Marinade, the leading liquid staking protocol on Solana, announces ecosystem token exchange program
This letter serves to announce, in a transparent and public way, Marinade’s intent to exchange a portion of the DAO treasury among the builders of Solana to promote alignment and accelerate decentralized governance.
Marinade has been built from the beginning until now with the vision of ultimately being owned by the whole Solana community. To serve as a public good for all, and to be governed by all.
To properly explain the opportunity of a token exchange, this article paints a wide picture of Marinade’s original contribution to Solana, the current challenges in the market, and an explanation of how this program will drive Marinade and Solana’s mission forward.
The introduction of the Marinade token exchange program has been broken down into the following sections.
Foreword
Marinade’s core mission is to decentralize the Solana network, and we do so with liquid staking (mSOL) across 400 different validators. Thanks to our community, Marinade is the #1 project on Solana in terms of TVL, with over $800M. In just 7 months, we have captured 1.5% of staked SOL market share and operate with a 0.12% management fee.
Marinade was built without VC money, without a token sale (IDO), and without running a validator. We have been a profitable project since initial launch and continue to be so with more than 30 paid contributors/team members in our DAO. The governance token (MNDE) distribution began with a fair launch liquidity mining program to bootstrap the initial liquidity. As of today, 7% of token supply has been released.
Over the past 6 months, the Marinade DAO concentrated all its efforts into one single goal: to provide as much utility as possible for mSOL. A liquid staking token is only useful with widespread adoption and if it is accepted on the largest Solana lending protocols, AMMs, NFT marketplaces and even centralized exchanges such as FTX. mSOL has become the de facto standard in the Solana ecosystem, both for staking and DeFi strategies.
The path forward in 2022 will be paved with two objectives: decentralize Solana, and decentralize Marinade.
The pendulum of decentralization is often met with the opposing force of efficiency. There is an inherent tradeoff of agility and speed of execution when decentralizing. In our nascent stages, Marinade required unbridled flexibility to iterate and make the appropriate strategic and operational decisions. For this reason, power remained in the hands of the Executive team. But now that we’ve built a solid foundation, it’s time to disperse control with the introduction of Marinade DAO governance.
Let’s get to it!
Problem: State of Solana staking
State of Solana staking in time, assumes $100 SOL price
The conventional method of SOL staking is not capital efficient and concentrates power in the hands of few. Marinade is solving these challenges of traditional SOL staking:
385M SOL ($38.5B) locked in staking
The conventional staking method comes with an opportunity cost: you either lock and stake your SOL or find another use in DeFi (eg. provide liquidity, lend, deposit as collateral to borrow against…). However, if you utilize your SOL in DeFi, then you miss out on the staking rewards. What’s more, you lose short term liquidity because it takes 2–3 days to unlock your SOL and make it liquid.
There are 1,613 validators, but the 20 largest have 33% voting power
At the moment, 20 top validators collectively control 33% of all SOL staked, and are theoretically able to halt the network.
Outlook on Solana validators and decentralization from 2021–22 heading into 2023.
$5M of SOL delegated for a new validator to break even
To spin up a new validator on Solana, it takes about 50,000 SOL staked to cover the voting fees and hardware costs. The Solana Foundation validator program, which helps bootstrap new validators, is now oversubscribed and has about an 18-month waiting period.
Solution: Marinade’s liquid staking
Marinade is a DAO enabling Solana liquid staking — the foundational security layer for Solana that helps:
Earn staking rewards without locking in your SOL
When staking SOL with Marinade, you get back an mSOL token that represents your staked funds. This mSOL automatically appreciates in value as staking rewards come in. You can swap mSOL to SOL anytime without waiting for the 2–3 days cooldown period to pass if you choose to do so.
Use your mSOL (staked SOL) in DeFi
26 of the top 30 DeFi protocols on Solana have integrated mSOL (staked SOL). From using mSOL as collateral in lending protocols, liquidity pools, options, yield aggregators, to perps. MSOL, the stake rewards-bearing token, we have you covered.
Spread stake and risk across 400+ validators
Marinade uses a public, permissionless algorithmic formula for SOL delegation. It bypasses the super minority (top 20 validators) and stakes to hundreds of well-performing validators to diversify risk and support decentralization. This is a key differentiator between Marinade and other liquid staking solutions. We are consciously diluting the SOL stake concentration and acting as a security layer for all of Solana.
Solana-native DAO governance
Unlike Ethereum-based alternative solutions, Marinade’s DAO and governance model is built natively on Solana. Through the governance token MNDE, the possibilities include bootstrapping new validators, funding grants through the DAO treasury, and securing delegated SOL for the validator of your choice.
As we continue to onboard influential players from the Solana ecosystem, mSOL adoption will continue to grow, accruing value for both Solana and Marinade.
Network effects have made mSOL the most widely adopted staking solution, and will continue to do so. Marinade is continuing widespread DeFi adoption with wallets, protocols, NFT projects, and others. Very shortly, Marinade will announce strategic infrastructure-level partnerships built on top of our on-chain governance. From RPC nodes providers, DAO communities, and NFT marketplaces to CEX staking, Marinade is focusing on long-term value partnerships.
Up until now, the team has consciously turned down and postponed investment talks with the major crypto players. However, given our traction and success, we believe now is the time to bring in the right partners to collectively govern Marinade.
So what is the opportunity exactly? We touched on the inherent value of keeping Solana decentralized, and making it composable with mSOL that connects both worlds–staking and DeFi. But let’s talk numbers.
Market: $38.5B worth of staked SOL, $2.5B staking rewards
Market, assumes $100 SOL price
It’s been only a year since the staking rewards were activated on Solana. As time passes and rewards slashing is introduced, mSOL utility will naturally grow as will the liquid staking category overall. Liquid staking is far superior to the traditional way of staking because it mitigates risk by staking to different validators, unlocks staked liquidity, and ultimately brings more composability for SOL.
385M SOL ($38.5B) staked in total, 11M SOL ($1.1B) in liquid staking
As of now, out of the $38.5B in SOL staked, there is $1.1B SOL staked through liquid staking. Marinade is leading the market with a 65% share.
$2.5B staking rewards per year
The Solana inflation rate is at about 6.5% p.a. translating into $2.5B staking rewards per year.
$36.5M transaction fees per year
At the moment, the transaction fees add up to roughly 365,000 SOL/year. Marinade expects SOL delegation infrastructure to play a big part when the priority-transaction fee model is introduced to Solana.
Business Model: $46M staking rewards through Marinade
Business model, assumes $100 SOL price
$40M/year in staking rewards to mSOL holders
The Marinade DAO decides on the staking rewards revenue split between the supply-side, validators, and protocol’s treasury.
As of now, Marinade caps eligible validators for stake at 10% commission. Once the commission is cut, the DAO takes a 2% fee and the rest of the SOL rewards flow into the stake pool causing the mSOL/SOL price to rise and accrue value for mSOL holders (SOL stakers).
Marinade has become cash flow positive within a few weeks since its launch in August 2021.
$1M/year flowing into the DAO treasury
Marinade takes a 2% performance fee cut on SOL staking rewards. The protocol’s TVL yields about 0.12% p.a. from staking rewards. Another revenue stream is liquid unstake fees driven by volume–at the moment adding up to 5,000 mSOL p.a.
$5M/year in net validators rewards
Delegating SOL to 461 validators, with an average stake of 13,000 SOL with average validator’s commission at 9.5%, Marinade rewards in total $5M in yearly fees for validators. This will be an important part as the Marinade DAO considers governance token (MNDE) voting on the delegation strategy and as a result the effective rewards on voted validators.
Maximum Extractable Value
Due to massive Solana adoption, priority transactions and a fee-based model will likely get introduced to Solana. Marinade and its SOL delegation strategy will play a critical part in it.
Roadmap: Governance, Ecosystem token exchange, Integrations
MNDE voting on SOL delegation strategy
To connect the MNDE ownership with the protocol, Marinade introduces MNDE locking as an entry point to the governance. Activate MNDE voting to decide on part of the delegation strategy, liquidity mining rewards, SOL delegation to validators of choice and MNDE emission strategy.
Ecosystem token exchange program
Introduce a way to exchange assets for locked MNDE to let both the community and key Solana players in the Marinade governance.
Infrastructure-level integrations
mSOL gets listed on top-tier exchanges and is established as the standard way to interact with the Solana ecosystem. It is possible to use mSOL to buy NFTs, pay for transactions, merchant payments. Marinade’s liquid staking is integrated into crypto wallets, DeFi apps, and exchanges.
Ask: How to participate in the token exchange program
Marinade wants to maintain its standard of building transparently in the open, and that’s why the DAO chose this method of a public invite to the upcoming token exchange program.
There will be 100M MNDE (10%) tokens reserved for the MNDE exchange program, split into two parts:
The primary objective of this governance token exchange is not to raise funds. It is to open up the Marinade governance to the right partners, grow the TVL, launch the next phase of shared ownership, and put the rights over Marinade into the Solana ecosystem.
What Marinade DAO looks for in the ideal Solana ecosystem MNDE governance candidates:
To get into Part 2: the DAO-vetted whitelist round, anybody can reach out to the Marinade DAO by email (info@marinade.finance) or by submitting a request from the Become our Partner docs page and go through the following procedure:
About Marinade
Marinade.Finance is the first non-custodial liquid staking protocol built on Solana. Stake your SOL tokens with Marinade and receive mSOL (“marinated SOL”) tokens in return that can be used in decentralized finance (DeFi). mSOL is the most widely integrated collateralized version of SOL. The price of mSOL goes up relative to SOL each epoch, with rewards being accrued into your stake account.
Marinade’s delegation strategy stakes to 400+ validators that are selected automatically by an open-source, fair formula based on performance, commission, and decentralization.
