Solana was one of the biggest crypto surprises in 2021. Not only did its native SOL cryptocurrency appreciate by over 10,000% year-to-date (YTD), but it did so by providing a refuge from Ethereum’s huge transaction gas fees. This goes on to show that value in utility pays off.
Another way to add utility and value is to become a Solana stakeholder. As a Proof-of-Stake blockchain, Solana uses economic validators instead of miners to secure the network. In turn, this staking mechanism allows you to earn rewards, all without any hardware or monetary requirements!
Quick Solana Roundup
Solana falls in the category of potential Ethereum killers, shared by other smart contract platforms such as Binance Smart Chain, Cardano, Avalanche, etc. Although its market share in this ecosystem is still comparatively small, Solana’s trend goes upward.
Degenerate Ape Academy boosted Solana’s appeal greatly during the height of the NFT Summer. This NFT collection reached $110 million in total trading volume, soon followed by pixelart Solana Monkey Business at $107 million, and the blockchain 3D tactical game Aurory at $76.9 million.
However, the biggest attraction of Solana is its network performance. Specifically, it is drastically faster than Ethereum, with up to 50,000 transactions per second, while Ethereum has to handle its traffic with 15–45 TPS. Moreover, Solana exerts a minuscule gas fee cost, $0.00025 per transaction, vs. Ethereum’s volatile fee, between $6 to $250, depending on the network congestion.
These are just some of the reasons making Solana a better choice to Ethereum. However, you should note that Solana is also far more centralized compared to Ethereum. This means that those who hold SOL tokens are mainly Venture Capital investors and developers.
In turn, they can dictate the platform’s development, which is why many crypto investors overlook other flaws and prioritize decentralization instead.
Solana Staking Explained
You may have already heard of crypto mining, specifically in relation to Bitcoin and Ethereum. While mining itself is a figure of speech, what bears keep in mind is how decentralized blockchains secure the network and maintain its upkeep. However, unlike Proof-of-Work (PoW) blockchains like Bitcoin, Proof-of-Stake (PoS) blockchains do not rely on mining but economic validation.
In other words, while Bitcoin miners need specialized ASIC hardware, no such requirement exists for a PoS blockchain like Solana. Instead, it uses validators to process all the transactions on the network and verify its consensus across nodes.
SOL holders can delegate their tokens to validators, thus amplifying their weight in processing and securing the network. In turn, these delegated stakes, as the number of SOL tokens, serve as proof that when a validator votes on a network consensus, it is trustworthy.
As you can see from the validator map above, the entire network is secured by the collective validator voting across the globe. In short, this process means reaching a Proof-of-Stake so that the network is safe from attacks and subversion.
As a result of your part in securing the network as a stakeholder, you receive a reward in SOL tokens. Presently, the nominal annual percentage yield (APY) for Solana staking is 7.23%, not including the validator commission rate.
Lastly, keep in mind that by delegating your SOL tokens to validators, you retain complete ownership and control of them. You can always withdraw them or select different validators.
Steps to Start Solana Staking
When you first delegate your SOL tokens, they must be fully activated. More precisely, Solana measures its network staking cycles in epochs, with each one lasting about two days. Therefore, you will have to wait for another epoch for your stake to start earning APY. Accordingly, this may take two to four days.
Moreover, validators charge a fee on stakes themselves, known as the previously mentioned commission rate. Every time a SOL reward is issued, the fee is automatically deducted and split between the validator’s account and stakeholders.
To start staking, you first need a Solana wallet. The good news is that you have plenty of options. However, we’ll use Phantom wallet since it’s the most convenient due to its browser integration.
- Download and install Phantom wallet.
- Once you have added it to your web browser, you will see an icon in the upper-right corner, just like other browser extensions.
Don’t forget to store your Phantom password and recovery phrase safely!
- Fund the wallet with SOL tokens by clicking on the wallet icon and the Deposit button. You could go to crypto exchanges like Binance, FTX, or Coinbase, buy SOL, and then send them to your Phantom wallet by pasting the deposit address to your crypto exchange’s sending address field. You can see your deposit address simply by typing the token you wish to deposit and then clicking on it. Then, it is just a matter of clicking on the Copy button and pasting the wallet hash address into your crypto exchange’s send bar.
Otherwise, you can transfer SOL from one of many DeFi protocols if you have SOL tokens there or buy them directly via credit/debit card using MoonPay—a payment processor.
- Go to SolanaBeach.io validator list. Here, you will see handy tools to filter through the validators you delegate your SOL tokens to. The most crucial factor to consider is the commission rate. After all, your reward will be deducted by that percentage.
- Next, watch out for validators that are defunct. They will be marked as Delinquent noting their inactive state for a prolonged period.
- When you click on a validator, you receive additional info, such as website, commission rate, and slot success rate. The latter tells you the percentage of their successful validation.
- Now, to enter your Phantom wallet’s staking option, click on Manage token list and type Sol in the search bar. Toggle the Solana (SOL) token to make it appear in the list of assets. Close the tab.
- You can also add other tokens to appear on the wallet’s front page. Next, when you click on the Solana token, you will see the Start earning SOL button. Click on it and type in the stakethat validator name we have previously selected from SolanaBeach.io. You will notice it has the same icon and the same commission rate of 4%.
- Lastly, enter the number of tokens you wish to delegate to this particular validator and click on the Stake button.
That’s it! As noted previously, you will start earning SOL tokens when the next epoch arrives.
SOL Is Worth Staking
Solana stands as one of the more prominent competitors to Ethereum. With all the funding and general interest it is receiving, it holds potential going into the future. This makes it worth a look for crypto enthusiasts.
And as you can see, it’s pretty easy to start staking Solana, so there’s no reason you shouldn’t give it a try if you’re considering it. Just carefully follow the steps listed in this guide, and you should start earning rewards soon.
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