You own SOL. You know you should stake it, but you’re not sure how to go about staking on Solana. That’s okay, we’re here to help! This concise explanation provides a comprehensive overview of staking SOL. We answer the most frequently asked questions and cover all the key areas. We’ve also provided optional resources for those who wish to explore further.
Why Stake SOL?
Staking SOL is not just about earning rewards — it’s critical to the decentralization and security of Solana. By staking, SOL token holders contribute to the resilience and governance of the network. Choosing the right validators to stake with is critical. Delegating tokens to a validator is similar to voting in a representative democracy, as it reflects trust in their ability to maintain consistent uptime and vote quickly and accurately. Other considerations include the validator's ethical behavior, response to hard forks, and contributions to the Solana ecosystem.
Staking that is well-distributed among reputable validators enhances the decentralization of the network. This makes it more difficult for any single, well-funded entity to manipulate consensus decisions for personal gain.
At Helius, our goal is to grow the Solana ecosystem. We are also committed to providing the best value for our stakers. We have a high level of trust, top technical expertise, and complementary operations that allow us to provide the best rewards to stakers.
What Happens with Staking?
There are two forms of staking on Solana: native staking and liquid staking. Currently, 94% of staked SOL is native staking, which is the main focus of this article. Liquid staking will be discussed in a later section. Users can perform native staking through many platforms. These include multi-signature treasury management tools like Squads, popular wallets, and dedicated staking websites. To perform native staking, users need to deposit their tokens into a staking account. This will be delegated to the validator's voting account. A single user can create multiple staking accounts. Each account can be delegated to the same or different validators.
Above: A single staker delegates to multiple validators
Each staked account has two key permissions: staking permissions and withdrawal permissions. The system defines these permissions when the account is created and assigns them to the user's wallet address by default. Each permission has different responsibilities. Withdrawal permissions have greater control over the account. It has the power to remove tokens from the staked account and can update staking permissions.
In staking, the most important unit of time is an epoch. Solana’s epochs last for 432,000 slots, which is approximately two days . The system awards staking rewards at the start of a new epoch. This process is automatic; stakers will see their balances increase with each epoch. Users can harvest MEV rewards directly through the Jito website (more on this later).
When you stake SOL natively, you lock up your tokens until the end of the current epoch. If a user deactivates their stake at the start of a epoch, they may face a cool-down period of up to two days before they can withdraw their tokens. If they withdraw at the end of a epoch, the process can be almost instantaneous.
Similarly, there is a warm-up period required to activate staking, which can last two days or be almost instantaneous, depending on when the user starts their staking account. Users can consult the Solana block explorer to track progress for the current time period.
How do operators make money?
Validator operators can make money in three ways:
Issuance/Inflation: The issuance of new tokens
Priority Fees: Users send SOL to validators to prioritize their transactions
MEV Rewards: Users give Jito tips to validators to include transaction bundling
Validators’ income is entirely in SOL, which is directly proportional to their staked amount. Operational costs are primarily fixed, in a mix of SOL and fiat.
Solana distributes staking rewards in each time period by creating new SOL tokens according to the inflation plan. The current inflation rate is 4.9%, and it is gradually reduced at a rate of 15% per year, with a final rate of 1.5%.
A validator's staking rewards are based on the credits they receive. Validators earn credits by accurately voting for blocks that become part of the chain. Validators that experience downtime or fail to vote in a timely manner receive less credits. In general, a validator holding 1% of the total stake should receive approximately 1% of the total inflation rewards.
A validator's staking rewards are distributed among its stakers based on the size of their delegation. A validator can charge a commission that is a percentage of the total inflation rewards issued to all stakers. The commission fee is typically a single-digit percentage, but can be anything from 0% to 100%.
Above: Solana Inflation Schedule
Priority Fees
Validators who are designated as current block builders receive fees from every transaction they process. There are two types of these: base fees and priority fees. These payments are immediately credited to the validator's identity account. Previously, the distribution of these rewards was 50% each for base fees and priority fees, with the remaining fees being burned. With the passage of SIMD-96, this structure will soon change, allowing 100% of priority fees to belong to block makers.
Users pay a priority fee to have their transactions prioritized. Ensuring priority is critical in many cases, including arbitrage, liquidations, and NFT minting. Complex transactions require more computing power and therefore pay higher priority fees. Accounts with popular tokens with strong demand require higher priority fees.
Income from the base fee is far less important than the priority fee, but is necessary to prevent spam. The system fixes the base fee at 0.000005 SOL (5000 lamports) per signature. Most Solana transactions require only one signature.
MEV (Jito) Rewards
Validators operating the Jito validator client account for over 90% of all stake. Jito introduces an off-protocol blockspace auction. Blockspace auctions happen off-chain. They allow searchers and applications to submit a group of transactions called a bundle. These bundles typically contain time-sensitive transactions like arbitrage or liquidations. Each bundle comes with a "tip" to the block builders. These provide validators with an additional source of income separate from priority fees and base fees.
In 2024, Jito MEV revenue grows from a negligible figure to the main validator income source. Jito charges a 5% fee on all tips. Validators can charge their own MEV commissions using a mechanism similar to inflation rewards. Stakers divide the remaining fees based on the relative size of their delegations to block builders.
Above: Data quantifying the growth of priority fees and Jito tips. Data source: Blockworks Research
Collaborative Business
Helius validators charge 0% commission on issuance and MEV rewards; our stakers enjoy the highest native yield. Our goal is to increase total stake and improve transaction speeds for our customers. Using staked SOL for connectivity helps us reduce congestion and improve performance of our core business.
Our previous article analyzes the costs and revenues of running a validator in more detail.
Where does the APY come from?
The annualized percentage yield (APY) represents the compounded annual percentage return a staker would get for staking for a full year at current interest rates. Multiple factors influence this rate, including the network's current issuance rate, validator performance and uptime, how prevalent users are in tipping validators, and the current staking rate (i.e., the percentage of SOL staked). Multiple websites list validators ranked by APY, with StakeWiz being one of the most comprehensive.
Specifically, APY will come from two main sources: issuance and MEV rewards.
Issuance
Validators distribute staking rewards among their stakers based on the size of each staker's delegation. Validators receive commissions ranging from 0% to 100% for their services. These rewards depend on the validator's voting performance . Points are awarded for each successful vote. Running a Solana validator is technically demanding. This difficulty increases as the speed of the chain continues to increase.
Well-managed validators generate higher rewards due to the following factors:
Minimum Downtime: Validators cannot participate in voting during downtime and therefore do not earn points.
Timely voting: Validators who consistently lag in consensus participation may receive fewer points.
Accurate voting: Points are earned only for voting on subsequently confirmed blocks.
MEV (Jito) Rewards
MEV rewards are playing an increasingly important role in the composition of staking rewards. The rise in on-chain transaction volume and the resulting arbitrage opportunities have driven this growth. Recently, Jito MEV tips have accounted for approximately 20-30% of total rewards, significantly increasing stakers' returns. Similar to issuance rewards, validators receive commissions ranging from 0% to 100% on MEV tips. Jito also charges a 5% commission on all MEV-related revenue.
Other Considerations
Despite the potential for higher returns from low-commission validators, many people still choose high-commission validators like Coinbase. This is due to factors such as vendor lock-in and regulatory arbitrage. For example, funds using Coinbase Custody must be staked exclusively on Coinbase's validators. Centralized exchanges benefit from retail users who prioritize convenience over yield optimization. Off-chain users are less sensitive to low returns, giving exchanges flexibility in offering rewards.
Finally, new protocol mechanisms such as SIMD-123 are designed to let validators share block rewards directly with stakers. If implemented, this would provide an additional source of income for stakers.
Who are the key players in the Solana staking ecosystem?
Solana validators can be divided into several categories.
Ecosystem Teams
Many well-known Solana application and infrastructure teams operate validators that complement their core business. For example, Helius operates a validator to support its RPC service.
Example:
Helius
Mrgn
Jupiter
Drift
Phantom
Centralized Exchanges
Centralized exchanges are among the most validators staking Solana, providing one-click staking solutions for off-chain exchange customers.
Examples:
Kraken
Coinbase
Binance
Upbit
Institutional Solution Providers
These companies focus on staking services tailored for institutional clients. They support multiple blockchains to meet a wider range of client needs.
Examples:
Figment
Kiln
Twinstake
Chorus One
Independent Teams
Solana’s validator ecosystem includes many independently operated mid-sized and long-tail validators. Multiple validators have been active since genesis and contribute to the ecosystem through education, research, governance, and tool development.
Examples:
Laine
Overclock
Solana Compass
Shinobi
Private Validators
There are also over 200 private validators on the network. Their stake is self-delegated and may be controlled by an operating entity. These validators are characterized by a 100% commission rate and a lack of public identity information on block explorers and dashboards.
What is Liquid Staking?
Liquid Staking allows users to spread risk across multiple operators through staking pools, which enable the issuance of Liquid Staking Tokens (LSTs). These tokens represent ownership of the underlying staking account.
LSTs are yield-earning assets that accrue rewards based on the APY of the underlying staking account. With native staking, rewards increase the staked SOL balance every Epoch. In liquid staking, the number of tokens remains the same, but their value appreciates relative to the SOL token.
LSTs improve the capital efficiency of staking by unlocking DeFi opportunities. The classic example is depositing LSTs as collateral on a lending platform. This allows users to borrow while still earning staking rewards.
Helius launched our own LST (hSOL) through Sanctum, a popular LST launching platform. Our token is backed by a single-validator staking pool . Helius stakers can convert existing stakes to hSOL using Sanctum’s platform, which provides a 0% fee interface for this conversion process.
Currently, only 7.8% of staked SOL is liquid staked, but this portion is growing rapidly. Liquid stake represents 32 million SOL, an 88% increase from 17 million at the beginning of 2024. JitoSOL is the most popular, accounting for 36% of all Solana LST. Other notable options include Marinade (mSOL) and JupiterSOL (jupSOL), accounting for 17.5% and 11% of the market, respectively.
In many jurisdictions, issuing staking rewards as tokens is considered a taxable event (similar to stock dividends) and is taxed as income when received. However, LST allows users to earn rewards without such a taxable event. Their wallet balance remains the same; only the value increases. Always consult a financial expert for guidance on your specific situation.
Is Staking SOL Safe?
With native staking, stakers always maintain control and custody of their SOL. If a validator goes offline or performs poorly, non-custodial stakers are free to unstake and switch to a different validator. In the event of a network failure, staked positions will not be impacted. Once network activity resumes, positions will remain unchanged.
Liquidity staking is also widely viewed as a safe option. The staking pool process has been audited nine times by five reputable firms to ensure its robustness. During adverse market conditions or black swan events, LST may temporarily trade below its underlying value. While these deviations are generally short-lived, investors should consider tail risk, especially when using LST as collateral.
Slashing is a penalty mechanism that reduces delegated stake to discourage malicious or harmful behavior. Solana does not currently implement slashing, but it is under consideration and may be introduced in the future.
Finally, stakers should follow best practices to securely manage their private keys to prevent loss or theft.
How does staking SOL differ from staking ETH?
Solana differs from Ethereum in the way it approaches staking. Solana integrates delegated proof of stake (dPoS) directly into its core protocol, making delegation possible without relying on external solutions. Ethereum, on the other hand, transitioned from proof of work to proof of stake, relying primarily on third-party platforms like Lido and Rocket Pool for delegation and liquidity staking. Solana’s staking participation rate is 67.7% of the total supply, compared to 28% for Ethereum.
On Ethereum, the only native staking option is home staking. This self-custodial option requires technical proficiency and specialized hardware. Validators must stake at least 32 ETH and ensure their hardware remains online and properly maintained. The network of thousands of home stakers contributes to Ethereum’s reputation as a highly decentralized blockchain.
A handful of major platforms dominate liquid staking on Ethereum. Lido dominates the market, controlling over 28% of the staked ETH supply. Lido issues stETH, a yield token that increases in value as rewards accumulate. Ethereum is an older network with lower inflation rewards. Staking ETH with Lido offers an annual yield of 2.9%, significantly lower than the yield from staking SOL. Lido charges a 10% fee on staking rewards. stETH, like all LSTs, carries risks. These risks include smart contract vulnerabilities and stETH’s price diverging from ETH.
Finally, Ethereum includes a slashing mechanism to punish validators for misbehavior, although slashing events are rare.
Conclusion
This article explored the concepts and mechanisms of Solana staking. Whether you are an experienced participant or a new member of the ecosystem, understanding staking is critical to making informed decisions as a long-term SOL holder. Staking is a way to earn competitive yields and is a fundamental mechanism that supports network security and decentralization.
Preview
Gain a broader understanding of the crypto industry through informative reports, and engage in in-depth discussions with other like-minded authors and readers. You are welcome to join us in our growing Coinlive community:https://t.me/CoinliveSG
Anais
