4 Essential Things You Need to Know About Staking Solana

 

Everyone wants a passive income and Solana is one of the chains that fulfill this dream easily. But why only Solana, there are other cryptocurrencies, because Solana has many validators. It means you can delegate SOL to validators. Did you know SOL tokens are inflationary and its staking rewards for validators are 6.03% APY?

The more native tokens you delegate to the validator, the more weight he gains for voting. But Solana has two types of accounts, one is normal is just used for sending and receiving and another is for staking. In addition, the fee required for staking is 0.01 SOL and you can delegate as many validators as possible.

Understanding Staking on Solana

Let’s learn the Solana staking mechanism. The whole process of staking process ensures that other people’s transactions are validated efficiently and securely. When you stake your tokens, you are essentially “voting” for the validator you trust. It means the more tokens a delegated to voters, his influence has been increased.

If you are participating in staking, you are also contributing to the security of the chain. Your participation generates a reward because of transaction fees and newly minted SOL tokens must pay you. According to estimates, over 65% of the total SOL supply is currently staked, and it shows the popularity and trust in this mechanism among participants.

How to Stake Your SOL Tokens

1. First, you need to have SOL tokens in a compatible wallet. You can choose from Phantom and Solflare wallets. These wallets also support staking functionalities.
2. Deposit SOL tokens, if you have not created a stacking account, create it.
3. Choose a validator to whom you want to delegate your stake.
4. You will get better results if you research validators based on their performance and commission rates.
5. Specify the amount of SOL you wish to stake and confirm the transaction.

Types of Staking: Native vs. Liquid

Native Staking

Native staking allows you to retain custody of your assets while earning rewards directly from the network. It commands over 90% of all staked SOL due to its straightforward nature.

Liquid Staking

Liquid staking helps you to stake as well as retain liquidity through derivative tokens. Your tokens are traded within DeFi platforms. It enables you to earn rewards while maintaining access to funds.

Risks and Rewards of Staking

Rewards

1. You can earn a steady stream of passive income, which is typically distributed regularly.
2. You can get compound growth by reinvesting into your stake account.

Risks

1. The success of your staking rewards heavily relies on the performance of your chosen validator.
2. The value of SOL itself can fluctuate dramatically due to market conditions.

Remember, do not perform slashing, because you can lose rewards, or in the worst case, you can lose your entire staked tokens.