How much can you earn by staking your Solana (SOL)?
What is Solana?
Solana is a blockchain network that is optimized for scalability, with a focus on fast transactions and high throughput. A few core ideas for what would later become Solana were first conceived in a 2017 white paper by Anatoly Yakovenko, a software engineer who previously worked at Qualcomm and Dropbox. Yakovenko went on to pair up with former colleagues at Qualcomm, Greg Fitzgerald and Stephen Akridge, and three others to found the company that would eventually become Solana Labs.
Solana Labs raised funds through private token sales in 2018 and 2019 to fund development of the Solana protocol. The Solana network launched on Mainnet Beta in March of 2020. Solana Labs remains a core contributor to the Solana project while the Solana Foundation also helps fund ongoing development and community-building efforts.
The Solana network’s native cryptocurrency is the SOL token. SOL tokens can be used to pay transaction fees, interact with smart contracts, or earn a staking yield.
Solana uses a Proof-of-Stake consensus mechanism to secure the network. On top of Proof-of-Stake, Solana also uses a unique Proof-of-History approach to determine the time of a transaction in a trustless way. This reduces transaction times and dramatically speeds up transaction speeds, giving the network block confirmation times of only 400 milliseconds compared to Ethereum’s 15 seconds and Bitcoin’s 10 minutes.
What is Solana staking?
Since Solana operates with a Proof-of-Stake consensus mechanism, users holding SOL tokens can earn staking rewards in exchange for using their holdings to secure the blockchain. Staking is the process of locking up your SOL tokens to provide economic security to the Solana network. Through the process of staking, the Solana network ties its security to the honesty of the majority who are incentivized as token holders to maintain the integrity and value of the network.
How do I stake my SOL?
Solana staking works by delegating your tokens to validators who process transactions and run the network.
To stake SOL, you must move your tokens into a wallet that supports staking. Solana provides complete documentation for staking here. There are two general approaches to staking your SOL:
- Using a non-custodial wallet like SolFlare. With a non-custodial wallet, you have the sole control your private keys which means that you do not have to trust a third party with your keys. The downside to a non-custodial wallet is that you are solely responsible for not losing your keys and keeping them secure. When it comes to staking, with this approach you are responsible for choosing your validator, so choose carefully.
- Using a custodial wallet like Coinbase, a crypto exchange. With a custodial wallet, you trust a third party to control your private keys and provide you access to your tokens when you wish to send or trade them. The upside to custodial wallets is that they are typically more convenient and your personal responsibility of safeguarding your private keys is lessened. With this approach, you do not have the ability to choose your validator – you must use your custodian’s partner validator.