Why do Binance, Bybit, and Bitget all want a share of the Solana staking market?

Original Title: “Why Binance, Bybit and Bitget Want a Piece of the Solana Staking Market”
Author: Sage D. Young, Unchained
Translation: Felix, PANews
The liquid staking ecosystem of Solana is gradually expanding, with new major players joining continuously.
On August 29, three centralized exchanges, Binance, Bybit, and Bitget, launched new liquid staking tokens (LSTs), which will allow holders to earn rewards while ensuring the security of the Solana blockchain and still participate in lending and other DeFi activities.
According to DefiLlama data, the liquid staking ecosystem on Solana has more than doubled this year, growing from $1.9 billion TVL on January 1 to $4.1 billion, with the three protocols Jito, Marinade, and Sanctum accounting for nearly 77% of the market share.
On the X platform, Sanctum hinted at its role in the launch of BNSOL (Binance) and BBSOL (Bybit) by responding to Binance's announcement with a handshake emoji and stating that, in light of Bybit's disclosure, "we are ready to help bbSOL grow stronger."
According to CoinGecko data, since the announcement, Sanctum's governance token CLOUD has risen by over 40%, jumping from $0.169 to $0.25.

The Booming Liquid Staking Field of Solana

An increasing number of participants are entering the Solana liquid staking ecosystem, highlighting the maturation of the LST market on Solana.
Marinade is the second-largest liquid staking provider on Solana, with a TVL of $745 million, having launched its LST in 2021; while Jito is the largest liquid staking provider, with a TVL of nearly $2.9 billion, having launched its mainnet at the end of 2022.
However, the total liquid staking TVL (which first appeared on Ethereum when Lido Finance launched its LST in 2020) is $42.5 billion. Among them, Ethereum holds 83% of the market share, which is several times that of Solana's 9.6%.
Andrew Thurman, a contributor at the Jito Foundation, added, "About 40% of staked ETH is liquid staking, while only 6% of staked SOL is liquid staking." "It is expected that the numbers for both will gradually converge, meaning there is still significant growth potential in the Solana liquid staking market to accommodate many products."
Lucas Kozinski, a founding contributor of the Ethereum restaking protocol Renzo, stated that the launch of Solana LSTs by the three exchanges could be a "big deal." "This indicates that some of the infrastructure and products we have on Ethereum are just beginning to launch on Solana." These products will help onboard users into Solana's native DeFi.
Jacob Joseph, a research analyst at crypto analytics firm CCData, stated, "The staking ecosystem of Solana has rapidly expanded over the past few years, with companies like Jito and the recent Sanctum joining the ranks." This "indicates that Solana is receiving increasing attention."

Launching LSTs to Increase Revenue

As for why these exchanges are becoming active in Solana's LST ecosystem, Lucas Kozinski, a founding contributor of the Ethereum restaking protocol Renzo, suggested that one possible reason is that launching new LSTs "can provide users with additional products to earn extra rewards and charge fees from them."
Binance is the third-largest LST by market cap, charging a 10% fee on staking rewards for ETH. According to its official website, the 10% fee is used to cover operational costs such as hardware and network maintenance for its validator nodes.
Suki Yang, co-founder of the Solana-based Memecoin platform LMAO, shares a similar view. "Imagine if users use Solana liquid staking tokens on the exchange; all Binance has to do is take a cut from the rewards generated by the liquid staking tokens… Doing this (launching LSTs) is completely in their own interest."

Keeping SOL on Exchanges

Another possible reason these centralized exchanges want to launch LSTs is to keep as much SOL on their platforms as possible.
Suki Yang, co-founder of LMAO, stated that exchanges optimize for two metrics, just like investment banks: trading volume and assets under management (AUM). By offering their own LSTs, they allow users to stake their SOL within the exchange without needing to withdraw.
Without LSTs, exchanges cannot earn value when tokens are withdrawn from the exchange. Additionally, the more assets on the platform, the larger the AUM, which enhances the company's credibility, attractiveness, and financial valuation.
As of August 1, Binance's net balance of SOL (composed of customer deposits and third-party custody) was 32,732,433.696 SOL, valued at approximately $4.7 billion, accounting for about 7% of the circulating supply of the token. On the other hand, as of August 8, Bybit's balance included 2,643,721 SOL, worth about $375 million.