Solana staking explained

What is Solana staking?

Solana is a decentralised network, meaning it’s distributed across a vast number of computers. In the absence of a central authority, it relies on a system called a consensus mechanism to ensure that all participants agree on the latest state of the shared ledger.

One of the main responsibilities of a consensus mechanism is to determine how the network processes transactions and adds new blocks to the chain. In proof-of-work (PoW), used by Bitcoin and Litecoin, ‘miners’ compete to solve complex mathematical problems for this right. proof-of-stake (PoS) takes a different approach, relying on ‘validators’, who have deposited or ‘staked’ a certain amount of a network’s native token.  

While PoW relies on computing power to secure the network, PoS incentivises good behaviour with rewards and discourages malicious activity by issuing penalties that may result in the partial or entire loss of a validator’s stake. PoS also boosts decentralisation by lowering the barriers to participation, in contrast to PoW, which requires miners to invest substantial sums in energy and hardware. 

Launched in 2020, Solana is the second-biggest PoS network by market capitalisation after Ethereum. However, while Ethereum randomly selects validators, Solana uses a variation of the PoS mechanism called delegated proof-of-stake (DPoS), which involves electing validators. It combines DPoS with an innovation known as proof of history, which timestamps transactions, allowing the network to agree on the correct order, to improve scalability.   

How does Solana staking work?

To participate in Solana’s consensus mechanism, holders of its native token, SOL, have two choices. They can become a validator, which involves running the blockchain software and requires specific hardware, or they can delegate their tokens to an existing validator and earn a share of the rewards. Unlike other PoS networks, there’s no protocol-level minimum to delegate, although validators need a funded voting account.

Solana’s validators process transactions and then vote on which blocks should be added to the chain, effectively confirming the validity of the transactions they contain. Each vote is weighted by the stake backing the validator- the higher the stake, the greater the influence. When SOL holders delegate their tokens, they increase this weight and inform the network that they trust the validator.

Staking rewards range between 5%-7% per annum and are paid once per epoch (lasting around two days). The yield is variable because the calculation depends on SOL’s inflation rate (4.3% as of August 2025) and the total active staked SOL, both of which change continually. It also takes into account a validator’s ‘uptime’, determined by credits earned for every block vote. 

Solana doesn’t automatically penalise or ‘slash’ malicious behaviour, primarily because it slows down the network. Until the development team resolves this dilemma, the network halts when a validator breaks the rules, and the offender may subsequently lose some of its stake.

How to get started with SOL staking

The first step is to purchase SOL from a cryptocurrency exchange and store it in a digital wallet suitable for staking. These are either ‘hot’ wallets, meaning they’re connected to the internet, like Solflare or Phantom, or cold wallets, which are hardware devices that remain offline, such as Ledger.

The next step is to select a validator. Metrics worth researching include:

• Uptime: The percentage of time a validator is online (at least 95%)

• Commission: How much the validator charges (usually between 5% and 10%)

• Size: Smaller validators boost decentralisation

• Performance: How many rewards they’ve previously earned  

The final step is to delegate the stake to the chosen validator directly from the wallet. Delegators retain control of their tokens, and they can increase their stake at any time or reassign it if the validator underperforms.

As mentioned earlier, the network issues rewards once per epoch. It automatically restakes rewards unless withdrawn, which allows for compounding.

Benefits and risks

The main benefit of Solana staking is the income it generates. The amount depends on the level of involvement- validators tend to earn the highest rewards, but they need a degree of technical expertise and to maintain uptime. In contrast, holders who delegate their tokens only have to research which validators to back, so the income they receive is effectively passive.

Solana’s transaction or ‘gas’ fees are relatively low compared to other protocols, which means participants keep more of their rewards. The average fee is just 0.000172703 SOL (as of August 2025), worth €0.03.  

Staking also bolsters security because the more SOL staked, the less likely an attack that would allow a malicious party to reverse or censor transactions. The attacker would need to control at least 33% of the total active stake (407,713,495 as of August 2025), amounting to €21.5B.

However, there are risks to consider too, primarily losses due to penalties. While slashing isn’t automatic on Solana for the time being, it can still occur if the network gets disrupted.

Staked tokens are subject to a withdrawal period designed to maintain the network’s stability. After requesting a withdrawal, the status of the stake changes to ‘deactivating’ until the start of the following epoch, at which point the tokens become accessible. Also worth noting, only 25% of the network’s total stake can be deactivated each epoch.

Finally, cryptocurrencies in general are volatile, and SOL is no exception. The value of the rewards in euros may fluctuate from day to day, and past performance is no guarantee of future returns. 

Liquid staking and alternatives

Service providers also offer passive income, and they make staking more accessible by lowering the technical barriers. But they charge fees, and they pose custodial risk because the funds are exposed to cyberattacks, as experienced by crypto exchange Bybit in February 2025, or mismanagement, which led to FTX’s collapse in 2022.

Liquid staking protocols issue what are known as liquid staked tokens (LSTs) representing delegated tokens. Holders can then use the LSTs elsewhere, for instance in decentralised finance applications like lending protocols or liquidity pools, which facilitate trading on decentralised exchanges. As the name suggests, the main difference with direct staking is instant liquidity- instead of locking up their tokens and having to endure the withdrawal period, holders can use LSTs immediately.

One example of a liquid staking protocol accessible in Germany is Marinade, which issues an LST called mSOL. Another option is to use a crypto exchange, although fees usually are more significant, on top of the withdrawal time. 

Finally, exchange-traded products (ETPs) also offer exposure to SOL staking. Some of these products trade on the Xetra, so they can sit in a portfolio alongside traditional asset classes and contribute to returns. As they trade daily, they’re more liquid than direct staking (due to the withdrawal period).

Maximizing rewards with Solana staking

Here are a few tips for making the most of Solana’s staking rewards.  

Research- Thoroughly research validators to identify strong performers. Block explorers like Solana Beach share a broad range of information about validators, including their success rate, measured by the percentage of their blocks that have been added to the chain, their total staked SOL and their commission rate. Solana Beach ranks Helius (based in Frankfurt) as the top validator, with a 99.98% success rate and a total stake of 12.2M SOL (worth €2.1B as of August 2025).

Compare commission- Rates generally range from 5% to 10%, although Helius doesn’t charge commission. As a general rule, weigh up the commission rate against the validator’s performance and try to strike the right balance between risk and reward.   

Diversify- Spread funds across different types of staking, for instance delegating from a digital wallet, using a liquid staking protocol and investing in an ETP. Diversification allows investors to take advantage of the benefits offered by each approach.

Monitor performance- Block explorers and some wallets, including Solflare, allow delegators to track the performance of validators. Restake when necessary, especially if a validator underperforms.  

SOL staking compared to other staking options

For context, here’s how SOL staking compares with two major PoS networks, Ethereum and Polkadot, based on several of the metrics mentioned earlier in this article.

First, a brief summary of how their mechanisms work. While Ethereum randomly selects validators, Polkadot uses a variation of PoS known as nominated proof-of-stake, which allows holders of its native token, DOT, to register as nominators and vote for validators.

Minimum stake - Ethereum’s minimum stake to launch a validator is the highest of the three networks at 32 ether, its native token (worth €121K as of August 2025). The alternative is to use a staking service or purchase an ETP. Polkadot is more accessible, starting at one DOT (€3.25) to join a nomination pool and rising to 7,500 DOT (€24k) for validators.

Rewards - Polkadot’s reward is the highest at 13.15%, nearly double Solana’s upper limit of 7% and more than four times Ethereum’s reward of 2.9%. The main factor influencing Polkadot’s rewards is era points earned by validators for activities like block production. Ethereum also takes into account a validator’s activities, along with the size of its stake compared with the total staked ether.

Penalties - Ethereum and Polkadot both automatically penalise validators for malicious behaviour, which could lead to loss of stake and removal from the network.

Withdrawals - Withdrawals on Polkadot take the longest at 28 days, during which time the stake doesn’t earn rewards. Ethereum’s period is variable, lasting 17 days as of August 2025.

Tax and security considerations

The German Federal Central Tax Office classifies crypto as a private asset subject to the holder’s prevailing rate of income tax. So an investor who pays 45% tax on their salary pays the same rate on crypto-related activity such as disposals. But this tax only applies to assets sold within a year (unless the annual net gain falls under €1K). Crypto held for longer than a year is exempt from tax, but income generated from staking, above the threshold of €256, is liable. 

Another consideration is security, but there are several steps investors can take to protect their assets.  

Cold storage- As explained earlier, hot wallets are connected to the internet, which makes them convenient but vulnerable to hacks. Cold wallets, on the other hand, remain offline so they’re considered the safest way to store crypto.  

Seed phrase- Self-custody digital wallets are issued with a seed phrase, a sequence of random words that the owner can use to recover an inaccessible wallet. Keeping this phrase secret is crucial because anyone who knows it can access the funds. The safest way to store it is on a piece of paper kept in a safe, beyond the reach of hackers and thieves.

Two-factor authentication (2FA) - 2FA is a security measure that requires users to provide two forms of identification to access any type of account, including a digital wallet. The two factors typically take the form of a ‘knowledge’ factor, like a password or PIN number, and a ‘possession’ factor, such as a mobile device or security token that the owner can use to generate a temporary code.  

Opt for a crypto ETP- Investors can gain exposure to Solana staking through exchange-traded products (ETPs) that trade on the Xetra exchange. These products can sit in a portfolio alongside traditional assets like shares and bonds and contribute to overall performance. The CoinShares Physical Solana Staked ETP is fully backed by SOL stored with Komainu, an institutional custodian, and pays staking rewards of 3% per annum (as of August 2025). This solution avoids relying on a self-custody solution. 

FAQ

Can anyone stake Solana?

Yes. Solana doesn’t enforce a minimum stake like some other PoS networks. Holders of SOL can register as validators, responsible for processing transactions and adding blocks to the chain, or they can delegate their tokens to validators who they believe are trustworthy. Running a validator requires a degree of technical expertise, while delegators need to research which validators to back. Staking services offer an alternative, provided by crypto exchanges and liquid staking protocols.

What are the rewards for Solana staking?

The staking reward ranges between 5%-7% per annum (as of Aug 2025) based on the network’s inflation rate, the total value of staked SOL and a validator’s uptime. Rewards are calculated and paid once per epoch. Validators charge commission fees, which reduce the rewards received by the holders backing them.   

How long is the lock-up period when unstaking?

Typically up to ~2  days because the network processes withdrawals at the start of an epoch (a mechanism designed to preserve stability). What’s more, only 25% of the network’s entire staked SOL can be withdrawn each epoch.

Which wallet is best for SOL staking?

Investors can choose between ‘hot’ wallets suitable for staking, like Solflare or Phantom, or cold wallets, such as Ledger. Hot wallets are connected to the internet, so they’re convenient but vulnerable to hacks, whereas cold wallets remain offline, so they’re considered more secure. 

Further resources

Learn about the CoinShares Physical Solana Staked ETP, which is fully backed by SOL stored with Komainu, an institutional custodian. The product accrues staking yield into the ETP’s NAV (currently ~3% p.a. as of Aug 2025); no distributions are paid to investors.