The new service, known as Marinade Native, removes the smart contract risk of exchanging SOL for mSOL while maintaining the expected yield of nearly 7 per cent, according to developers

Top Solana protocol Marinade Finance will support direct-to-validator staking of SOL tokens besides its popular mechanisms for issuing mSOL, the liquid staking token (LST).

The new service, known as Marinade Native, removes the smart contract risk of exchanging SOL for mSOL while maintaining the expected yield of nearly 7 per cent, according to developers. That is because users keep custody of their SOL contrary to getting what amounts to a yield-infused depository receipt.

Marinade already oversees $167 million in crypto assets – just a bit more than half of the total value locked (TVL) on Solana. But its liquid staking solution appears to have reached a ceiling at 2 per cent of the network’s SOL, according to protocol insiders. They are assured further growth for Marinade will come only from appealing to institutional investors too sapped to handle liquid staking tokens.

Marinade Native is fundamentally targeting the 50-times larger market and expecting to see further decentralization within staking on Solana, according to Michael Repetny, a core contributor to Marinade.

Staking SOL directly to validators is not new. It is the primary procedure investors used to capture the benefit of Solana’s proof-of-stake blockchain, which pays interest to those who financially vouch for the validators powering the network.

What is new is that it extends the staked SOL across an index of top validators instead of just one. The technique, known as automated staking, is one of the two key advantages of its liquid staking token mechanism, besides the aspect where it issues mSOL.

It is not staking to just one, but to nearly 130 validators that are rated based on their performance, some decentralization aspects and so on, Repetny added. We are bringing in a product that depends on this automated staking and completely avoids the smart contract risk.

The risk of locking SOL into a liquid staking contract was seen last November, when the FTX’s failure sparked a flight to safety across the Solana ecosystem, including in Marinade. Spooked mSOL holders started trading their LSTs at a discount instead of waiting for a few days to reclaim their SOL from the protocol.

Even though Marinade’s process worked fine during the process and none of the staked SOL was lost, the event underlined the restrictions of liquid staking. The protocol is still recovering from the TVL decline it experienced during the event.

Solana’s adoption of liquid staking stays much below Ethereum’s, the biggest blockchain for DeFi and staking protocols. Repetny traced the difference up to tech differences between the two chains and the way they handle unlock periods.