Solana Staking: What To Know & How To Get Started

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

• Your tokens are exposed to counterparty risk.
• Staking rewards may be capped.
• Exchanges will store your crypto in their proprietary wallets – you no longer directly control your crypto.

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.

Pros And Cons Of Delegating Your Solana To A Network Validator

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:

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 on the “Solana” button to pull up your balance.

Step 3: On the next screen, click on “Start earning SOL” under “Staking”.

Step 4: You’ll now be prompted with two options: Liquid Staking and Native Staking. To delegate your Solana to an existing validator, click on “Native Staking”.

If you’re specifically interested in Liquid Staking, scroll down to the section of “Liquid Staking Your Solana (Intermediate)”.

Step 5: The next screen will show you all the individual validators that are available for delegation.

Step 6: 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.

Once you press the “Stake” button, your $SOL is now staked directly with the chosen 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.

Step 1: Head to Jito and press “Stake Now” on the home page.

Step 2: You will automatically be redirected to the staking page of Jito. Over here, click on the “Unstake” option.

Step 3: Once you click on “Unstake”, you will be prompted with two options to unstake your $JitoSOL:

• • Use Jupiter to unstake immediately but with a slippage of 0.3%

• • Use Jito to unstake at a 0.1% fees but with a 1 day delay

There is a clear tradeoff between urgency and quantity. If urgency is priority, we would suggest going through Jupiter (top decentralized exchange on Solana).

If quantity is your priority, you can click on the information icon to understand the process of unstaking directly through Jito.

Here’s what it says:

Step 4: Input the amount of $SOL you wish to unstake, click on your preferred option (Jupiter or Jito) and then click on “Unstake $SOL”.

Note: You will need to hold extra $SOL in your wallet to pay for gas fees for your transaction.

Step 5: Confirm the transaction in your wallet.

Step 6: In the bottom left corner of your screen, you will see two pop-ups showing that your transaction has first been submitted to the blockchain and then executed.

You can then head into your wallet to confirm that the transaction is complete.

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. 

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.

Despite the fact that Solana doesn’t have any minimum staking requirements to run your own validator, it is extremely difficult to break even from this endeavor. If you are an individual looking to earn passive income, we suggest you look at the other options mentioned above. 

Pros And Cons Of Running Your Own 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.

Converting your $SOL to any liquid staking token such as $JitoSOL is a taxable event as you are realizing a capital gain / loss. For individual tax advice regarding staking rewards, please consult a tax advisor.

There are a lot of benefits to staking, but it does not come without risk. One of the biggest risks you should consider is the “Platform Risk” which means that you can lose all your staked $SOL if the staking platform you use gets compromised. 

That’s why it’s important to do research into the platform before staking your $SOL with them.

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.

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.

Jito is a leader in liquid staking for $SOL tokens.

• People who want to earn interest on crypto: If you’re investing for the long haul, you can get paid to wait for future price appreciation.
• People who can afford to wait: Staking crypto often comes with lock-up periods during which you can’t withdraw, use, or sell your crypto.
• People interested in compounded returns: Stakers can reinvest their staking rewards, thereby potentially increasing their returns over time.

Yes. Whichever wallet holds the $JitoSOL will receive the yield as the value of $JitoSOL increases with respect to its staking APR. As long as you own the wallet with the $JitoSOL, you will continue to receive yield on that specific wallet.