SOL Staking: What To Know & How To Get Started
Key Takeaways
- Staking your Solana helps secure the Solana blockchain and earns you additional SOL as a reward.
- SOL staking has historically yielded around 5.5% APY, but keep in mind the network inflation rate validator commission, as both will impact your net staking rewards.
- There are four primary methods to stake your Solana – staking SOL through a centralized exchange, delegating your SOL to an existing network validator, “liquid staking” your SOL via a staking pool, or running your own network validator. We will cover exactly how to stake Solana using each approach.
What Is Solana Staking?
The Solana blockchain works through a mechanism called Proof-of-Stake. This mechanism keeps the blockchain decentralized by having different holders of the Solana token (SOL) validate transactions on the Solana blockchain.
Through this process, the network ensures that no single user can become powerful enough to tamper with transactions while also rewarding everyday owners of the token for helping to secure the protocol.
To take part in this validation process, SOL holders must lock up their tokens through a process called “staking.” In return, they receive an attractive yield on their staked tokens.
How Much Can I Earn By Staking Solana?
Gross Solana staking yields are listed in the table above; this is how much a Solana staker would expect to earn on an annualized basis. Depending on how you stake your Solana, you may also pay a commission or fee to the validator doing the staking on your behalf; average validator fees are also shown in the table.
You must also take into account the network inflation rate, which is the annualized growth of the total supply of SOL tokens; as more SOL tokens are issued, each existing SOL token is worth less. Taking both Solana inflation and average validator fees into account, the current adjusted net reward rate is also shown above.
Check out more strategies for earning yield on crypto in our complete guide.
How To Stake Solana
There are several options for staking Solana:
- Through a centralized exchange (Beginner): Delegate your SOL tokens to a centralized platform that stakes your tokens on your behalf.
- Through a network validator (Intermediate): Delegate your SOL tokens directly to a validator on the Solana network who stakes them on your behalf.
- Liquid staking (Intermediate): Delegate your SOL tokens to a “liquid staking” provider who gives you back a liquid derivative token that can be traded.
- Running your own network validator (Expert): Validate transactions on the blockchain directly through a machine you control. Gather support by getting others to delegate their SOL to you.
Staking Via A Centralized Exchange [Beginner]
A number of centralized exchanges, such as Uphold.com, and Coinbase, provide rewards for staking your Solana. The process for staking through these platforms is very easy and just takes a few clicks.
The downside, however, is that in order to stake your tokens, you must use the custodial wallets of these companies. This means that you don’t hold the keys to the wallets, and you are entrusting your funds to the company you select.
How To Pick A Centralized Exchange
For many stakers, the most important consideration when deciding where to stake their tokens will be the staking rewards.
These vary widely across centralized exchanges, with most coming in between 4% – 10% APY rewards for staking.
Other considerations include:
- The security of the centralized exchange: Remember, you will be trusting your tokens to these platforms, so they need to be safe.
- Staking lock-up periods: Some platforms will award a higher APY if stakers lock up their tokens for a period of one or two months.
- Unstaking delays: Some exchanges require users to wait a while after unstaking to receive their tokens back into their wallet.
Pros And Cons Of Staking Solana Via A Centralized Exchange
Pros
- Simple process allows staking with just a few clicks.
- All-in-one platform with no need for a traditional wallet.
- Simplified tax reporting as the exchange provides your tax forms.
Cons
- You contribute to greater centralization of the network.
- Your tokens are exposed to counter-party risk.
- Staking rewards may be capped.
How to Stake Your Solana On A Centralized Exchange
For this example, we will be using Uphold to stake, which currently offers one of the best $SOL staking yields, but you can also use other centralized exchanges.
Please note that Uphold is not available in all countries and you will need to be a resident of a supported country in order to use the platform.
Step 1: To get started, you will need to have created an Uphold account and completed identity verification. Once you have an account, navigate to Uphold’s staking page and click “Start Staking.”
Step 2: You will be taken to your wallet page. Click “Go to Staking.”
Step 3: Review the instructions and click “Next.”
Step 4: You will see a list of cryptocurrencies you can stake. Find Solana and click on it.
Step 5: Click “Start staking SOL.”
Step 6: Enter the amount of SOL you would like to stake then click “Preview staking.”
Step 7: Read the terms, check the acknowledgment checkbox, and click “Confirm Staking.” Your SOL is now staked!
Delegating Your Solana To An Existing Network Validator [Intermediate]
While delegating to a centralized exchange is the easiest staking option, many blockchain users prefer to put their SOL to work in a more decentralized way. The easiest path to do this is to delegate to a network validator.
How To Pick A Validator
Below are a few of the largest Solana validators, including explanations of what each listed metric means:
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Pros And Cons Of Delegating Your Solana
Pros
- Keep custody of your tokens – they never leave your wallet.
- Get to choose which individual validator to support.
- May offer higher yields vs. centralized staking.
Cons
- Tax liability is a hassle as you have to track data down from the blockchain itself.
- You are exposed to the performance of individual validators.
- Delegating is more complex than staking on an exchange.
How To Delegate Your Solana
The easiest way to delegate SOL to network validators is through a Solana wallet that supports staking. The below table lists a few of the most popular Solana wallets that offer integrated SOL staking:
| Token Information | Details |
|---|---|
| Solana Wallet | Integrated Staking Options |
| Phantom | Delegation to the validator of your choice |
| Solflare | Liquid staking via Marinade (mSOL), delegation to validator of your choice |
| Exodus | Delegation to Everstake validator |
| Slope | Delegation to a pool or individual validator of your choice |
| Atomic Wallet | Delegation to validator of your choice |
| Ledger (Hardware Wallet) | Delegation to a Ledger by Figment validator node |
The instructions below are for delegating using the popular Phantom Solana wallet. For a step-by-step guide on installing the Phantom wallet, click here.
Step 1: Install the Phantom wallet through their website and add some $SOL funds.
Step 2: Once your funds are in your wallet, click the “Solana” button to pull up your balance.
Step 3: On the next screen, click the “Start earning SOL” prompt next to the gold star.
Step 4: The next screen will show you all the individual validators that are available for delegation.
Step 5: Click on the validator you would like to delegate to, enter the amount of SOL you would like to stake, and click the “Stake” button.
Step 6: Your SOL is now staked directly with a validator.
*Note: Please note that staked SOL does not get activated right away. Delegators will have to wait until the end of the Solana “Epoch” for their SOL to start earning yield.
Liquid Staking Your Solana [Intermediate]
Staking Solana through a centralized exchange or by delegating to a validator locks your funds up, rendering them unusable for other yield-bearing activities such as trading or lending.
While this lockup is core to the premise of staking, there is a special form of staking called “liquid staking,” which allows you to earn rewards on your staked SOL while also receiving a liquid token that can be used in place of your staked tokens. Liquid staking providers work by taking your SOL, staking it across a number of different validators, and then issuing back a “staked” token to you, which represents your staked Solana.
This token can be transacted with as if you still had your original SOL tokens. In fact, these staking tokens are normally more valuable than whatever SOL is trading at — meaning if SOL is trading at $100, staked SOL tokens will trade for >$100. This appreciation is due to the accrued SOL staking rewards, which are baked into the value of the liquid staking token.
Each liquid staking platform has their own staked-SOL token. Lido, our preferred liquid staking provider, issues the stSOL token to users who stake their Solana. Once you stake your SOL and receive stSOL in return, you can use this new token for lending, liquidity providing, and trading just like you would your actual SOL.
Note: Please note that swapping your SOL for a derivative staked token like stSOL may constitute a taxable event.
Editor’s Pick for Liquid Staking: Lido
How To Pick A Liquid Staking Pool
When picking a staking pool, you should consider several factors:
- Fees: Staking pools may charge fees that include deposit fees, withdrawal fees, management fees, and reward fees. These eat into your staking returns, so it’s important to compare them to ensure you are getting the best deal.
- Validator Etiquette: The decentralized ethos of blockchains means that stakers should seek to delegate their tokens to non-majority validators. Some liquidity staking providers do a better job than others of maintaining this balance and ensuring validators are secure.
- Security: Remember that you are entrusting your hard-earned SOL tokens to a third party, so making sure their services are secure should be a top priority. The best liquid staking providers are audited by third-party companies to ensure their smart contracts and security protocols are bulletproof.
Besides Lido, some other liquid staking providers include:
| Name of Liquid Token | Staking APY | Total Staked SOL | % of Overall SOL Stake | |
|---|---|---|---|---|
| Lido | stSOL | 5.5% | 4,004,655 SOL | 1% |
| Marinade Finance | mSOL | 5.67% | 7,610,000 SOL | 2% |
| Socean | scnSOL | 6.33% | 127,051 SOL | .04% |
Pros And Cons Of Staking Solana Via A Staking Pool
Pros
- Hold a liquid token even while your $SOL is staked.
- Get even bigger returns on your $SOL by combining staking with other DeFi yield activities.
- More decentralized than using CeFi and easier than directly delegating to validators.
Cons
- Tax reporting is a hassle and swapping between $SOL and staked $SOL constitutes a taxable event.
- Your tokens are held by a third party.
- Getting the most out of liquid staking requires a deep knowledge of crypto and DeFi protocols.
How To Liquid Stake Solana Using Lido
Liquid staking is most reliable when done through a trusted third party. The instructions below will walk you through liquid staking your Solana through Lido. We will be using the Phantom wallet in this example which can be created by following these instructions.
Step 1: Visit the Solana staking section of the Lido website and click the blue “Stake SOL” button.
Step 2: Click the blue “Connect Wallet” button.
Step 3: In the pop-up, select the wallet you use.
Step 4: In your wallet interface, approve the connection between your wallet and the Lido website.
Step 5: Once your wallet is connected, you will see your SOL balance. Enter the amount you would like to stake and click the “Submit” button.
Step 6: Approve the staking request in your wallet interface.
Step 7: Congratulations, your SOL is now staked through Lido! You should see the staked amount in your wallet.
Boost SOL Rewards With stSOL
Once you swap some of your staked SOL for Lido’s stSOL liquid token, you can get even greater rewards by loaning out your stSOL throughout the DeFi (decentralized finance) ecosystem. These rewards are on top of your stSOL APY.
Check out the example below to see how this works.
stSOL Rewards Example
One of the best ways to put your stSOL to work for you is to use it to provide liquidity in a liquidity pool. Liquidity pools are a basic building block of the DeFi world that allow traders to exchange tokens with each other. For example, an ETH/SOL liquidity pool would have traders that want to sell ETH and purchase SOL on one side trading with traders that want to sell SOL and purchase ETH on the other side.
There are also liquidity pools that support stSOL and they need traders to provide liquidity for those looking to purchase stSOL. The liquidity pool provides a reward to traders who supply it with both of the liquidity pool assets for the service of supplying liquidity.
One of the most popular liquidity pool providers on the Solana network is Aldrin. Their stSOL/SOL liquidity pool provides a 13.69% APY to traders who supply both the stSOL and SOL tokens. Connect your wallet to their interface here in order to start the process and put your stSOL to work. Note that you will also need to provide SOL to the liquidity pool in order to execute this trade.
Your rewards will be paid out in Lido’s native LDO token and Aldrin’s native RIN token. The table below shows the cumulative APY of this strategy.
| APY | Output Token | |
|---|---|---|
| Staking with Lido | 5.5% | stSOL |
| Providing Liquidity on Aldrin | 13.69% | LDO + RIN |
| Cumulative Return | 19.19% |
You can also check out Lido’s official DeFi SOL page for a variety of other yield-bearing use-cases of your stSOL tokens.
Running Your Own Network Validator [Expert]
The most direct way to earn from your SOL tokens is to run your own validator node. This is a complex and technically challenging process normally only undertaken by Solana users that have a background in computer science and have experience running complex computer systems.
Validators earn money from the Solana reward fees that are generated for validating blocks. Most big validators will charge a commission fee to those who wish to delegate their Solana tokens.
Each validator is responsible for marketing their services and attracting SOL holders to delegate their tokens to the validator. Ultimately, the validators with the largest scale make the most money.
What You Need to Run Your Own Solana Validator
Running your own validator node means validating Solana transactions directly on a machine that you own or have control over. Some validators opt to run their machines at home, but most effective and scalable validator rigs run in data centers with industry-grade components and internet speeds.
For the absolute bare minimum validator rig that you can run at home, check out the Solana validator requirements. A more scalable off-site solution can be found through providers like latitude.sh, who have data center machines for rent.
The physical system is not the only cost that new validators will incur. Each validator on the Solana blockchain “votes” to validate every block of transactions.
These votes cost about 1 SOL token a day. There is a wind-up period before validators can expect to break even that takes into account the commissions they charge and the current price of SOL.
To help new validators get started, the Solana Foundation has a Delegation Program that awards selected new validators with a starting set of delegated SOL tokens.
Pros And Cons Of Staking Solana Using Your Own Network Validator
Pros
- Get to directly validate on the Solana blockchain.
- Set your own commissions and run your validator node like a business.
- You can spin up a validator rig without having to own the hardware.
Cons
- Most complex staking option; requires a strong technical background.
- Requires a lot of upfront investment.
- Tax reporting is a hassle; you have to retrieve tax information directly off the blockchain.
How to Stake Solana With Your Own Network Validator
There is no single best path to run a validator node. The below resources provide some guidance on how to get started, but individual steps will vary. For an in-depth technical guide, check out this write-up from a validator node owner.
Step 1: Read through the Solana documentation on being a validator.
Step 2: Decide whether you will use at-home hardware or remote hardware to run your node.
Step 3: Purchase enough SOL to start your validator node.
Step 4: Once your setup is up and running, begin marketing your validator services to encourage others to delegate their SOL to you.
To Sum It Up
Staking SOL is a great way to earn some passive yield on your idle tokens. Staking is also the primary method by which users of the Solana blockchain ensure it continues to run, so it’s a profit-bearing activity that’s also civically engaging with the blockchain ethos.
Staking ranges from being as simple as a few button clicks to as complex as setting up your own servers and nodes. Each path has its benefits, drawbacks, and different groups of SOL holders that may be interested in it.
Frequently Asked Questions
Cryptocurrency holdings are taxed when they are sold. The US tax code generally does not distinguish between crypto earned as staking rewards or through any other activity — rather, they tax all crypto holdings at the moment of sale. For individual tax advice regarding staking rewards, please consult a tax advisor.
There is no minimum amount that is required to start staking. While that is the case, it’s advisable to stake at least 0.01 $SOL in order to cover network transaction fees and still have some $SOL left over to stake.
Through liquid staking, $SOL can be leveraged to earn staking rewards while also providing a liquid token that can bear additional yield through lending, liquidity providing, or trading.
Blockchains charge transaction fees in order to emit rewards for validators. These rewards compensate them for staking their $SOL and maintaining the network.
Staking yields vary but normally range between 5% and 10%.
When selecting a validator, it’s important to keep in mind factors like the validator’s reputation, their fee structure, their node uptime and performance as well as how much $SOL tokens they already have delegated to them. Check out our “Delegating your Solana to an existing network validator” section above for more details.
Lido is a leader in liquid staking across multiple chains. Their Solana offering is no exception.
