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Learn about Solana Staking
How to stake Solana (SOL)?
There are several ways to earn a return on your SOL, including lending them out to custodial providers or through decentralized lending protocols, running your own validator, or delegating your tokens to validators of your choosing.
For the best security and control over your funds, we recommend using a Ledger Hardware Wallet. To delegate your tokens, you should ensure they are stored on your Ledger or another compatible wallet such as Solfare Wallet, and then follow these steps:
Step 1: Make sure you already have SOL tokens in a supported wallet, such as Solfare Wallet. Open the wallet and click on ‘ACCESS WALLET’ at the top right corner.
Step 2: After you enter your wallet interface, click on ‘START STAKING’, choose “Native SOL Staking” and click on ‘START STAKING’ again.
Step 3: Input the amount of SOL tokens you would like to stake and choose a validator from the drop-down menu to delegate to. Check our FAQ on how to choose a validator if you are unsure who to delegate to.
Step 4: Click ‘STAKE’ and ‘CONFIRM’ to finalize the transaction.
Note that each stake account can only be used to delegate to one validator at a time. To delegate a fraction of your tokens to a validator or to delegate to multiple validators, you must create multiple stake accounts.
Additionally, there is a limit on how much total stake can be delegated or deactivated in a single epoch to prevent large, sudden changes in stake across the network. No more than 25% of the total active stake on the network can be activated or deactivated in a single epoch. If more than 25% of the total active stake on the network is being activated in a single epoch, a portion of the activating/deactivating stake up to the global 25% limit will change state at the first epoch boundary, while the remaining stake will stay as “activating” or “deactivating” for at least one more epoch until the next epoch boundary.
When you delegate or deactivate a stake account, the operation does not take effect immediately. It takes several epochs to complete and the exact duration of the warmup and cooldown periods is difficult to predict because they depend on the behavior of other network participants.
Do I need to maintain my staking in any way?
After delegating your SOL tokens, there are a few things to keep in mind:
- With your effective staked SOL, you will receive rewards every 2-3 days that will automatically be added to and compounded with your staked amount.
- Stake accounts have a lockup period during which the staked tokens cannot be withdrawn to the wallet before a certain date. While locked up, the stake account can still be delegated, un-delegated, or split, and its stake and withdraw authorities can be changed as usual. A lockup can only be added when a stake account is first created, but it can be modified later by the lockup authority or custodian, whose address is also set when the account is created.
How do I choose Solana validators?
It is essential for users to stake their PoS tokens with dependable and highly performant validators, which is why we have rolled out our Staking Rewards Verified Staking Provider (VSP) Program in June 2022. Through this program, we thoroughly scrutinize potential validators, evaluating factors such as security measures, their on-chain reliability, their provider setup, and value-added services for the whole ecosystem.
There are many metrics to consider when selecting a validator to delegate to:
Commission Rates: The commission rate a validator charges is the % of your reward that the validator keeps for themselves. A high commission rate means your rewards will be lower whilst a low commission rate could mean that the validator is not profitable and could cause issues for them in the future. Keep in mind that validators can adjust their commission rates up or down over time.
Number of Users: A high number of delegators could indicate positive sentiment towards a validator.
Validators Self-Staked balance: A provider that has a high amount of staked tokens likely has more incentive to continue operating their services as they have more to lose than those with low self-staked balances. This metric has some limitations as validators can choose to delegate to their own validator from another wallet, which is done to increase the security of their funds.
Current Status: You can see whether the validator is currently active or not by checking the validator list shown on this page. Validators that are active have a green dot under them.
Network Share: You typically don’t want to choose a validator with the highest network share or a validator with a low network share. Delegating to the most popular validators increases centralisation risks within the network as those validators will have more say in governance and a larger share of the blocks. A validator with a low network share, might not be profitable and hence increases the risk of them discontinuing their services.
Performance: Make sure you pick a validator with the highest possible uptime performance by viewing the validator information on the Validator Dashboard. Our recommendation is to only pick those with a >=99% Slot Success Rate and a long history of not getting slashed.
Value Add to the Ecosystem: Some providers offer extra services to their delegators, such as tax reporting tools, explorers, etc. This can be another great way to filter for validators that are thinking long-term.
How are the rewards generated?
Native staking rewards for SOL are composed of:
Block Rewards: Protocol-based rewards are determined through an algorithmic disinflationary schedule that is a function of the total token supply. The token inflation rate was initially set at 8% in January 2021 and will gradually decrease at an annual rate of 15% until it reaches 1.5% indefinitely. This means that the portion of staking rewards coming from token inflation will decrease gradually as the total token supply increases at a decreasing inflation rate until it reaches a 1.5% inflation rate, at which point the rewards will remain flat assuming no changes in any of the parameters. These issued tokens are split and distributed to participating validators, with approximately 95% of the issued tokens initially allocated for validator rewards.
The number of tokens available to pay rewards for an epoch is fixed and must be evenly divided among all staked nodes. Therefore, your rewards for an epoch are not available until the end of that epoch.
Transaction Fees: 50% of each transaction fee is destroyed, while the validator that processes the transaction retains the remaining fee. This means that a validator that processes more transactions has a greater chance of earning higher rewards in the same network conditions. Additionally, transaction fees are set by the network cluster based on recent historical throughput, and they may be higher than usual when demand for transaction processing on the network is high.
Please note that the total annual rewards are divided by all active stakers; hence, as the amount of staked tokens goes up, the reward rate goes down.
You are welcome to play around with our Staking Calculator to get a better feel of how these metrics can influence your rewards.
What are the risks of staking SOL?
We strive to make staking as safe and transparent as possible, however, it’s important to consider factors that may influence whether a particular staking option is appropriate for you.
- Slashing risk: If a validator misbehaves, such as by creating invalid transactions or censoring certain types of transactions or network participants, the SOL delegated to them may be partially slashed. Slashing is currently done manually and the slashable amount is under exploration, but it is essentially a function of either the fraction of slashed validators out of the total validator pool or the amount of time since the validator vote was cast, or both. Although slashing is uncommon due to the incentives for validators to gain rewards rather than face penalties, it is important to choose a reliable validator to reduce the risk of being slashed.
- Unbonding risk: Crypto markets are highly volatile, and investors need to be aware that they cannot sell their tokens immediately once they have staked them. The cool-down period for unstaking SOL is 1 epoch (2-3 days). Please take note of this lockup period before you decide to stake. Consider keeping funds liquid if you do not intend to hold SOL long-term.
- Protocol security risks: There is an inherent risk that the protocol could contain unknown bugs. This not only applies to staking but your SOL investment in general.
Please note that this is not an exhaustive list of all the risks related to staking.
What is SOL?
SOL is the native token of the Solana network that performs the following key functions on the platform:
- Staking: Users can lock SOL up to contribute to the security of the Solana Network and earn rewards.
- Gas token: Each transaction processed by the network requires a small fee to be paid to the validator.
- Governance: SOL is used to vote on governance proposals on the network. Only staked tokens are eligible to be used for governance voting. The amount of voting power is measured in terms of staked balance. Only the community of validators can vote through on-chain governance process to decide matters such as staking rewards and inflation.
What consensus algorithm does Solana use?
Solana uses the Proof of History consensus, a high frequency Verifiable Delay Function that requires a specific number of sequential steps to evaluate and produces a unique output that can be efficiently and publicly verified. Proof of History allows you to create a historical record that proves that an event occurred at a specific moment in time. It is also open-source, meaning that anyone can inspect and use the code.
There is no minimum or maximum requirement for the number of active validator sets. Currently, there are approximately 1900 active validators on the Solana network per Solana Beach.
What are the tokenomics of SOL?
SOL is an inflationary token that was launched in Mar 2020 with an initial inflation rate of 8%. This rate will gradually decline at a 15% annual rate and is targeted to reach a constant annual inflation rate of 1.5% by approximately Mar 2031. Please note that the inflation schedule is subject to change according to the Solana Documentation.
Currently, there is a token burn mechanism in place where 50% of each transaction fee is burned, providing a mechanism to limit inflation.
Initial Distribution Breakdown
Any tokens that have been minted are free to be used and staked. The initial distribution of SOL tokens is as follows:
15.86% to Seed Round investors
2.63 to Founding Sale investors
5.07% to Validator Sale investors
1.84% to Strategic Sale investors
1.6% to Public Auction Sale investors
12.5% to team members
12.5% to the Solana Foundation
38% to the Community reserve fund (managed by the Solana Foundation)
From the Staking Rewards Journal