On April 20, Solana briefly surpassed Ethereum in total dollar value staked. This boom was driven by its high staking yield and a participatory onboarding approach. At its height more than $53.9 billion dollars worth of SOL was staked for a staked market cap of over $54 billion for Solana. The network has a very high staking participation rate at about 65%, significantly higher than that of Ethereum.
Perhaps the most important reason explaining Solana’s rise is its enticing staking yield. Solana's staking yield is significantly higher than Ethereum's, with Solana offering 8.31% at the network level compared to Ethereum's 2.98%. This increase in yield has incentivized more users to stake their SOL tokens. Consequently, the network’s staked value has skyrocketed.
Staking Yield and Participation
Solana’s emphasis on broad participation is the crown jewel of its strategy. The network is determined to bring staking to the masses. This innovative approach, combined with an aggressive drive to increase staking participation rates, resulted in skyrocketing staking participation rates.
Solana's staking participation rate is higher than Ethereum's due to its attractive staking yield. That higher yield encourages more users to stake their tokens, raising the total staked value of the network. This stands in sharp contrast to Ethereum, which has a much lower staking yield and a more complicated staking model.
Solana's strategy of prioritizing broad participation and offering high staking yields has proven effective in attracting stakers and increasing the network's staked value. This approach has allowed Solana to briefly overtake Ethereum in total staked dollar value, showcasing the potential of its staking model.
Security Concerns
Even with its success of attracting stakers, Solana hasn’t been able to escape criticism about its economic security. Ethereum researcher Dankrad Feist has told Decrypt that currently Solana has almost zero economic security.
Feist’s worries point to a larger reality— economic security is critical for blockchain networks. Equity Economic security is the cost needed to successfully launch an attack and/or breach the network. The greater our economic security, the harder and costlier it becomes for bad actors to corrupt the network.
Staked Solana value has grown a staggering 2400%. It needs to address these security issues to guarantee its long-term viability and stability. An empowered economic security model will provide the network’s best defense against adversarial exploitation. Beyond additional network integrity protections, this will eventually allow greater transaction verification flexibility on the Solana blockchain.
Market Dynamics
On April 20, Solana edged ahead of Ethereum in staked market cap by less than five million dollars. This trend underscores the fast-paced reality of the cryptocurrency space. Market conditions, staking yields, and network participation rates can all be factors that affect the staked value of various blockchain networks.
The battle between Solana and Ethereum, and all the other Ethereum competitors, is a perfect example of the innovation currently taking place in the blockchain space. Each of these networks continues to be dynamic and agile. They want to serve their users’ needs, and adapt and respond to market demands.
At its peak, Solana had staked value that exceeded Ethereum’s. This significant accomplishment further demonstrates its ability to upend the status quo and take on Ethereum’s reign as the dominant force in the staking market. The world of cryptocurrency is rapidly developing. It will definitely be interesting to see how Solana and Ethereum continue to pivot and battle it out in the future.
