The emergence of Solana Exchange-Traded Funds (ETFs) introduces a critical split in the ecosystem. Non-staking ETFs inadvertently boost rewards for on-chain participants, while stake-enabled funds offer convenience at the potential cost of increased network centralization.
The Great ETF Divide: To Stake or Not to Stake?
Solana's robust staking culture, with over two-thirds of its supply delegated to validators, now faces a new dynamic. The market is splitting between two types of ETFs: those that hold SOL passively and those that actively stake it. Hong Kong's ChinaAMC Solana ETF, for instance, is explicitly non-staking, imposing a 1.99% fee that creates a negative yield compared to spot holdings. Conversely, US products like the REX-Osprey SSK delegate their holdings, passing through yield to investors but raising important questions about network control.
Unstaked ETFs: An Unlikely Ally for On-Chain Stakers
Contrary to initial fears, non-staking ETFs don't drain on-chain yields; they gently raise them. Solana's reward model is designed to be self-correcting. When the percentage of staked SOL decreases, the same pool of inflation rewards is distributed among fewer participants, thereby increasing the APY for everyone who remains staked. This creates a powerful incentive for capital to flow back on-chain, establishing a new equilibrium.
Key APY Impact
The math is clear: $1.5 billion in non-staking ETF assets would nudge the staking APY from 6.06% to 6.18%. If that figure grows to $10 billion, the APY could rise by a significant 88 basis points, effectively subsidizing dedicated on-chain stakers.
The Centralization Conundrum of Staked ETFs
While stake-enabled ETFs seem beneficial by maintaining the staking ratio, they introduce a significant risk of centralization. Instead of a distributed community choosing validators based on performance, institutional custodians direct billions of dollars in delegations. This power can concentrate within a few large, compliance-focused validators, shifting control over block production and transaction ordering away from the broader community.
The real question isn’t whether ETFs drain staking, but whether the institutional capital they unlock stays passive or begins steering Solana’s validator economy from the inside.
Who Chooses the Validators?
Designs like SSK's allow custodians to choose validators and even hold other staked ETPs, creating layered structures where multiple intermediaries take a fee. This is operationally similar to Lido's role in Ethereum, but it lacks on-chain governance and the composability of a liquid staking token. The result is a validator set skewed towards entities with robust US legal footprints and compliance infrastructure, rather than those chosen for decentralization or performance.
Market Projections and Future Implications
JPMorgan projects a base case of $1.5 billion in first-year inflows for US-based Solana ETFs. If this capital flows into non-staking funds, the on-chain APY will see a modest increase. However, if stake-enabled products dominate, validator concentration could accelerate rapidly. The path forward depends on the marginal buyer: retirement accounts will likely choose the ETF route for its simplicity, while on-chain users will continue staking natively to capture full rewards and maintain control. The community must monitor on-chain data to see whether these new financial products ultimately diversify or concentrate the power within the Solana network.