Unlocking liquidity: Gracy Chen insights on the future of Solana staking

In the rapidly evolving world of blockchain technology, the ability to efficiently manage assets is becoming a pivotal concern for both individual investors and institutions. Staking, a widely used mechanism to secure networks and earn rewards, has traditionally required locking up assets for a specific period, creating a dilemma between earning a yield and maintaining liquidity. For investors, this posed a challenge, particularly in volatile markets where the ability to quickly sell assets is crucial. The rise of liquid staking has introduced a potential solution to this problem, allowing investors to enjoy the benefits of staking without sacrificing liquidity.

The Solana blockchain, known for its high transaction speeds and low fees, has been at the forefront of decentralized finance (DeFi) innovation. As the demand for more flexible financial tools increases, liquid staking is emerging as a promising avenue for enhancing the user experience within blockchain ecosystems. This new staking model allows users to continue using their staked assets for other financial activities, such as lending or providing liquidity, while still earning rewards.

Recently, We spoke with Gracy Chen, CEO of Bitget, on how liquid staking works, its impact on the broader Solana ecosystem, and what the future holds for both individual and institutional investors as liquid staking gains traction.  

1. Can you explain the concept of liquid staking and how it differs from traditional staking models?

Liquid staking allows users to earn staking rewards on a crypto asset without losing liquidity. This is done by providing a tokenized version of the underlying staked asset. Essentially, users can continue using their staked assets as collateral or for trading, which isn’t possible with traditional staking. In traditional staking, the assets are locked, and users cannot sell them during the staking period. Previously, users faced a trade-off between earning a stable staking yield and retaining the flexibility to sell their assets if prices surged. Additionally, traditional staking involves a waiting period to unlock assets before they can be sold, often resulting in missed opportunities to sell at optimal prices.

2. How do you see the liquid staking market evolving on Solana, especially given its high transaction speeds and low fees?

The ability to earn stable returns while keeping the flexibility to sell assets makes liquid staking particularly attractive on Solana. Solana is already among the top five cryptocurrencies by market capitalization, and I expect the introduction of liquid staking to further boost its appeal. This will likely attract more capital to the ecosystem, especially given Solana’s high transaction speeds and low costs.

Bitget was one of the first exchanges to offer Solana liquid staking in collaboration with Solayer, a leading restaking network. As part of this service, users receive BGSOL tokens, which allow them to stake SOL while retaining liquidity. In addition to earning staking rewards, BGSOL holders can participate in DeFi activities such as trading, lending, or providing liquidity on decentralized platforms.

3. What role does liquid staking play in improving liquidity for users, and how might this impact the broader Solana DeFi ecosystem?

Liquid staking plays a critical role in maintaining liquidity while staking assets. This is important for DeFi protocols because it allows them to increase their earnings without changing their capital base. As more users adopt liquid staking, the overall liquidity within the Solana DeFi ecosystem is likely to improve, driving further growth and innovation. By enabling stakers to continue participating in DeFi activities, liquid staking can also act as a catalyst for blockchain technology development globally, not just within the Solana ecosystem.

4. What are the main risks or challenges associated with liquid staking on Solana, and how are they being addressed?

While liquid staking offers several advantages over traditional staking, it also shares some of the same risks, such as security concerns and regulatory challenges. There’s always the risk of smart contract vulnerabilities, which could compromise staked assets. Additionally, navigating the regulatory landscape remains a challenge, especially as the legal frameworks for crypto and staking are still evolving. For newcomers, the complexity of these protocols might create a high entry barrier, but this issue will likely be mitigated over time as decentralized applications (dApps) become more user-friendly.

5. How do you expect institutional investors to react to liquid staking opportunities on Solana, and what are the key factors driving institutional interest?

Liquid staking makes Solana more appealing to institutional investors by offering the flexibility they need. The more attractive a blockchain is for its users, developers, and traders, the more interest it will attract from institutional players. By 2025, I believe institutional capital will play a major role in Solana’s market discussions, especially with the potential introduction of ETFs. The combination of high transaction speeds, low fees, and the ability to maintain liquidity makes Solana a very compelling option for large-scale investors.

6. In the context of Solana's rapid growth and adoption, what regulatory considerations should liquid staking projects be aware of in the near future?

Regulations around liquid staking vary across jurisdictions, and this issue needs to be viewed as part of a broader conversation on cryptocurrency regulation. As the industry matures, I think we will see clearer guidelines that will help projects navigate these challenges more easily. We are in an era of regulatory change, and while some may see this as a cause for concern, I view it as an opportunity. Platforms like Bitget and innovations like liquid staking on Solana are well-positioned to take advantage of this shift.

Conclusion 

The advent of liquid staking represents a significant shift in how crypto assets can be managed, particularly within high-performance ecosystems like Solana. By enabling users to stake assets while maintaining liquidity, it addresses one of the key limitations of traditional staking models. 

However, as with any emerging technology, there are risks, particularly in the areas of security and regulation. By focusing on user-friendly platforms and maintaining an open dialogue with regulators, the blockchain community can ensure that liquid staking continues to evolve as a secure and sustainable solution.