Liquid Staking is Lucrative Saving (2024)

Put Your Money to Work

“Make your money work for you”. This is a phrase we’ve all heard a million times at this point whether it’s from some billionaire or TikTok guru. It can be frustrating to hear since most of us are struggling to get by and don’t necessarily have thousands of dollars to park in an ETF for a few percentage points per year, let alone start a small business or anything like that. However, there is truth to the concept that the only way to escape an endless cycle of barely getting by is to achieve some level of passive income.

Thankfully, there are some ways to put your money to work for you that don’t require massive initial investments. One amazing tool available to almost anyone right now is Liquid Staking on Solana. By now, you’ve likely heard of staking, as in, locking up your coins for some set period of time to help secure a blockchain against various attacks and build investor confidence in the security of the chain. This usually yields rewards for those who actually validate the chain and then those rewards are often split with those who have delegated their coins to be staked with these validators. However, you may not yet fully understand the much more tantalizing version of staking that we’re here to discuss today.

Liquid Strategies for Lucrative Saving

Liquidity in financial terms means assets that can be utilized at any given moment as opposed to assets that need to be unlocked, converted or otherwise prepared before use. In general, cash is liquid, cars are not.

The beauty of Liquid Staking is that you can earn rewards from staking your coins without completely losing your ability to treat them as liquid assets for use elsewhere. For example, here’s the setup I employed a few months ago:

• Stake with SolBlaze (for many, many reasons which we’ll get to later). Your choice of validators is up to you, although likely best to just go with what SolBlaze automatically sets up (they delegate SOL via many Solana validators which strengthens the decentralization of Solana). Congratulations, you’ve just put your money to work for you! You’re now entitled to a percentage of the staking rewards paid to the validators that you’re delegated to as well as other SolBlaze-specific rewards. But that’s not all…
• This will give you bSOL tokens, as in, proof that you have ownership rights over a certain amount of the SOL staked by SolBlaze. These tokens aren’t just badges of honor, though, they’re liquid assets that can be utilized on various Decentralized Finance (DeFi) platforms that recognize and trust SolBlaze (at this point, almost any platform on Solana falls into this category given SolBlaze’s incredible track record).
• For example, marginfi (a decentralized lending protocol) accepts bSOL. If you lend your bSOL for others to use, you can borrow SOL against the amount you’ve lent. This will earn marginfi points and more BLZE rewards for you (more on that later).
• This is where it gets crazy, and it’s where you’re beginning to enter a slightly more dangerous portion of the risk curve: if you still want more, you can then stake that SOL with another liquid staking protocol. In this case, I used Jito. Staking the SOL you just borrowed from marginfi on Jito will give you JitoSOL which is similar to SolBlaze, although, a little less complex and therefore often less rewarding.
• Then, you can also take your JitoSOL elsewhere, like Kamino (a lending, liquidity & leverage protocol). In this case, I added mine to an LP pool for passive rewards and to earn Kamino points for a future airdrop.

Complexity and Risk

If your head is spinning, you’re not alone. The strategy above is a little complicated and unless you plan to invest vast sums of money, you probably don’t need to think too hard about how it works. The point here is that Liquid Staking unlocks so much potential for one coin. A simple $100.00 USD investment could get you about 1 SOL today, and you could simply hold it for higher values in the future… or, you can use strategies like the one above to make that 1 SOL work so, so much harder for you.

If you follow the above instructions, there are risks associated which you absolutely need to consider (each platform has good documentation on the associated risks and I highly encourage you to read them). However, if it all works out, your 1 SOL will be earning you passive SOL income from SolBlaze, blze points, marginfi points, Kamino points and all the passive income from each platform along the way.

SolBlaze’s Strengths

So, why SolBlaze? Couldn’t you just use Jito or any other platform? You definitely could, and as you saw in the past example, there’s no reason not to diversify. However, I would focus on SolBlaze for these reasons:

• BlazeStake automatically delegates SOL across many Solana validators to strengthen the decentralization of Solana.
• BlazeStake has the largest validator set of any Solana stake pool (200+ validators).
• You can withdraw your SOL from the stake pool at any time either through the instant unstake feature or through delayed unstaking.
• bSOL is designed to increase in value compared to SOL every epoch relative to the staking APY, as bSOL is always backed by an amount of SOL which increases as staking rewards compound.
• BlazeStake uses the official stake-pool smart contracts from Solana Labs and these official contracts are more heavily audited than some of the ones used by other 3rd-parties.
• BlazeStake has an open referral program to help grow stake to the pool and increase decentralization
• BlazeStake pioneered the Custom Liquid Staking protocol, which allows you to liquid stake to specific validators or groups of validators.
• BlazeStake has upcoming airdrops of Solana ecosystem tokens, as well as the their governance/utility token, BLZE. This further increases your staking rewards. As of today, (February 27th, 2024), the BLZE chart speaks for itself. Why wouldn’t you want to be earning this?
• A portion of stake pool fees will go towards an ecosystem treasury where the community can vote to support various projects on Solana.

Now, if all you care about is making your money work for you, you’re good to go. Of course, for legal reasons, no profits are guaranteed. As mentioned above, each of these platforms comes with their own risks. I myself unwound these positions during a large SOL drawdown so as to manage my money wisely, although, I re-entered some of them once market conditions improved. There’s no such thing as free money, but SolBlaze is getting close. In any case, some of you are likely wondering things like “how is this possible?” or “what exactly are these risks you keep mentioning?”. For those with greater curiosity, let’s press on!

Some Platforms are Riskier than Others

So, what are the risks? Depending on how far you travel along the risk curve, Liquid Staking can be relatively safe. However, let’s look at an example of how it can go wrong:

The above article is brief, but basically, one entity sold so much of Marinade Finance’s mSOL liquid staking token that the price of mSOL depegged from where it ought to be and plummeted much lower. As in, instead of reflecting the value that any given liquid staker ought to have been able to acquire by trading their mSOL back in for SOL, the token reflected a much lower value.

How would this have affected you? If you’re a somewhat normal individual with only a little bit of money invested and if you weren’t doing anything risky like the multi-loop strategy above, you were fine. As you can see from the charts, it did not take long at all for the proper value to return, and if this event spooked you, you could have just waited for the repeg and sold your mSOL back into SOL and moved on with your life.

For those with more of a degen mindset, however, this could have been very dangerous. Lending and looping assets come with certain pricepoints at which your money will be liquidated to protect the platform as a whole and hopefully prevent a complete collapse. If you were looping mSOL with Kamino, for example, and had taken a risky approach when doing so, you would likely have been liquidated during this event.

The good news here is that for the most part, the risks are whatever you’re comfortable with. If you want to build out a strategy that maximizes potential profit at the expense of safety, you can, but if you want to simply stake with SolBlaze and go about your day, your risks are very minimal. The only thing you really have to worry about would be market-wide chaos and selling. Any black swan style event can wreak havoc throughout all financial markets, and crypto is no different. Holding any crypto currencies exposes you to this risk, though, so the risk you take with liquid staking really just comes down to the platform themselves.

Here’s a great thread from SolBlaze on how they protect you from a similar event to the above issue with Marinade:

Plus, they offer these security benefits as well:

• Their smart contract was developed under Solana Labs, the same organization that wrote the code for the official Solana validator client.
• The smart contract has been audited seven times by five separate organizations to ensure maximum safety of funds.
• The upgrade authority for the smart contract is currently governed by a robust ecosystem multisig that is overseen by the Solana Foundation to ensure that no malicious updates can be deployed.

This is Great but… How?

So, how does it all work? The hard technology side of it is far beyond most, so I’ll keep my explanation brief and point you to some resources for further reading if you want to learn more.

As mentioned above, many blockchains, like Solana, use a consensus mechanism called “Proof of Stake” to secure their network. Basically, a bunch of computers form nodes that are referred to as “validators” because they “validate” the state of the network. Each of these validators has access to a certain amount of the primary network coin, in this case SOL, and a majority of them have to agree on what state the blockchain is in at regular intervals to prevent issues.

For example, if I claimed that SolBlaze had sent me all of their staked SOL and tried to sell it, I would never be able to get away with that because my false transaction on the chain would be rejected by all of the validators. They all indirectly agree that we live in a world where SolBlaze is diligently protecting their customer’s assets, not giving them all way to one user, and their agreement continues to validate this truth.

These validators can provide their own coins to stake towards this process, but not everyone can afford to set up and run the computers required for this process. This is where delegation comes in. Individual can utilize various staking and liquid staking platforms to delegate their tokens to a specific validator. These validators then usually share some of the yield they’re receiving to protect the network with anyone who is delegating with them.

Staking like this can be rewarding, but we want to go further. To quote Phantom Wallet’s educational guide, Liquid Staking is different because:

“…traditional staking requires stakers to lock up their SOL directly with a validator. This means that their staked tokens are not readily available for trading, spending, or transferring.

Liquid staking aims to address this liquidity issue by allowing staked assets to be used in various ways while still participating in the staking process.

When participating in liquid staking, holders stake their SOL to a smart contract or staking pool — instead of directly to a validator.

In return for staking their tokens, participants receive a different type of token that represents their staked SOL. This new token — referred to as Liquid Staking Token (LST) or Liquid Staking Derivative (LSD) — can be traded, used in DeFi applications, or transferred while still earning staking rewards.”

For further information on how SolBlaze manages their liquid staking platform, check out their informative documentation!

Let’s Stake with SolBlaze for Less Stress

As we’ve seen, Liquid Staking can be slightly more risky than traditional staking. However, it generally only suffers during unusually negative market conditions, when all investments tend to suffer, or, when you trust an unsafe platform with your coins.

On the flipside, Liquid Staking opens up a world of possibility for your coins with dozens or even hundreds of potential strategies all along the risk curve. It’s up to you how you weigh your own risk and reward, but one thing’s for certain: if you’re going to put your money to work for you, you might as well let it work intelligently and skillfully across multiple platforms to maximize your chances of building up your stack! Get staking, folks, the Liquid Staking ecosystem of Solana awaits and SolBlaze is ready to help you on this journey.