Solana News: Solana Briefly Surpasses Ethereum in Staking Market Cap—Bullish Momentum or Red Flag?

SOL's Staked Value Flips ETH—But Not Everyone's ConvincedSolana briefly overtook Ethereum in terms of total staked market cap, igniting a heated debate among analysts and investors. While some viewed the milestone as a major achievement for Solana, others questioned whether the network’s staking dominance could be a long-term drawback.As of April 20, over $53.9 billion worth of SOL was staked on the Solana network, spread across more than 505,000 unique wallets, according to blockchain data. The network currently offers an annualized staking yield of 8.31% — a rate that significantly outpaces Ethereum's 2.98%.This staked value briefly edged past Ethereum’s $53.93 billion in locked ETH, despite Ethereum having more than 34.7 million staked tokens, per Beaconcha.in.Why Did Solana Overtake Ethereum in Staking Value?The flippening was driven largely by SOL's outsized price performance over the past two years. Since June 2023, the SOL/ETH price ratio has surged nearly 10x, climbing from 0.0088 to 0.0866, according to CoinGecko.Yet, not everyone sees this shift as a bullish development.High Staking Rewards May Be Hurting Solana DeFiIndustry observers argue that Solana’s generous staking yield may actually be pulling users away from DeFi, diminishing capital availability for protocols across the network.“Solana having 65% of its market cap staked means there's no other use of its token. It's actually bearish,” said JC, a developer at Builda Protocol, on X.Tushar Jain, Managing Partner at Multicoin Capital, echoed the concern, stating it’s irrational to lock funds into DeFi protocols when staking offers a higher return.“It doesn’t make sense for you to provide liquidity on a SOL/USDC AMM when that might earn you 5%, but staking earns you 7%,” he said.DeFiLlama data shows that Ethereum leads in DeFi with $50.4 billion in total value locked (TVL), compared to Solana’s $8.85 billion. In liquid staking, Ethereum again dominates, boasting $21.5 billion in liquid staked ETH versus Solana’s $7.2 billion in liquid SOL.Staking Debate: Is Solana Truly Secure?Solana’s staking model is also under fire for its lack of automatic slashing penalties — a key feature that punishes bad behavior in Ethereum’s staking architecture.“It’s ironic to call it staking when there is no slashing. What’s at stake?” said Ethereum researcher Dankrad Feist in an April 20 post. “Solana has close to zero economic security at the moment.”Solana Labs responded by stating that slashing is possible but not automatic. Punitive action against malicious validators requires a network-wide restart, a process viewed by some as impractical. CEO Anatoly Yakovenko confirmed that a more robust “correlated slashing” model is in development and expected later this year.Meanwhile, Ethereum developers are working on efforts to further decentralize staking, following concerns over Lido’s 88% market share in Ethereum’s liquid staking sector. High entry costs—32 ETH minimum to become a validator—have pushed many users toward centralized staking pools, raising concerns over the network's decentralization trajectory.