The Solana network has recently emerged as the blockchain of choice.  Known for its speed and low costs, nearly 90 million monthly active users rely on Solana (SOL) for meme coin trading, remittance and payments, and decentralized finance. Native staking is also a trendy option for investing in Solana and earning rewards in the long term. But how does native SOL staking compare to other blockchains like Ethereum, and what advantages does it offer? In this blog, we’ll explore the following topics:
  • What is Solana native staking
  • How Solana staking differs from other major blockchains
  • The advantages of staking SOL and 
  • The opportunities for maximizing rewards on Solana.
Read on to learn more about Solana.

How Does Native Staking Solana Work?

How Does Native Staking Solana Work Native staking is directly staking SOL on the Solana network through its built-in consensus mechanism. Solana has a Delegated Proof-of-Stake (DPoS) consensus mechanism.  Here’s a quick breakdown of critical staking terms for SOL staking:
  1. Delegation: SOL holders select a validator node and delegate their tokens.
  2. Validation: Validators process transactions, contribute to network security and produce new blocks.
  3. Rewards: Validators and delegators earn rewards in native SOL tokens.
  4. Unbonding: When users decide to unstake their tokens, they must wait for an unbonding period of two to four days before accessing their assets.
You can quickly and easily access Solana native staking through a crypto wallet such as Phantom or Solflare. With their seamless user interface, these wallets are favorites among SOL token holders. Stake details such as staked SOL, APY, and validator uptime can be seen. Stake details such as staked SOL, APY, and validator uptime can be seen For Solflare, click the Staking tab from the wallet interface, then click Stake. This will automatically delegate to the Solflare validator. Your staked assets will then earn rewards. Note that native staking is distinct from third-party staking options such as liquid staking, where users receive liquid staking tokens instead of native SOL tokens.

Solana Native Staking vs. Other Blockchains

Proof-of-Stake (Pos) and Delegated-Proof-of-Stake (DPoS) are the primary staking consensus mechanisms.  Other consensus mechanisms have been adopted, such as Nominated Proof-of-Stake (for Polkadot) and Ignite (for Cosmos); however, these are mainly variants of the two primary staking mechanisms. As such, they will be discussed as part of PoS or DPoS.

Delegated-Proof-of-Stake (DPoS)

Solana, Polkadot, and Cosmos operate under the DPoS consensus mechanism. Holders delegate their tokens to validators and receive staking rewards in the form of the native networks’ tokens. This delegation process is critical because operating your standalone validator can cost hundreds of thousands. This high financial cost runs in addition to the technical complexity of creating a validator. Most retail SOL token holders have neither the economic nor technical resources to participate in the staking process.

Proof-of-Stake (PoS)

Ethereum is one of the few blockchains that supports PoS and solo staking, also known as traditional staking. Solo stakers set up their validator by assembling hardware and software and locking 32 ETH directly on Ethereum. While the technical barriers are still high, the financial costs are relatively lower than other blockchains. As of writing, 32 ETH costs less than USD 80,000.

Pros of Staking on Solana

Staking on Solana has several advantages that make it appealing to investors. It’s a great long-term bet on the blockchain industry, reducing the risks of the SOL token going to zero. Solana staking is also accessible to virtually anyone. Here are a few reasons why you should stake on Solana:

Wide-Adoption

Wide-Adoption According to Token Terminal, the Solana blockchain is the most adopted network. It has four times the users of the next blockchain. It has earned the reputation as the “Ethereum Killer” for its ability to process fast transactions at extremely low fees.  This efficiency also means that staking rewards can be distributed frequently and reliably without high transaction costs.

Low Entry Barrier

Unlike Ethereum, which requires 32 ETH to become a validator, Solana’s DPoS system allows anyone to delegate their tokens with no minimum required. This makes staking accessible to smaller investors. From a technical standpoint, anyone can stake with their Solana crypto wallet. There is no need to understand coding or hardware setup.

Short Unbonding Period

Solana is a strong contender for investors seeking decent staking rewards with flexibility. Solana’s staking rewards, at 7% APY. This staking yield is lower than the double-digit returns of its competitors, such as Cosmos (18% APY) and Polkadot (11% APY). However, Solana makes this up with one of the shortest unbonding periods at 2-4 days.  You have quicker access to funds when unstaking SOL versus Cosmos and Polkadot at 21 and 28 days, respectively.

How to Maximize Native Staking Rewards on Solana

To maximize staking rewards on Solana, investors can adopt several strategies. These don’t have to be complicated, like engaging in decentralized finance or liquid staking. You can make simple moves that will go a long way.

Delegate to Reliable Validators

Delegate to Reliable Validators Quick Google searches on the validator can reveal much information. Free sites such as Solana Compass also provide a score. 

Compound Rewards

Resist the temptation to withdraw the stake rewards. Reinvest these to benefit from compounding returns. If the Many wallets and platforms support automatic compounding of rewards, which can significantly boost earnings over time.

Solana Network Statistics

Take note of these critical statistics that can impact your staked SOL.

Total Active Stake (Staking Market Cap)

Like market capitalization, the total value of all Solana tokens, the staking market cap indicates market confidence. Investors perceive large market capitalization positively, with the network showing price stability. The total value of staked SOL relative to total market capitalization also indicates the level of participation among token holders. The following section will discuss this further.

Staking Participation Rate

Solana's staking participation rate is 66%, almost 3x higher than Ethereum. The staking participation rate is a percentage of a network's tokens that are staked on the network. The metric shows the level of engagement among investors and token holders, as well as the overall health and level of network security.

Inflation Schedule

Inflation Schedule The SOL staking yield incentivizes validators and token holders to engage in network security. Being a validator costs money. This staking yield is the primary cause of network inflation, with additional SOL tokens printed over time. The initial inflation rate is 8%, while the target long-term inflation rate is 1.5%. Knowing how this drives down staking yields is essential for a long-term investor.

Is Solana Staking Worth It?

Absolutely. Solana is one of the top blockchains in 2024 and has amassed millions of users with its high-performing network. If you want to invest in Solana long-term, taking advantage of staking opportunities will boost your crypto asset returns.
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