What is mSOL?
Liquid staking can be confusing. mSOL tokens represent your staked SOL tokens. Let's see what this means.
What is mSOL?
mSOL is a liquid staking token that you receive when you stake SOL on the Marinade protocol. These mSOL tokens represent your staked SOL tokens.
They act as a receipt, allowing you to exchange them later on for your staked SOL and the earned rewards. Meanwhile, you can use mSOL in DeFi while enjoying your staking rewards.
Do I need to claim my rewards?
The short answer is no. mSOL is a frictionless token. This means that each epoch, its value is recalculated. Staking rewards are earned for the SOL staked in Marinade. The price of mSOL is then calculated as follows:
Price of mSOL = total_staked / tokens_minted
As the protocol cannot create new mSOL without SOL being exchanged for them, only the total staked amount is going up (for any new mSOL minted, the same amount of SOL, at the current price of mSOL, has to be staked and also joins the total staked amount).
This means that the price of mSOL is going up each epoch relative to SOL as long as staking rewards are distributed for the SOL staked in the protocol. If you keep mSOL for a year, its value against SOL will have gained 6.21% (Marinade's APY at time of writing).
Is mSOL safe?
As we just saw, as long as Marinade protocol earns staking rewards, your investment is growing. How does Marinade ensure that the protocol is safe?
We have undergone a series of audits to ensure that our code is safe. It is also on the verge of becoming open source for everyone to see. Risks always exist in DeFi, but mSOL's tokenomics and Marinade protocol are both designed with security as a major concern. You can learn more about this on this page:
Our delegation strategy is also built to improve decentralization rather than focusing on pure APY, aiming to secure the network. You can learn more about it in our delegation strategy below.
What can I do with mSOL?
mSOL tokens already have dozens of use cases in our growing ecosystem. They allow you to access DeFi protocols while enjoying your staking rewards and helping the network. To help you get started, here is a non-exhaustive list of DeFi protocols where you can use mSOL:
Borrowing/Lending - mSOL can be used as collateral or borrowed on multiple platforms.
Liquidity provision - You will find many liquidity pools using mSOL in DeFi. They can be divided into two categories:
mSOL/SOL pools - These pools are a way to use your mSOL in DeFi while avoiding impermanent loss.
mSOL/XXX pools - These pools will be subject to impermanent loss but will allow you to provide liquidity on a large number of pairs.
Single-asset staking - As of today, it is possible to stake your mSOL to earn MNDE, our governance token. This is only possible on Marinade.
Trade on DEXs - mSOL is available on most decentralized exchanges and can be traded for other crypto tokens. Remember, by trading your mSOL, you also trade your accumulated rewards.
And this is just the start. mSOL could theoretically replace SOL in the whole DeFi ecosystem. Any protocol that is currently using SOL could integrate mSOL. The network would become more secure and decentralized and our users would all earn their staking rewards while enjoying DeFi as they currently do.
If you still have any questions left or if you want to get involved in our community, join us on Discord and come meet us in our kitchen!
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