3 ways to make money on Solana DeFi

• Introduction

• Validator Staking

• NFT Lending

  • Why is NFT Lending growing so fast?

  • Main Platforms

• Airdrop Farming

  • marginfi

  • Cypher Protocol

Introduction

There are many ways to potentially generate yield from farming, airdrops, providing liquidity, and staking. Today we will take a look at some of the methods that allow users to either generate yield or obtain eligibility to receive airdrops.

Validator Staking

Validator staking on the Solana blockchain involves committing SOL tokens as collateral to participate in consensus. Validators validate transactions and produce blocks, maintaining network integrity. Validators stake a specific amount of SOL tokens and are rewarded with newly minted SOL and transaction fees. The higher the number of stakers and the better their geographical distribution, the higher the Decentralization, security and growth.

If you’re interested in staking your SOL, consider staking with Step Finance’s Validator.

Liquid Staking

Liquid staking refers to a process where users can stake their native token while still maintaining their liquidity. Traditional staking usually involves locking up tokens for a specific period, during which they cannot be easily accessed or traded. In contrast, liquid staking provides a way to "stake" tokens while keeping them fungible and tradable in the market.

Marinade Finance is the biggest DeFi project on Solana, with the highest TVL. By staking SOL with Marinade, users receive the same $ amount of their liquid token, mSOL. mSOL is the liquid SOL token with the most DeFi integrations, offering users the possibility to multiply yield by staking mSOL tokens on a DeFi platform, while also receiving rewards from the staked SOL tokens.

NFT Lending

NFT lending is a growing practice where individuals pledge their NFTs as collateral to obtain loans on platforms like Sharky. This form of lending allows investors or lenders to earn interest on their investments. NFT lending offers the potential for higher returns compared to staking and standard crypto-based lending. In NFT lending, borrowers secure their loans by locking their NFT assets as collateral.

NFT lending is possible through decentralized finance (DeFi) applications. DeFi platforms use smart contracts to govern the lending terms and rates for NFT loans. As NFT lending is a relatively new trend, it is expected to evolve further as more individuals and capital participate, and regulatory measures may come into play.

Why is NFT Lending growing so fast?

There are several reasons why the market is growing at a fast pace. One of the main reasons why is that lending allows a less risky way of earning SOL when compared to NFT Trading. Although loans may default, the risk of losing money is theoretically lower than with NFT Trading. Even though it is arguably far riskier, many users prefer to lend their SOL on such platforms instead of staking SOL on a validator, stating that the yield compensates for the risk taken.

The NFT Lending market attracts a new group of users, which are somewhere in between the high-risk and low-risk profiles. There is a segment of the ecosystem which neither likes NFT Trading due to being high-risk, nor staking their SOL as they do not see yield worth the risk of delegation. These users likely have their SOL in hot wallets and can now have a chance to earn high yields for a lower amount of money invested.

Those with a risk profile between high-risk and low-risk may be interested in lending their SOL on platforms such as Sharky and Citrus.

Main Platforms

The main lending platforms on Solana are Sharky, Citrus, Frakt and RainFi. Sharky holds a 67% dominance of the lending market, followed by Citrus with 21% and Frakt with 12%. Note that these percentages may differ as mentioned by the Lending Aggregator WolfCap.

Airdrop Farming

As covered in our previous newsletter, July has seen a broad increase in interest in the Solana DeFi ecosystem due to a shift in sentiment as well as the airdrop announcement from several DeFi projects such as margin fi, Cypher Protocol and more.

marginfi

The lending platform, MarginFi, offers users points based on their lending and borrowing activities. Lending earns 1 point per dollar lent daily, and longer lending durations boost points. Users with larger deposits and longer activity have more points. Borrowing is important too, with 4 points per borrowed dollar daily. Referrals also earn points, starting with 10% of referred users' points. Referring users gain a bonus as the referral network expands.

The points system is designed to foster engagement, community growth, and user-friendly interactions within the DeFi landscape.

Conclusion

There are many opportunities to potentially make money in the Solana ecosystem. Although this is true, the risks must be known. There is always a risk of losing all your money in case of exploits, hacks or rugpulls. Being a DeFi power user requires continuous learning and active position management.