The cryptocurrency domain is the space of many earning opportunities to be received, and among the most striking and stable of them is staking. To the holders of Solana (SOL), staking is a rather different way of getting passive income by contributing to the network. The solana price today offers great throughput and low transaction costs, and therefore gained popularity as both a blockchain to execute decentralized applications and a network to execute staking. This article will take you through the process of how to earn passive income through Solana staking, what it entails, and what you should bear in mind prior to making it a reality.
What also matters is, what is Staking?
Staking is the act of validating transactions in the blockchain. Instead of making use of energy-intensive mining and exploitation, blockchains such as Solana make use of a proof-of-stake (PoS) consensus mechanism. In this framework, owners of the SOL token have the opportunity to likewise delegate their tokens to a validator node that can utilize such tokens in assisting to validate transactions and secure the network. The validator, in turn, transfers part of the rewards that it has received to the participants who are delegates of SOL.
The Staking Solana Network Functioning
Solana incorporates a novel hybrid type that integrates Proof of Stake (POS) with a cryptographic clock that sorts proceedings before being confirmed under the POS system; the Proof of History (POH). Solana validators carry out the role of block production and transaction confirmation. To be effective in their work as validators, these validators need a lot of SOL in order to effectively carry out their work, and this is where staking is necessary. By staking your SOL, you delegate your tokens to the validator of your choice. This transfer is not an ownership change, i.e., you do not lose complete control over your tokens.
How to begin Staking Solana
In order to begin earning passive income in the form of staking, you cannot skip the first stage, which is purchasing the SOL tokens if you do not have them yet. As soon as you hold SOL in any of the wallets that support it, you can start the staking procedure. Phantom, Solflare, and Ledger are the most popular Solana staking wallets. Using such wallets, you can navigate through a list of validators and delegate your SOL within several clicks. Once you select a validator, you will mention how much SOL you want to delegate. Note that staking can become active or inactive in a couple of days. Rewards are usually shared once every era, and on the Solana network, once every 2336 epochs, or approximately every 24 hours or 3 days.
Selecting a Good Validator
Validators are not equal, and it depends on whom you choose, your staking can be boosted or even lost. The characteristics of a good validator are high uptime (i.e., nearly permanent availability online), low levels of commission, and a good reputation within the Solana community. Validators that attain higher performance would have an increased possibility of being selected to generate the block and hence give more rewards. An amount in the form of a commission is charged on the rewards accumulated by validators, and the rate varies between 0 percent and 10 percent or more. A lower rate of commission may appear appealing, but one should be more careful and consider this rate in comparison with the trustworthiness of the validator. Having a validator that goes down regularly and has no commission can cost you compared to a validator that spends less time offline and charges a reasonable commission rate.
Risks and Considerations
Staking is usually viewed as a general risk-free method of gaining passive income, but it is not without risks. A possible vulnerability is the validator slashing, in which a fraction of the staked tokens is lost as a result of bad behavior or extended unavailability. Though slashing itself is not quite possible on Solana, it could happen to some other networks. The other factor to consider is the liquidity of your money. After staking your SOL, it cannot be withdrawn immediately. It can take one or two times to unstake, and in the process, your tokens will be locked. Consequently, staking might not go well with you if you suspect you may need to access your finances on short notice.
Conclusion
The Solana staking is easy to use and can bring stable passive income and help the network to be healthy and scale. Since Solana is still expanding and gaining popularity, staking seems to be an increasingly appealing choice among both novice and more experienced crypto investors. Selecting a validator you can trust and learning the mechanics and the risks of staking itself, you can make your SOL work and increase the amount of your holdings with time.