This episode reveals the strategic pivot from retail-focused liquid staking to institutional-grade native staking on Solana, detailing how market demand and risk aversion are reshaping the entire staking landscape.
Marinade's Hackathon Origins and Co-Founder Split
- Michael Repetný recounts Marinade's unconventional start in late 2020, born from a Solana hackathon. Initially joining a supposed team that turned out to be a single individual, Michael helped build a liquid staking concept inspired by his experiences with high gas fees on Ethereum.
- After winning a prize, a strategic disagreement emerged with his initial co-founder, who wanted to pursue other chains, while Michael was committed to Solana.
- The team voted to follow Michael's vision, leading to a split. The pivotal moment came when a grant from the Solana and Serum Foundations was sent to a wallet Michael controlled, cementing the new direction.
- Serum Foundation: An early and influential entity in the Solana ecosystem, closely associated with the FTX-incubated Serum DEX, which provided grants to promising projects.
- Following the split, Marinade merged with another hackathon project, SmartPool, bringing in key early contributors, including a future co-founder of the RPC provider, Triton.
- Michael Repetný on the early days: "We rejected all the VC money and started building hoping that maybe this underdog can beat the giant coming from ETH… Lido and all the rest that had the playbook."
Pivoting to Institutions via the Solana Incubator
- Despite being an established project for nearly three years, Marinade joined the Solana startup incubator. Michael explains this was a strategic move to bridge the gap between their European-based team and the US-centric institutional market.
- The incubator provided direct access to funds, family offices, and other key ecosystem players in New York, offering invaluable feedback.
- This experience was crucial for developing Marinade's institutional offerings, helping them identify and address gaps in compliance, legal frameworks, and product design required by institutional clients.
Building for Institutions: The Rise of Native Staking
- Michael details the evolution from Marinade's initial liquid staking token, mSOL, to its native staking product. The team observed that mSOL's growth stalled after reaching 6 million SOL in TVL, prompting an investigation into user preferences.
- Liquid Staking: A method where users stake tokens and receive a liquid derivative token (like mSOL) in return, which can be used in DeFi. This introduces smart contract risk.
- Native Staking: Staking directly through the protocol's mechanics, which avoids smart contract risk but traditionally lacks liquidity.
- Feedback revealed that many users were hesitant due to smart contract risk and the relative ease of native delegation on Solana. This led to the creation of Marinade Native, a product that automates stake diversification across 100+ validators without taking custody of the user's SOL or introducing smart contract risk.
- The native product quickly grew to 1 million SOL in TVL, attracting a new, more institutional audience that uses qualified custody solutions and requires a longer, relationship-driven sales cycle.
The Economics of Native Staking and the Stake Auction Marketplace
- A key challenge with the native product was creating a revenue model without custody of the funds. Marinade solved this by developing the Stake Auction Marketplace.
- Validators who wish to receive stake from Marinade must post a bond, which acts as an insurance policy for staker rewards.
- Validators then bid for delegation from Marinade's pool of SOL. Marinade takes a cut from these bids, and the remaining upside is passed to the stakers, often resulting in a higher yield than other staking methods.
- This model aligns revenue for both liquid (mSOL) and native staking products, as validators compete for the same pool of SOL. Michael notes that mSOL now has a 0% performance fee, with revenue generated entirely through the validator auction.
Strategic Focus: Why Native Staking Outpaces Liquid Staking
- Michael provides a candid analysis of why he is less bullish on liquid staking compared to native staking on Solana. While liquid staking tokens (LSTs) now account for about 10% of staked SOL (up from 4-5%), he believes the native staking market, representing the other 90%, holds far greater potential.
- Investor Insight: On-chain data reveals that most LSTs are simply held in wallets and not actively used in DeFi, questioning the core value proposition of liquidity for the average user.
- Institutional hurdles for LSTs include smart contract risk, asset pooling concerns, compliance issues (unknown validators), and potential tax triggers in certain jurisdictions.
- Michael argues that for users whose primary goal is to "stake for the best rewards in the most secure way possible," a well-designed native staking product is superior. Marinade's TVL is now split roughly 50/50 between its liquid and native products.
Navigating MEV: Sandwich Attacks and the Stake Auction Marketplace
- The conversation shifts to the complexities of MEV (Maximal Extractable Value) on Solana, specifically sandwich attacks, and their impact on Marinade's open auction system.
- Sandwich Attack: A malicious MEV strategy where an attacker places transactions before and after a victim's trade to manipulate the price and profit from the difference, resulting in a worse execution price for the user.
- Initially, Marinade's permissionless auction allowed any validator to bid for stake, including those running sandwich attack strategies. These malicious actors could afford to place higher bids, creating a dilemma for the protocol.
- After extensive research with teams like Jito, Marinade's governance voted to blocklist validators confirmed to be engaging in malicious MEV. This led to the removal of dozens of validators and the re-delegation of approximately 6 million SOL.
- In response, Marinade launched Marinade Select, a permissioned staking product open only to KYC-verified, reputable validators, offering institutions a fully compliant and secure staking option.
The Current State of Sandwiching on Solana
- Jack asks whether sandwiching is still a major issue, noting that the public discourse has quieted down. Michael suggests the problem hasn't disappeared but has become more sophisticated.
- Current tooling shows very few sandwiching validators, but Michael believes this is because attackers have adapted their methods, making them harder to detect. He refers to this as a "cat and mouse game."
- He also agrees with Anza's Max Resnick that technical improvements on Solana have reduced transaction leakage, which naturally decreases opportunities for such attacks.
- Strategic Takeaway: While protocol-level fixes are the ideal long-term solution, Marinade's current approach is to ensure that any MEV captured through its system is distributed back to stakers, turning a potential negative into a source of yield.
The Institutional Battleground: Winning the ETF Staking Game
- With Solana ETFs on the horizon, the discussion turns to the highly competitive business of becoming an official staking provider for these products.
- Michael notes that for ETF issuers, the primary criteria are compliance and security, with yield being a secondary consideration.
- The major challenge for a Solana-native protocol like Marinade is competing with large, multi-chain node operators (e.g., Coinbase) that have pre-existing relationships and economies of scale with asset managers from the Bitcoin and Ethereum ETFs.
- Marinade's value proposition is its ability to offer diversified, on-chain delegation to dozens of community validators, which would otherwise be inaccessible to large institutions. This helps decentralize the network while providing competitive, transparent yield.
- Marinade has already secured partnerships with Canary's Solana ETP and Bitwise's European product and is integrated with custodians like BitGo, Copper, and Zodia.
The Surprising Scale of Private Validators
- Michael reveals a fascinating and often overlooked segment of the Solana staking market: private validators.
- Private Validators: Nodes that run with a 100% commission, meaning any third-party stake delegated to them earns zero rewards. They are used by large SOL holders to stake to themselves.
- An estimated 25% of all staked SOL is delegated to these private validators.
- The primary motivation is to capture 100% of the rewards, including priority fees, which are not typically shared with delegators in standard native staking. This can add an extra 30-50 basis points of yield.
- Investor Insight: This highlights a significant pool of capital that prioritizes yield maximization and control over simplicity. Marinade sees an opportunity to offer these large holders a more efficient alternative that provides similar or better yield without the operational overhead of running a node.
MNDE Tokenomics and Future Product Direction
- The Marinade DAO recently approved a proposal to direct 100% of protocol revenue to its treasury. 50% of this revenue is now used for a continuous buyback of the MNDE token.
- In Q4, Marinade plans to launch "Recipes," a feature allowing users to receive their staking rewards in a stablecoin instead of SOL, providing a predictable, dollar-denominated cash flow.
- Looking ahead, Michael's vision is to blur the lines between native and liquid staking, creating a "savings account" for Solana where securely staked assets can be used as a line of credit, for margin trading, or as collateral without compromising security.
Conclusion
This episode highlights the maturation of Solana's staking ecosystem, where the focus is shifting from pure liquidity to risk-mitigated, institutional-grade yield generation. For investors and researchers, the key takeaway is that native staking solutions offering compliance, security, and transparent yield are positioned to capture the next wave of institutional capital.
