that Marinade demonstrates its commitment are:

Publishing its source code on GitHub, where anyone can inspect, audit, or contribute to it.
By following a clear and fair contribution workflow, where pull requests are reviewed by the core team and merged after passing automated tests and code quality checks3.
Furthermore, it has a public roadmap on Notion, where it shares its vision, goals, milestones, and progress with the community.

Marinade security measures also include audits, a unified bounty program, and partnerships to ensure the security of Marinade’s operations. Staking integrations with projects like Solflare and others enhance Solana’s security and further promote decentralization. Marinade assists DeFi and NFT projects in managing treasuries efficiently, contributing to sustainable growth. It is vital to note that active community engagement with recurring AMAs, collaborations, and gaming events strengthens the Solana ecosystem. Also, documentation improvements and the user-friendly “how to stake” guide make Marinade accessible to new Solana users.

The Marinade NFT

Marinade introduced on-chain NFT governance by minting NFTs by locking up tokens. Furthermore, Minting the NFTs enhances accessibility and engagement. The NFTs are linked to Solana’s blockchain and grant governance rights. The tokens are unlocked after 30 days, with the option to burn NFTs. During NFT burn, unlocked NFTs are permanently destroyed, adding rarity to the mix. Also, the Marinade NFTs offer value transfer because the NFTs contain both NFT and token value, therefore impacting marketplace prices positively.

Conclusion

Marinade is a liquid staking protocol that offers a unique value proposition for SOL holders who want to stake their tokens without locking them up or compromising their security or decentralization. Marinade also empowers its users to govern the protocol through the MNDE token and participate in various DeFi opportunities on Solana. Marinade is a community success story that showcases the potential and innovation of the Solana ecosystem.