Staking in crypto means locking up your tokens to receive rewards. It has various benefits. For example, it helps secure a blockchain and generates passive income.
Solana is such a blockchain where you can stake your $SOL tokens. Staking $SOL is not difficult. Hence, here’s a beginner’s guide to staking $SOL.
What Is Staking $SOL?
One of the things you can do on Solana is staking $SOL. If you stake a cryptocurrency, the associated chain puts it to work. These are PoS chains or Proof of Stake chains. Solana has a variation on POS, namely, PoH or Proof of History. It supports Solana’s PoS mechanism.
These mechanisms verify and secure all transactions. Because this happens on a blockchain, there’s no middleman involved. So, that’s among others what makes a blockchain decentralized. It also makes sure that a blockchain can keep running.
You can compare staking with good old-fashioned interest earning on your savings with a bank. That’s the traditional way. However, there’s more to blockchain consensus. The more tokens a chain has locked up, the more secure that chain is. There’s a simple reason for this. Any attacker needs a 51% majority before they can take control. So, the math is simple. So, the more coins a chain has staked, the more difficult it is to take control. As a result, a high staking percentage makes a chain more secure.
Source: X
Now, Solana has a worldwide network of validator nodes. These validator nodes work to confirm transactions. In return, the validators receive rewards for their work. However, in most cases, it’s expensive to run such a node. That’s why we, token holders, can delegate our tokens to validators. This results in us, the delegators, also receiving a part of the staking rewards.
So, staking $SOL has some interesting benefits. For example,
- Earning staking rewards.
- You contribute to the Solana network.
- It’s a source of passive income.
The picture below shows how Solana’s Proof of History works.
Source: Binance research
How Does Staking $SOL Work?
Staking $SOL can happen in three different ways.
- Solo staking — You decide to run a validator node. However, this requires expensive hardware and technical knowledge.
- Staking services — This is the most popular option. You can opt to delegate your $SOL to a validator’s staking pool, run by a trusted third party. This setup allows you to earn rewards by staking $SOL. However, there’s no need to invest in setting up a validator node. You also remain in control of your $SOL.
- Crypto exchanges — Some exchanges offer staking services. However, staking $SOL with an exchange means that you no longer may have control over your $SOL. Especially with a centralized exchange. Remember, not your keys, not your coins.
So, for staking services, you have a couple of options. For example:
- Wallets — Like Phantom or Solflare. Staking $SOL straight from your noncustodial wallet.
- Platforms — Like Marinade Finance, Jupiter, Jito, or SolBlaze.
Source: X
Be aware that staking typically has lock-up periods. During this lock-up period, you can’t access your staked $SOL and, for instance, sell it. These lock-up periods vary between the services you use. For example, from 2 days to up to 30 days. Make sure to thoroughly research staking requirements and rules.
Liquid staking is another option. Once you stake your $SOL, you receive another (derivative) token. This derivative represents your staked $SOL. You can use this derivative in DeFi, and get more rewards, or you can sell it. However, whoever owns the derivatives, also owns the staked $SOL. The following video explains stalking $SOL.
Conclusion
Staking $SOL has various benefits. You secure the network and earn rewards in return. There are various ways how you can stake your $SOL.
The current $SOL price is $123. It has a market cap of $57 billion. There’s an unlimited max supply and a 581 million total supply. Currently, 465.5 million $SOL circulate. 381.8 million $SOL are currently staked.
Disclaimer
The information discussed by Altcoin Buzz is not financial advice. This is for educational, entertainment and informational purposes only. Any information or strategies are thoughts and opinions relevant to accepted levels of risk tolerance of the writer/reviewers, and their risk tolerance may be different from yours.
We are not responsible for any losses that you may incur as a result of any investments directly or indirectly related to the information provided. Bitcoin and other cryptocurrencies are high-risk investments, so please do your due diligence.
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