SolBlaze: How Solana Liquid Staking Works

8 min readFeb 23, 2024

Solana, with its lightning-fast transactions and DeFi ecosystem, has become a major player in the blockchain space.

At the heart of its security and functionality lies Solana’s Proof-of-Stake (PoS) consensus mechanism, where token holders called validators contribute computing power to verify transactions and earn rewards.

Ever thought of participating in staking while still having access to your SOL tokens for other DeFi opportunities? This is where liquid staking comes in.

· Fundamentals of Liquid Staking
∘ Traditional staking
∘ Liquid staking pools
∘ What are Liquid Staking Tokens (LSTs)?
∘ Potential risks of liquid staking
· Why Liquid Stake Your SOL?
∘ Earning Power
∘ Flexibility and composability
∘ Pool advantages
· The Power of Liquid Staking with SolBlaze
∘ Solana stake pool protocol
∘ Market positioning
· DeFi Potential with bSOL
· SolBlaze’s Rewards and Incentives
· Liquid Staking Economic Impact on Validators
· What Lies Ahead For Solana Liquid Staking
· Conclusion

Liquid staking is a new level of flexibility in the Solana ecosystem. Unlike traditional staking, which locks your tokens for an extended period, liquid staking allows you to earn staking rewards while maintaining accessibility to your SOL.

Through innovative solutions like smart contracts and liquid staking tokens (LSTs), your staked SOL transforms into a new token you can freely trade, lend, or borrow against in various DeFi protocols, maximizing your earning potential.

This ability to combine staking rewards with DeFi composability is revolutionizing the Solana landscape. With more and more users turning to liquid staking, it’s playing an increasingly crucial role in the growth and evolution of the Solana DeFi ecosystem.

Fundamentals of Liquid Staking

Before diving into the world of Solana liquid staking, let’s first understand the basics.

Traditional staking

A relatable example is locking your money in a bank account that earns interest based on its duration and amount. That’s how staking works on PoS blockchains. You “lock” your tokens (e.g. SOL) to help validate transactions and secure the network, earning rewards in return. However, your tokens are inaccessible during this period, limiting their flexibility.

Liquid staking pools

Think of a liquid staking pool as a special “crypto bank” designed for flexibility. Here’s how it works:

Deposit your SOL tokens into the pool.
A smart contract (a self-executing program on the blockchain) takes your SOL and delegates it to multiple validators chosen by the pool operator.
You earn staking rewards for participating, just like traditional staking.
Instead of locking your SOL, you receive an equivalent amount of liquid staking tokens (LSTs), like bSOL for SolBlaze.

What are Liquid Staking Tokens (LSTs)?

LSTs can be considered as receipts for your staked SOL. They track your share in the pool and represent the value of your underlying tokens. Unlike your locked SOL, LSTs are freely tradable, usable in DeFi protocols, and transferable.

Trade LSTs: Sell your LSTs on the market without affecting your staked SOL.
DeFi Integration: Borrow, lend, or use your LSTs in various DeFi protocols to maximize your yield.
Transfer LSTs: Share your staking rewards with friends or family by sending them LSTs.

Potential risks of liquid staking

While exciting, liquid staking isn’t without some of these risks.

Bugs or exploits in the smart contract could compromise your funds.
Pool operator risks, choose reputable pools with proven track records.
When the value of your LSTs differs from your underlying SOL, you may experience impermanent loss when swapping back.

Why Liquid Stake Your SOL?

What if you could earn rewards while locking away your SOL? Liquid staking unlocks a new level of flexibility and potential compared to traditional staking. Some of these benefits are;

Earning power

Liquid staking pools often offer competitive annual percentage yield, sometimes exceeding traditional staking returns due to additional incentives and composability advantages.
With LSTs, you can compound your earnings by using them in DeFi protocols, potentially creating exponential growth compared to simply holding locked SOL.
Many pools offer bonus rewards in their own tokens or partner projects, further increasing your earning potential.

Flexibility and composability

Unlike locked SOL, LSTs are freely tradable, allowing you to access your capital whenever needed.
You can use your LSTs as collateral for borrowing, lending, or participating in yield farming in DeFi protocols, maximizing your wealth from multiple sources.
Many pools have lower minimum staking requirements compared to directly staking with a validator, opening the door to smaller investors.

Pool advantages

Pools spread your stake across multiple validators, reducing risks associated with choosing a single, potentially underperforming validator.
Reputable pools prioritize security audits and robust infrastructure, enhancing the safety of your staked SOL.
User-friendly interfaces and automatic delegation make staking through pools significantly easier than managing your validator nodes.

The Power of Liquid Staking with SolBlaze

As a leading player in the Solana liquid staking landscape, SolBlaze aims to empower users with flexibility, security, and maximized returns.

It also strives to make liquid staking accessible, transparent, and secure for everyone while promoting the growth and decentralization of the Solana ecosystem.

Solana stake pool protocol

BlazeStake is the heart of SolBlaze, a non-custodial liquid staking platform. Here’s how it works:

Stake your SOL in BlazeStake to receive an equivalent amount of bSOL, SolBlaze’s liquid staking token.
Automatically earn staking rewards, compounded daily, and receive them as bSOL.
Use your bSOL in various DeFi protocols for borrowing, lending, or yield farming, maximizing your earning potential.

bSOL token represents your staked SOL on the SolBlaze platform. It’s freely tradable, transferable, and composable, unlocking the flexibility of your staked assets.

BLZE token is SolBlaze’s governance token. By holding BLZE, you can participate in platform governance, vote on proposals, and influence the future of SolBlaze.

SolBlaze offers a powerful combination of flexibility, security, and DeFi integration, making it a compelling choice for those seeking to maximize the potential of their SOL holdings. With its focus on transparency and community involvement, SolBlaze is shaping the future of liquid staking on Solana.

Market positioning

Unlike staking protocols such as Marinade and Lido finance, SolBlaze stands out with its community-driven validator selection, promoting broader participation and risk reduction.

Real-time data and detailed insights differentiate SolBlaze, fostering trust and accountability. It sets a high bar in the industry with regular audits and multi-signature wallets that prioritize user fund safety.

DeFi Potential with bSOL

bSOL, the heart of SolBlaze’s liquid staking magic, isn’t just a receipt for your staked SOL; it’s a key to unlocking a world of DeFi opportunities on Solana.

Consider bSOL as a bridge connecting your staked SOL to various DeFi protocols. Unlike locked SOL, bSOL can be deposited, borrowed, or used as collateral in these protocols, allowing you to:

Borrow against your bSOL
Lend your bSOL for passive income
Fuel your yield farming

Beyond earning bSOL empowers you to manage your liquidity strategically:

Borrow against your bSOL to buy more SOL during dips or stablecoins to lock in profits.
Use bSOL as collateral to access exclusive token launches or liquidity pools in emerging DeFi projects.

Conduct thorough research and understand the risks before engaging in any DeFi activity.

SolBlaze’s Rewards and Incentives

SolBlaze understands the importance of rewarding its community. Beyond competitive staking yields, they offer a variety of incentives to attract early adopters, boost ecosystem growth, and reward loyal users.

Airdrops

SolBlaze conducted airdrops in the past, rewarding users with BLZE tokens for early participation and engagement. This helped attract users and build a strong early community. BlazeStake has upcoming airdrops of Solana ecosystem tokens, as well as the SolBlaze governance/utility token

2. Referral Program

Refer your friends to SolBlaze and earn BLZE tokens for each successful referral. This incentivizes community growth and spreads awareness.

While specific reward amounts may vary, the potential benefits are significant. Always stay updated on SolBlaze’s official announcements and conduct your research before making any decisions.

Liquid Staking Economic Impact on Validators

Liquid staking introduces a ripple effect, impacting not only users but also validators, the backbone of Solana’s network. These are some of the economic implications:

Increased competition

Liquid staking pools attract new participants, increasing competition for validator slots. This can lead to lower validator rewards per SOL staked, potentially impacting their income. Large pools with significant stakes might wield more influence, potentially marginalizing smaller validators unless mechanisms counter this.

2. Potential fee changes

Some liquid staking protocols implement dynamic fees based on demand and validator competition. This could benefit validators during high-demand periods but might lead to uncertainty in their income. Other protocols might opt for fixed fees, offering predictability but potentially limiting their ability to adapt to market conditions.

Liquid staking presents a complex picture for validators. While it brings increased competition and potential fee reductions, it also gives access to larger stake pools and strengthens network security. It is important to choose reputable platforms with decentralized structures and participate in platform governance to ensure a healthy and sustainable validator ecosystem.

What Lies Ahead For Solana Liquid Staking

The Solana liquid staking ecosystem has seen tremendous growth, pushing new possibilities for users and validators alike.

The chart trajectory shows the total value locked (TVL) in Solana liquid staking is steadily increasing, indicating growing adoption and trust in the ecosystem.

User interest in liquid staking is surging, driven by the advantages of flexibility and DeFi integration. This means well for Solana liquid staking solutions like SolBlaze.

Platforms like SolBlaze are constantly innovating, with features like decentralized validator selection and bSOL expanding capabilities and attracting users.

Competition from other liquid staking solutions and DeFi protocols on different blockchains could affect Solana’s market share. Continued vigilance against smart contract vulnerabilities and platform security breaches is crucial to maintaining user trust.

As adoption grows for the liquid staking solution, ensuring efficient network scalability to handle increased activity will be essential.

Conclusion

Solana’s liquid staking landscape offers exciting possibilities. With flexibility, composability, and potentially higher returns. Unlike traditional staking, it represents a powerful tool for maximizing your investments.

SolBlaze stands out within this ecosystem with its commitment to decentralization, transparency, and community involvement. Their focus is on security, user-friendliness, and innovative features.

The future of liquid staking is bright, with the potential for even more diverse use cases and deeper integration with DeFi. SolBlaze is actively shaping this future, fostering innovation, transparency, and responsible development.

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