Solana Staking: How To Stake SOL
|— Staking Solana allows you to passively earn rewards by locking up your SOL tokens to help secure the Solana blockchain.|
— You can stake Solana by operating a blockchain validator node, delegating your stake to another validator, or using a staking pool.
— Ledger Live helps you easily stake your Solana tokens via Figment, a trusted validator.
Known for its remarkable transaction speeds, Solana is home to thousands of projects in DeFi, NFTs, and games. Solana’s ecosystem has attracted well-known institutions, developers, and crypto thought leaders as investors. But what is Solana exactly?
Well firstly, it’s a proof of stake blockchain, meaning it allows you to participate in the blockchain’s network operations by locking up your cryptocurrency. In return, the Solana network provides passive income on your tokens. This concept is called crypto staking.
But how does that work within the Solana ecosystem exactly? What is solana staking and how does it work?
Let’s dig in.
Solana Staking: What is it all about?
Solana Staking is a way for you to participate in the security mechanism of the Solana blockchain in return for network rewards. The Solana network locks up your tokens as collateral to ensure that validations on the network happen smoothly.
But before you commit your tokens to the Solana blockchain (or any other blockchain, for that matter), make sure you read Ledger’s guide on crypto staking to understand what the core PoS mechanism entails. While Solana is indeed built on these foundations, it also has its own unique rules for rewards, penalties, and consensus. So, let’s look at how it works.
How Does Staking Work on Solana?
Staking on Solana involves three main concepts: cool down periods, slashing and, of course, rewards. If you’re just starting with staking, you’re probably most concerned with the latter, so let’s start there.
In most proof-of-stake blockchains rewards play an important role in keeping the network secure. And Solana is no different. Block creators, called validators in a POS system, must stake their cryptocurrency in order to validate transactions and create blocks. In short, every successful Solana block will generate a specific number of new Solana tokens.
Crypto Rewards…and Punishments
The generated tokens are awarded to the participant that validates the block and added to the overall supply of the cryptocurrency. These rewards can be quite lucrative, and in fact, that’s the whole point of their existence–as an incentive for good behavior. But what happens if these validators decide to take advantage of their power to create blocks?
Simply, the solana network uses a slashing to control any bad behavior by the nodes. Slashing is a blockchain’s method of punishing validators who behave badly. Basically, slashing involves a participant losing their staked SOL if the network decides they have acted maliciously. And slashing mechanisms in Solana are strict: a participant can lose up to 100% of their stake. That means you can lose money by delegating your funds to the wrong validator. If the validator acts maliciously, it’s your assets on the line. That’s why it’s so important to choose your validator wisely.
So now you know how staking and rewards work, but what about unstaking?
Withdrawing Your Stake of SOL
Well, if you unstake SOL, you’ll have to wait out a “cool down period”. To explain, a cool down period is the time the blockchain takes to release your SOL once you unstake them. This happens because the network limits how many tokens can be unstaked in a single epoch (a fixed period of time on the blockchain), ensuring that validations across the network still run smoothly. So when you click “unstake”, parts of your stake gradually deactivate and become available for withdrawal. The active part of your stake continues to earn rewards until that fixed time frame ends, and that’s why you may have to wait some time before you withdraw.
Ways to Stake SOL
So now you know all about how SOL staking works, you might be wondering how to get involved yourself. Well, you can stake SOL in four main ways: solo staking, staking via centralized exchanges, delegating your funds to the validator, and staking pools. Let’s see how these staking mechanisms work and how you can get started.
Solo staking, also called native staking, is the process of staking independently by running your own blockchain node. As an independent validator, you need specific hardware to validate transactions and stake your SOL tokens.
While there is no minimum stake to become a validator, validating blocks costs a transaction fee of up to 1.1 SOL per day. Plus, to validate transactions effectively, you’ll need specialized hardware.
However, since solo staking is independent, you get to keep most of the block rewards — making it potentially more lucrative.
Delegate Your SOL to a Validator
Delegating your SOL to a validator is an affordable way of staking natively on the blockchain. In this method, you transfer your stake and voting rights to an established network validator. In doing so, you signal to the network that you trust the validator–you’re essentially voting for that participant to create the next block. The more votes a validator has, the more likely they are selected to validate the next block. Then for backing the validator who creates a block, you receive a portion of the rewards.
Delegating is a great way to earn staking rewards without running complex hardware yourself. However, validator delegating comes with a shared risk-reward structure. Meaning if the validator doesn’t abide by the network rules, you run the risk of getting your stake slashed.
Centralized Exchange SOL Staking
Staking via a centralized exchange essentially allows the platform to stake your assets on your behalf on the blockchain. These exchanges either run their validator nodes on the blockchain or delegate it to a trusted third party. They then pass on the rewards to you after taking a small percentage fee.
Most big centralized exchanges have a beginner-friendly process to stake your cryptocurrencies via their Earn programs. You can navigate to their “Earn” section, select the cryptocurrency you wish to stake, review the projected annual percentage return, and stake it with a few clicks.
However, you should be aware that staking using this method usually involves using a custodial wallet. If you leave your funds in a custodial wallet, you’re essentially handing over ownership of your funds to a centralized entity. If the platform shuts down, or the CEO goes rogue, they could potentially access your funds, and even pick up your staking rewards!
Pooled staking is a way to earn staking rewards by collectively pooling SOL tokens into a shared staking pool, managed by a designated validator. Rewards from the staking process goes to the participants based on their contribution to the pool and, of course, the validator.
Since pooled staking shares the rewards among participants, the overall return on investment for your stake is typically lower than solo staking. However, pooled staking offers an affordable and accessible entry-point for beginners. Plus staking in a pool with a self-custodial wallet offers you more custody over your assets than a centralized exchange.
Under the Pooled staking umbrella, you also have liquid staking. To explain, liquid staking also requires a staking pool. But it also follows a more flexible model that lets stakers use their locked-up funds for other crypto activities. In short, stakers receive tokens representing their share in the staking pool and these are pegged to the value of the original asset. This means you can use these liquid SOL tokens across the Solana DeFi ecosystem, for trading and lending activities. This type of staking is available for Solana directly through Ledger Live thanks to Lido, Ledger’s trusted staking provider.
Benefits of Staking SOL
Staking SOL offers two direct benefits: monetary rewards for the staker and increased security for the blockchain network.
By staking SOL, you can passively grow your assets by helping validate transactions on the network. While the exact reward percentage varies depending on the block, the current estimated reward rate for Solana staking is about 4.35%. So, for each successful block, you receive about 4.35% of your total stake as a reward.
And of course, becoming a staker also helps the entire Solana ecosystem. Blockchains derive their security from decentralization — i.e having a network of computers across the globe confirm transactions instead of a centralized entity like a bank. The more validators or stakers on the network, the more secure it is.
Risks of Staking SOL
While staking SOL is pretty straightforward, you must know the risks of locking up your cryptocurrencies. Some of the major risks of staking SOL include volatility, centralization risks, slashing, liquidity issues, and so on.
When you stake SOL tokens, you earn rewards in the form of additional SOL tokens at a specific percentage rate. However, the volatility of Solana can have a significant impact on your overall rewards. If the price of SOL decreases, the value of your investment might go down even if you have more tokens than you originally did.
While native staking is pretty safe, other types of staking comes with their own risks. For example, centralized staking pools have risks; they have a central entity operating the pool, essentially giving that operator disproportionate control over the platform. Then even with decentralized staking pools, there is also a risk of smart contract bugs—which could potentially become exploited. In both these cases, you could lose access to your funds through no fault of your own.
As explained earlier, in slashing, validators lose access to their funds if they behave maliciously. This also means that if you delegate your stake to a validator that behaves badly, you also stand to lose some of your tokens. Therefore, it’s important to vet validators based on their reputation.
Crypto markets move fast. In this dynamic environment, timing is crucial — a few hours can make all the difference, especially when it comes to responding to concerning signals in a project. However, staking cryptocurrencies comes with a “cool down period” which means you cannot unstake your cryptocurrencies immediately. This waiting period can be problematic, especially when you must react quickly to changes.
How to Stake SOL
So now you know all about the benefits and risks of staking SOL, you might be wondering how to start staking on Solana yourself. As explained earlier in this article, you can stake SOL in various ways, such as a centralized exchange, delegation, staking pools, or running a node. So let’s look at your options:
Staking SOL via an Exchange
Staking via a centralized exchange is typically the most popular option for beginners simply because of the ease of access. However, as mentioned, using these exchanges to store your assets is not entirely safe. Using this method you’re forfeiting control of your private keys — and, in turn, custody of your assets. If anything goes wrong with the exchange, such as a hack or lack of liquidity, you won’t be able to access your funds. But if you’re looking for the easiest option, find a centralized exchange, set up your account, KYC and then start staking whichever coin you want.
How to Stake SOL with a Ledger
So, while staking with exchanges might offer convenient access, it’s important to move to methods that give you full control of your digital assets. If you want to access the world of staking securely without running a node yourself, delegating SOL to a validator is the easiest way to start.
Luckily, you can easily delegate SOL directly within the Ledger Live ecosystem to a Ledger Staking node via Figment. You receive your rewards straight into your secure Ledger wallet — ensuring you have full custody of your private keys at every stage. Thus, Ledger is the most secure option for staking your SOL.
Here’s how you can use Ledger Live to start your staking journey easily:
- Connect your Ledger device and open the Solana app on your device.
- Next, go to the Ledger Live app, navigate to the “Accounts” tab and select your Solana account.
- Click on the “Stake” button below the account name, choose the “Ledger by Figment” as the validator, and proceed to the next step.
- In the second step, input the amount of SOL you wish to stake and confirm it on your Ledger device.
- Finally, review and approve the transaction to successfully delegate your Solana tokens.
You can also check out the guide on staking Solana via Ledger if you’re stuck on any particular step.
Final Thoughts on Staking Solana
Staking Solana is one of the best ways to grow your exposure to Solana, one of the fastest-growing blockchain ecosystems. Staking allows you to get the best of both worlds — earn rewards without actively working for it. But while staking can be rewarding, remember: it’s not just about growing your assets; it’s also about keeping them safe.
If you’re trusting a platform or validator with your funds, remember to DYOR — learn its history and reputation, check security measures, and their overall performance. However, the best way to keep your funds safe is using a self-custodial wallet like Ledger to stake your assets.
Choose self custody, choose Ledger.