Solana saw blockbuster growth throughout 2021, and the fledgling crypto is now ranked in the top 10 crypto assets by market cap. It has far outpaced the price performance of better-known cryptocurrencies such as Bitcoin and Ethereum, making Solana a top contender in the crypto space.
But while investors may be able to win big by betting on Solana, price gains aren’t the only way to profit from Solana (SOL). As a proof-of-stake cryptocurrency, Solana also offers investors the opportunity to earn passive returns through staking. Solana staking can provide additional returns if you plan to hold your tokens and helps secure the network. If you’ve been wondering how to maximize the returns on your investment into SOL, here’s what you need to know about Solana staking.
Featured Solana Staking Pools for August 2022
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- Liquidity through tokenization — There are no activation delays, and you'll get the ability to sell your staked tokens or use them as collateral in decentralized finance.
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- Decentralized security — The assets in this pool are spread across the industry’s leading validators chosen by the Lido DAO.
|Lido APR for SOL||5.4%|
|SOL Staked||2,830,153 SOL|
|Supported Wallets||Phantom, Solflare, Ledger, Solong, Sollet|
What is Solana?
Solana is a decentralized blockchain that was built to enable scalable, user-friendly apps. It is the fastest blockchain in the world — and is also the fastest growing crypto ecosystem — with thousands of projects that span DeFi, NFTs, Web3 and more.
Solana’s sole focus is speed, with 400 millisecond block times. As hardware gets faster, so does the network — but the price doesn’t increase with the speed. The scalability of this project ensures that the transaction fees remain less than $0.01 for both developers and users.
And that’s what makes it stand out — the promise of lower overall costs and faster transactions.
How does Solana staking work?
When transactions need to be verified, staked tokens play a role in the process. In return, staked tokens earn a reward for helping to secure the network.
Rather than leave your Solana tokens sitting idle on an exchange or in a wallet, you can earn a variable interest rate by staking your tokens to help secure the network and validate transactions.
Solana secures its network through a combination of Proof of Stake (PoS) and Proof of History (PoH) to maximize speeds. With Solana staking, PoH is used in place of Proof of Work (PoW), which is the typical option on other platforms, like Bitcoin.
You can stake Solana two ways: either through a wallet that supports staking, running a validator node, or through a staking pool. If Solana goes up in value, you get access to the gains when you unstake your tokens and trade. However, tokens that are staked can’t be used or traded until they are unstaked.
Luckily, Solana staking and unstaking is simple, and allows you to remain nimble in a fast-moving crypto market. Where and how you choose to stake your Solana can make a difference in the rewards rate and your ability to trade, though.
Potential returns for staking Solana
Solana staking generally does not offer a fixed interest rate. Rather, the rate can fluctuate based on network conditions — with rates generally based on the amount of SOL tokens staked compared to the supply of tokens.
In general, you can expect an annual percentage yield (APY) that starts at about 6%. That can and will change, but the range has consistently hovered at about 6% recently.
As with other interest-bearing financial products, SOL rewards earnings are driven by the amount you deposit — or, in this case, the amount you stake. The length of time you choose to stake will also affect your overall earnings. Staking for a shorter period or staking a smaller amount can limit your earning potential.
If you see an offer of significantly higher staking rates on certain platforms, be sure to check the fine print before making a decision. The platform you’re considering may be using locked staking that commits you to stake your SOL tokens for a longer period of time. This can result in higher returns — but can also put you at risk if the price of SOL changes and you want to sell but can’t due to locked tokens.
How much can you make for staking Solana?
|Stake Amount||APY||Duration||Potential Earnings|
|$1,000 in SOL||5.78%||1 year||$57.86|
|$10,000 in SOL||5.78%||1 year||$578|
|$100,000 in SOL||5.78%||1 year||$5,873|
|$100,000 in SOL||5.78%||180 days||$2,884|
|$100,000 in SOL||5.78%||5 years||$32,439|
Solana staking rewards are paid in Solana tokens, but we can use a dollar value to better understand earnings potential through staking.
One of the biggest factors for returns is the amount of SOL you stake. For example, let’s say you choose to stake $1,000 worth of SOL tokens with a total reward rate of 5.78%. Over the course of a year, your $1,000 stake may earn an additional $57.86. On the other hand, a $10,000 stake may earn $578 annually at that rate — and a $100,000 stake may earn about $5,783 annually.
The staking period you choose will also have an effect on your rewards. Staking for a shorter period of time will result in lower rewards because your staked tokens won’t spend as much time earning as they otherwise would. While a $100,000 stake may earn about $5,783 annually, staking for half the time (a 180-day stake) at the same rate and with $100,000 worth of SOL could result in rewards that are worth about $2,884 — which is significantly less than the annual rewards.
In the above example, the rate hasn’t changed, but the stake duration has. However, rates will fluctuate over time, and the effective reward rate can also vary based on network conditions and fees from the staking provider you choose.
What to know about returns for staking SOL
There’s a supply and demand element to staking Solana. In the examples above, we assumed that 75% of the total SOL supply is currently being staked.
Solana pays staking rewards once per epoch, with each epoch being about 60 hours — or two to three days. Rewards are paid to the validators, delegators, and people who have SOL staked. While yields are expressed on an annual basis, staking Solana typically results in receiving rewards more than 100 times per year.
Rewards are paid to your staking account or wallet and are automatically staked in addition to your initial stake. You can also unstake your rewards — or your initial stake — but rewards and stakes are subject to a short cooling down period of two to three days. By leaving your rewards staked, though, you can get larger returns over time through the magic of compound interest.
The rewards rates can also vary based on whether you delegate your SOL, run a Solana validator, or lend your SOL. It’s worth noting that lending SOL isn’t technically staking, but is often referred to as staking online.
In most cases, the easiest solution is to delegate your SOL tokens, although this typically earns a slightly lower rate compared to running a validator since validators usually charge a commission.
Right now, about 99.77% of all Solana staked tokens are delegated to a validator to earn rewards. The remaining 0.23% run a validator. Running a validator isn’t for beginners and can have significant costs.
What to know about Solana validators
Before discussing staking pools, which is a popular way to earn with SOL, it may be helpful to discuss validators.
In essence, a validator is both a record keeper and a (paid) voting board member. Validators process transactions on the Solana network and participate in consensus, which refers to an agreement on the order of transactions.
Validators provide a decentralized structure for Solana. This is used in place of having one central authority that determines the validity of transactions or a handful of powerful entities controlling much of the transaction volume.
On a related note, you’ll also encounter the term “delegators” when researching validators. A delegator assigns staked tokens to a validator.
In many cases, the delegator is you — the investor staking Solana tokens. However, many Solana staking pools can provide passive delegation, automatically choosing a validator for each SOL stake.
What to know about Solana staking pools
Solana staking pools offer a way to help decentralize the Solana network and can sometimes lead to higher yields. By distributing Solana stakes across a wider range of validators, a Solana staking pool helps build a wider and safer network, and some staking pools offer access to hundreds of validators.
Without pools, much of Solana’s staking activity would be limited to a small group of validators, making the network more centralized. Other cryptocurrencies, such as Bitcoin, face similar challenges, with just a few mining groups controlling the vast majority of all newly-mined Bitcoins.
In general, staking pools are considered to be safe, but each can have a slightly different structure or offer different ways to earn. Staking pools can also come with an extra cost, although typically just a small percentage of earnings.
For example, Marinade, among the largest SOL staking pools, offers access to over 450 validators and deducts a 2% fee from pool rewards each epoch. The average APY for SOL staking on Marinade ranged from just over 6% to 6.11% in recent weeks.
How to choose a Solana validator
When it comes to choosing a validator, it can be useful to weigh several factors.
However, some criteria can be counterintuitive. For example, a large validator may not always be the best choice, particularly if you favor a decentralized network. Well-established validators may also charge higher fees.
Some of the factors you may want to weigh include:
- Size: It can be helpful to weigh the number of delegators or the total amount staked when choosing a validator. However, larger validators generally don’t make staking any safer, and smaller ones don’t make staking any less safe. In some cases, however, larger validators will have more funding to purchase faster hardware or network capacity.
- Commission (fees): Expect to find fees ranging from 0% for new validators trying to attract stakes up to 10% on the high end. When you earn staking rewards, the validator deducts the fee from the reward for each epoch.
- Speed and reliability: Slower (or offline) validators can cost you money. The Solana network is focused on speed, so validators that are slower (or offline) may be skipped for consensus, which may result in lower earnings over time.
Tools you can use to help you choose a validator that matches your priorities include:
You also have the option to set up your own validator, but it’s helpful to be aware of the upfront costs and ongoing expenses associated with doing so.
The Solana documentation suggests a 16-core processor with 256 GB of RAM and multiple SSDs, including a 1TB or higher SSD for ledger storage. In addition to hardware investments, you’ll want to become familiar with the minimum requirements to participate in consensus. Sending vote transactions can cost up to 1.1 SOL per day.
That said, running a validator can be profitable, but profits aren’t guaranteed. You’ll likely have carrying costs until your validator attracts enough delegators to turn a profit.
Is it safe to stake Solana?
Staking doesn’t pose a risk to your SOL tokens themselves. Solana staking is non-custodial, meaning you don’t lose possession of your tokens. It’s not like making a deposit in a bank — only to find the bank boarded up the next day.
However, risks can arise in other ways when staking Solana. These include:
- Volatility: Crypto prices move quickly, and when your tokens are staked, you can’t trade or spend them. In most cases, you can exit a stake and can trade the previously staked tokens again within two to three days, but some platforms may require longer commitments.
- Earnings risks: A number of factors can affect your rewards earnings, including validator downtime or slow validators that get skipped for consensus. There’s also the risk that a validator can change their fee before the new epoch, reducing your earnings. Of these risks, slow validators are likely the largest concern. There are tools available to gauge speed and historical uptime before choosing.
How to stake Solana
The two primary ways to stake Solana work similarly. You can choose to stake Solana through a validator you choose or you can stake Solana through a staking pool.
To stake Solana directly through a validator, you can follow these steps:
- Choose a wallet that supports Solana staking.
- Fund your wallet. You may have Solana tokens on an exchange or in other wallets. Transfer some of your tokens to your Solana wallet that supports staking.
- Choose the amount you want to stake. Bear in mind that you don’t need to stake all your tokens but the amount you stake impacts your earning potential. Yields (rewards) aren’t affected by stake amounts but the amount you stake drives your earnings. A larger stake can earn more.
- Choose a Solana validator. While validators earn the same reward, fees and server efficiency can play a role in how much of the staking reward reaches you.
- Delegate your Solana tokens to the validator you’ve chosen. Each wallet has a slightly different user interface, but functionality is usually similar. Look for the staking section in your wallet. If you’re using the Phantom wallet, for example, you can search for your preferred validator by name and then enter the number of SOL tokens you want to stake.
- Start earning Solana rewards. Your stake helps validate transactions on the network. At the end of each epoch, you’ll earn rewards for your stake — minus any fees deducted by the validator. Rewards are automatically added to your stake amount, allowing you to compound your earnings.
You’ll follow similar steps during the process of staking Solana through a pool, with the primary difference being that you stake to a pool rather than directly to a validator. In many cases, the pool chooses a validator based on its own criteria. Some pools use algorithms to automate this process with the goal of higher yields or better decentralization — or both.
Is staking Solana right for me?
Many industry experts expect Solana to continue its price gains in the coming years, so staking can be a good way to earn a bit more while you wait to sell — if selling is your end goal.
There’s also limited risk with staking Solana. That’s because staking is non-custodial, so you always hold your own tokens. This structure largely limits any staking risks to what comes with choosing a slower validator or a pool with higher fees.
There’s also the risk of market volatility to take into consideration, as staking can make you less nimble, delaying your ability to trade by a few days.
That said, staking Solana can be a good bet for the right person. With the ability to stake directly to a validator through a wallet or to join a pool to help decentralize the network (and perhaps earn a bit more through validator optimization), staking Solana is often a safe, easy, and profitable way to build toward your future.
Frequently asked questions
Can you compound your Solana staking?
What is the minimum amount of Solana to stake?
What Solana wallet should I use when staking?
Should I use Coinbase to stake Solana?