The Validator Advantage 🔐
Sol Strategies bets on staking yield as USP
Hello!
Every Saturday I dive into a podcast by our partners at Decentralised.co and share what caught my attention.
This week's chat with Leah Wald, CEO of Sol Strategies, and Max Kaplan, their CTO, was more than about corporate treasury strategies. It was about why some blockchains make you want to throw your laptop out the window, while others work like normal software should.
Listen to the full episode here.
Having spent six years as one of the first engineers at Kraken, Maxhe's has seen both sides of the trading world. A centralised exchange then, and leading the tech team of an infrastructure company focused on Solana. His explanation of Ethereum's UX problems reminded me of the nightmare I went through when I tried buying a basename with some ETH lying in my wallet.
"You might have a token on Base that you want to use, but you don't have any ETH on base, but you have it on Arbitrum. And you got to bridge it back from Arbitrum to the ETH L1, then back to the base L1. Solana is just easier to use."
Solana’s UX advantage shows up in recent, lived experiences, too. It’s not easy to forget the launch of the $TRUMP memecoin and the hullabaloo around it.
When $TRUMP launched, Solana DEXs handled "double the volume of both Kraken and Coinbase combined."
“I think memecoins are the noise. Yes, they generated a ton of revenue in 2024. But take a step back and see why it happened. That’s where the real signal is. There were many other chains where memecoins could have been launched. Why Solana? It’s the only chain that can support so much volume,” he said.
Unlock Web3 Insights with Decentralised.co
Long-form stories trusted by the best in Web3. Senior executives from 140+ enterprises trust them to keep them updated on what's going on in crypto.
Good writing. In-depth conversations. Right in your inbox.
Subscribe to Decentralised.co
In terms of treasury, too, both Max and Leah spoke at length about why Solana offers an edge that Bitcoin treasury companies don’t enjoy.
The edge is not limited to just staking rewards.
With MicroStrategy, Michael Saylor had cracked a code: borrow cheap money, buy an appreciating asset, and let time work its magic. The formula worked.
With Solana, native yield generation is just one of the benefits Sol Strategies has over a Bitcoin treasury company.
Sol Strategies operates validators that currently handle 3.74 million SOL in delegations worth over $590 million.
This validator business allows them to bring down the cost of buying more Solana. How? That validator business generates staking yield, which they use to partially fund their bond interest payments.
This creates a self-reinforcing loop that Bitcoin treasury companies cannot build. More SOL staked means more yield generated. More yield means lower effective acquisition costs for additional SOL. Bitcoin appreciates, but it doesn't generate yield to fund operations.
Beyond just yield generation, Sol Strategies’ bet also gives them exposure to appreciation of Solana’s price, something that I know, is open to debate. Ask those who have seen their SOL bags slide almost 50% so far from its all-time high around the start of this year.
Well, you have to be patient. At least that’s the kind of attitude Leah is looking for in prospective investors.
“It’s a tough argument for retail investors focused on the short term to buy into,” Leah admits, while clarifying that her focus is on institutional investors, family offices, and ETF portfolio managers, who are focused in the long term.
“At the end of the day, it is the bet on the future of Solana.”
So, what’s the long term pitch? Revenue.
Leah believes self-reinforcing revenue loop separates Sol Strategies from any other treasury company.
Both Leah and Max believe that as more activity takes place on Solana, it will lead to higher transaction fees. Higher fees will generate more revenue for validators, which helps Sol Strategies acquire SOL at effectively lower costs.
When you first look at crypto treasury companies, you would wonder why Wall Street is willing to pay $2 for a stock that holds crypto assets worth $1?
Probably because there aren't many ways for investors with restrictions to get Solana exposure through traditional stock exchanges. That’s not all. Investors now have the Rex-Osprey Solana ETF that also allows staking. More are underway. At least eight others have already filed S-1s, the initial registration form for new securities required to be filed with the US Securities and Exchange Commission, for issuing spot Solana ETFs.
Leah feels that while pure-play treasury companies may see their premiums compress as Solana spot ETFs pick pace, a company that is building in the Solana ecosystem with focus on supporting the Solana ecosystem through their validator business is likely to retain its premium.
We have already seen competitors like DeFi Development Corp (DFDV) aggressively follow Sol Strategies’ playbook.
I am interested to see how the space evolves as more ETFs with staking capabilities join the race. Perhaps Sol Strategies’ soon-to-launch on-chain shares (Max expects them to be out by end of 2025) with full ownership and voting rights will be an interesting development for investors.
That’s it for this Saturday. See you next week.
Check out the full episode to hear Leah Wald and Max Kaplan’s full conversation with Saurabh Deshpande about token launches, public valuations and founders wanting to build cool stuff.
Token Dispatch is a daily crypto newsletter handpicked and crafted with love by human bots. If you want to reach out to 200,000+ subscriber community of the Token Dispatch, you can explore the partnership opportunities with us 🙌
📩 Fill out this form to submit your details and book a meeting with us directly.
Disclaimer: This newsletter contains analysis and opinions of the author. Content is for informational purposes only, not financial advice. Trading crypto involves substantial risk - your capital is at risk. Do your own research.