Greetings! Ever found yourself gazing at your crypto holdings, pondering whether there’s more to them than meets the eye? Well, hold onto your wallets, because we’re about to unravel the captivating realm of blockchain staking. In this article, we’ll take a look at a project which has been making waves in the blockchain world. We’ll be talking about blockchain staking, using Marinade as a point of focus. So, let’s dive in and unravel the wonders of Marinade staking’s transformative journey.
What is Staking?
Before we get started, let’s talk about blockchain. According to IBM, “Blockchain is a shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network”. In simpler terms, imagine a blockchain as a magical digital ledger where all transactions are written down and can’t be erased. But it’s not just any kind of ledger, it’s special because it’s shared by lots of computers all over the world. This way, no one can just change things without everyone else knowing.
Now, let’s talk about something called “consensus.” This is like getting a group of people to agree on something to do in the blockchain world, those computers we mentioned earlier need to agree on which transactions are real and should be added to the ledger. There are different ways the blockchain handles this agreement, examples are Proof of Work(PoW) Proof of Stake(PoS), Delegated Proof of Stake (DPoS), Proof of Authority (PoA), etc.
Our main focus is Proof of Stake(PoS), so what is PoS? PoS consensus model is a model whereby participants, referred to as “validators”, determine their ability to validate transactions by the quantity of cryptocurrency they “stake” as collateral. This stake establishes a vested interest in the network’s security and fidelity. Validators are selected to create blocks and validate transactions based on the proportional amount of cryptocurrency they hold in their staked position.
Staking is a process in blockchain where individuals hold and “stake” a certain amount of a specific cryptocurrency in a digital wallet. When you “stake” your tokens, you’re locking them up for a while to show you’re committed. In return, the system lets you do important things like verify transactions and keep the digital records accurate for some rewards.
Now that we understand the basics of staking and why it is important, lets talk about Marinade Finance.
What is Marinade Finance?
Marinade Finance is a liquid staking protocol built on the Solana blockchain (a high performance blockchain platform that can process up to 50,000 transactions per second), founded in 2021. It is the first non-custodial liquid staking protocol built on Solana. You might be wondering what is liquid staking. As explained by Marinade, liquid staking is an alternative to traditional staking (or native staking).
More light will be shed on liquid staking shortly.
After getting an original grant of $80,000 with no VC investment or ICO, Marinade officially launched Aug. 2021, they had a fair launch token after. With a decentralized ethos of being transparent and open to all validators and a thriving team, Marinade Finance hit $1B+ TVL shortly after 77 days of being launched and soared higher to being the top 1. One of the ways Marinade Finance attracted the attention of users was with low fees and increases in TVL rates. With the main goals, which are to decentralize Solana and decentralize marinade using MNDE governance, Marinade is on a mission of empowering users with the best tools to stake, secure and participate in the Solana ecosystem.
Staking with Marinade.
Marinade Finance is a non-custodial staking protocol, which means your tokens are always accessible. You can either stake natively or liquid stake to the same pool of 100+ high-performing Solana validators when using Marinade.
Liquid Staking: One of the problems stakers face is not having liquidity access while staking, i.e. they are giving up possible use of their tokens while it’s locked up. This is where liquid staking comes into play as through liquid staking, one can still utilize the liquidity of their token to look for additional yield while staking. It allows users to benefit from a protocol’s staking rewards while receiving a receipt for their staked tokens that can be used in DeFi, making their staked assets liquid. When you liquid stake with Marinade, you receive mSol which can be used for other DeFi activities on Solana like lending, adding to liquidity pools and MNDE staking. Liquid staking enables SOL liquidity as 70% of SOL tokens are staked, but only ~3% are liquid. That means roughly 2/3 of SOL tokens cannot be used in DeFi. The more the stake becomes liquid and distributed through the Marinade pool, the more fuel Solana DeFi has to grow.
De-Fi means Decentralized Finance, a p2p transaction occurring without the need of a central authority.
Native staking, also known as Marinade native is a way to stake your sol with no smart contract interaction. This means that you retain full custody of your sol at all times, and there is no risk of losing your tokens to smart contract hacks or exploits.
Staking with Marinade brings you Solana’s best validators in one click. Both native and liquid Marinade Finance stakers gets access to using the automated staking strategy expertly designed by the Marinade core team with influence from MNDE and mSOL holders. This algorithmic delegation strategy is permissionless and transparent. It is achieved by Marinade evaluating all active validators and making the code computing score available online with the results published on-chain. The validators’ details alongside their Marinade score can be viewed on Marinade’s dashboard (https://marinade.finance/validators/). When staking on Marinade, users will be able to choose between this algorithmic delegation strategy and directed stake.
Directed stake which officially launched on Marinade on 19th May, is a type of staking that allows users to delegate their stake to a specific validator on a blockchain network. Direct stake gives users more control over their staking, as they can choose which validator they want to support. This can be important for users who want to support a specific validator’s vision for the network, or who want to make sure their stake is delegated to a validator who is reliable and has a good reputation. Direct stake is also more liquid than regular staking, as users can unstake their tokens at any time and withdraw them from the validator. This makes direct stake a more attractive option for users who want to be able to access their funds quickly. One of the disadvantages of staking to a single or specific validator is If the validator’s node goes offline or experiences technical problems, you may not be able to earn rewards or participate in governance.
Direct stake holds 20% of the Marinade’s stakepool. This delegation of control grants Direct Stake a significant role in determining the distribution of this earmarked 20% share. At recurring intervals called “epochs,” the amount of mSOL being used to direct stake to each validator will be used to share the 20% of the stake to be distributed.
mSol token
mSol is a very important token in the Marinade’s ecosystem. As explained in Marinade’s doc, mSOL is the liquid staking token representing a stake position in the Marinade stake pool. This is your liquidity ticket while staking on Marinade as it grants you liquidity access to use other De-Fi protocol for extra yield and it has the most liquidity and integrations amongst Solana LSDs(Liquid Staking Derivatives). The supply of this token is controlled by Marinade using burning and minting operations in accordance with the overall state of the program. When liquid staking SOL for mSOL, the price of mSOL goes up relative to SOL each epoch with Solana inflation rewards being accrued into the underlying staked SOL in the Marinade stake pool. mSol has a true price powered by Pyth and Switchboard (both notable web3 projects), but can sometimes have a different price across different DEXs and exchanges when the mSOL/XXX pair becomes unbalanced.
visit the Marinade mSol cookbook for detailed strategies to utilize your mSol. (https://marinade.finance/learn/cookbook/)
Who controls Marinade?
One of the things that makes web3 decentralized is DAO. DAO which stands for Decentralized Autonomous Organization is a special organization in blockchain where a group of people come together in a fair and automatic way to make decisions. It’s kind of like an online clubhouse that listens to everyone’s opinions and follows the rules you set, all without needing a single person to be the boss. Marinade is no different, as it is owned and controlled by a DAO. This DAO can be accessed by the people that lock their MNDE in Realms (a platform for builders on Solana to create and manage a DAO) to obtain veMNDE(this is the representation of your governance power in Marinade DAO).
MNDE is Marinade’s official token, which was fairly launched on 7 November, 2021 with no ICO (Initial Coin Offering). MNDE has a total supply of 1,000,000,000 and it is the powerhouse of Marinade as it lets holders participate in the protocol’s governance. This includes control of the DAO’s fees, treasury and which validators will receive the pool’s SOL stake.
As voted by the DAO, they ratified a constitution to form a set of guiding principles and lay down shared goals which form alignment between Marinade holders, governors, and the team. Amendments to the constitution require a two-thirds majority vote with at least 1% participation of all tokens. To allow flexibility and predictability, the critical system parts are owned by the Marinade governance, and the operational control and funding are granted to the core team.
Marinade launched an on-chain DAO in April, 2022 to manage and vote on all decisions relating to treasury. In July 2023, The DAO migrated its governance platform to Realms connecting the protocol and MNDE holders more closely and transparently than ever before. This enables direct control of the treasury and protocol decisions by MNDE holders. The DAO has over $30m as seen on Realms. Marinade has a Council that consists of a group of 7 contributors who are chosen internally to drive the operational aspects of the Marinade DAO. To ensure a distributed and secure decision-making process, the Marinade Council utilizes a multi-sig (multi-signature) mechanism with 4 out of 7 requirements on Realms. This means that for any significant decision or action to be taken by the council, at least 4 out of the 7 council members must collectively agree and provide their digital signatures. This approach enhances accountability, reduces the risk of single points of failure, and promotes a collaborative decision-making process within the Marinade ecosystem.
Benefits of Using Marinade
- Security: Marinade is a non-custodial protocol, which means they don’t have access to the assets its users deposit therefore making sure that you retain full control of your tokens. Marinade has also been audited by 2 different firms with its code being reviewed by another, and it was passed without any critical issues.
- Ease of use: Marinade is easy to use, even if you’re new to staking. The platform has a simple interface that makes it easy to stake your Sol and start earning rewards.
- Liquidity: mSOL tokens are liquid and can be traded, lent, or used to participate in DeFi protocols on Solana. This means that you can still access your funds if you need them, even while you’re earning staking rewards.
- High yields: Marinade offers some of the highest staking rewards on Solana. Making you earn more sol for staking your sol with Marinade.
Conclusion:
It is not a secret that staking plays an important role in the blockchain world. Amidst the multitude of staking platforms, Marinade shines as an innovative choice, letting enthusiasts take part in Web3 staking. Marinade keeps things decentralized, making staking straightforward and also opening doors to the exciting possibilities of blockchain and staking.
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