With thousands of cryptocurrencies on the market, it's a challenge for crypto beginners to know which tokens are the best for investment.
Many emerging blockchains, such as Solana (SOL), have moved away from mining tokens using proof of work (PoW) consensus mechanisms into the more efficient and cost-effective proof of stake (PoS) consensus.
Proof of stake (PoS) provides earning opportunities for token holders simply from buying and staking tokens. But Solana (SOL) took it a step further and launched the blockchain as a hybrid model, which we'll explain more about in this post.
Solana has a projected 8% inflation rate, which decreases by 15% a year until it reaches a floor of 1.5%. The inflation and transaction fees are distributed between Solana network validators in proportion to their staking balance.
Solana (SOL) is unique and has excellent potential for future growth. In this post, you will learn more about this fascinating cryptocurrency technology and find out how to stake Solana (SOL) and earn rewards from your tokens.
Contents
- What Is Solana (SOL)?
- What Makes Solana Unique?
- How To Stake Solana (SOL)
- How To Choose A Solana (SOL) Validator
- Is Solana (SOL) Better Than Ethereum (ETH)?
- Recap Of How To Stake Solana (SOL)
What Is Solana (SOL)?
Anatoly Yakovenko founded Solana in 2017, but it launched officially in March 2020. The Solana Foundation has headquarters in Geneva, Switzerland. It is a "highly functional open source project that banks on blockchain technology's permissionless nature to provide decentralized finance (DeFi) solutions"- CoinMarketCap.
Anatoly's background includes a senior staff engineer position with Qualcomm and a software engineer with Dropbox. In 2017, he started working with a Qualcomm colleague, Greg Fitzgerald. Together they founded the Solana Labs, and more colleagues from Qualcomm joined them to help develop the Solana project.
The Solana protocol facilitates the creation of decentralized apps (DApps). It has a unique hybrid model of proof of history (PoH) combined with a proof of stake (PoS) consensus of the blockchain. This model makes Solana popular with retail traders, institutional traders, and investors. Solana's primary focus is to make DeFi more accessible to the world on a grander scale.
Check Out: What Is Solana? Should You Invest In SOL And Where To Buy It?
What Makes Solana Unique?
The Proof of History (PoH) consensus makes Solana (SOL) distinctive from other cryptocurrencies. The hybrid model allows for enhanced scalability and, therefore, more usability. Solana has lightning-fast processing times because the hybrid model decreases the validation time for smart contract execution and transactions.
What stands Solana apart from many other cryptocurrencies also creates great institutional appeal. Indeed, this week, VISA onboarded its first Solana-based project (Zebec) to its exclusive Fintech Fast Track Program that provides valuable resources to innovative Fintech companies for accelerating growth and pioneering new commerce models.
Zebec is a Solana-based "programmable cash stream protocol." Visa are one of the few mainstream companies that embrace crypto technology. In a CryptoSlate press release, the SVP and Global Head of Crypto at Visa, Terry Angelos, said, "By joining Visa's Fast Track program, exciting Fintechs like Zebec Protocol gain unprecedented access to Visa experts, technology, and resources."
Last year, 2021, Solana launched the Degenerate Ape NFT collection, sending the price of SOL to new highs of over $60. With accelerated developer activity on the ecosystem, the rise of gaming verticals and NFTs on Solana, more institutional interest and a growing DeFi system, is Solana (SOL) set up to be the next big thing for cryptocurrencies? It certainly looks that way, and we shall watch with interest.
Today, Solana is listed #10 on CoinMarketCap, and many crypto experts believe it could genuinely present an exciting challenge to Ethereum.
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How To Stake Solana (SOL)
As Solana (SOL) is available on most of the leading, reputable cryptocurrency platforms, it's a straightforward process to stake your SOL tokens:
- Buy SOL from eToro, Binance, Kraken, Coinbase or any of the reputable cryptocurrency platforms
- Move your SOL tokens into a secure wallet that supports Solana (SOL) staking
- Create a stake account – be aware of leaving some SOL in your secure wallet to pay transaction fees
- Click on the "staking" tab in your wallet
- Select the amount of SOL tokens you wish to stake and click on "confirm."
- Next, click on "Delegate" and select a validator. Remember to research your chosen validator and ideally choose a verified Solana validator
- Confirm your transaction
- You have now delegated your SOL stake when the transaction completes and are ready to start earning rewards.
Be aware there is a warm-up period of 2-3 days before you start earning rewards, which are compounded automatically. You can monitor your rewards in your secure wallet.
How To Choose A Solana (SOL) Validator
An essential element to staking Solana (SOL) is to choose a reliable validator to delegate your SOL tokens.
When you stake your SOL tokens, you are helping to secure the Solana network, and as an incentive, you can earn rewards from doing so. Staking SOL is a simple process. You buy Solana (SOL) tokens and delegate them to network validators who run and process transactions to keep the network running smoothly.
The more SOL stake delegated to a Solana validator, the more regularly the validator is selected to write new ledger transactions. Processing more transactions equals proportionally more rewards for validators and delegators.
Naturally, validators have costs for running and maintaining their systems, so they charge a commission fee to delegators as a percentage of rewards earned. Validators rely on these commission fees as their bread-and-butter income to enable efficient maintenance for operations. The commission rates may vary between validators, so it pays to determine your costs upfront before delegating your SOL tokens.
In addition, select a validator that maintains close to 100% uptime. However, you may consider delegating your SOL tokens to smaller-scale validators to help decentralise the Solana network, support network resilience, and add to the value of your delegated SOL investment long-term.
Your Solana (SOL) validator should demonstrate a long-term commitment to the network, providing value, supporting app development on the platform, educational materials, and tooling etc.
Thankfully, Solana has pre-vetted several validators and allocated a verified badge for reliability, which provides some assurance for your commitment and delegation of SOL tokens.
"Validators form the backbone of Solana's network" - Solana website.
If you are interested in becoming a Solana Network validator to help secure the Solana Ledger, check out the Solana Validator requirements on the website.
There are no minimum amounts of SOL tokens required to run a validator on Solana. Still, the website information says, "In order to participate in consensus, a vote account is required which has a rent-exempt reserve of 0.02685864 SOL. Voting also requires sending a vote transaction for each block the validator agrees with, which can cost up to 1.1 SOL per day." At today's SOL price, that could cost you $96 a day.
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Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
Is Solana (SOL) Better Than Ethereum (ETH)?
Solana (SOL) transactions are super-fast, supporting tens of thousands of transactions per second (TPS). Ethereum is in the process of the Ethereum 2.0 upgrade, and transaction speeds are abysmally slow, averaging 13 TPS, although, once completed, the Ethereum network suggests speeds of 100,000 TPS. Ethereum fees can be prohibitively expensive, and Solana's fees are notably lower.
Solana is (currently) better for the environment than Ethereum. The hybrid model of Solana, combining proof of history (PoH) and proof of stake (PoS), is 99.9% more efficient than Proof of Work (PoW). Ethereum is upgrading to change to proof of stake (PoS), so time will tell how efficiency improves on completion.
Solana is currently easier to program than Ethereum as it uses popular software called Rust, which developers can use to build a wide variety of applications. Solana uses less bandwidth than Ethereum as it uses a protocol called Turbine that breaks blocks down into packets, which transmits to a group of computers, spreading the load in such a way that results in low bandwidth use.
Solana (SOL) could feasibly be better than Ethereum, on many counts, but until ETH2 completes, it is uncertain if that situation will remain.
Recap Of How To Stake Solana (SOL)
Solana (SOL) has vast potential in the cryptocurrency market, becoming rapidly popular because of lightning-fast transaction speeds and low fees. The SOL token quickly shot to the top ten list of cryptocurrencies and attracted significant Institutional interest. Many cryptocurrencies fail to achieve such claims and, for Solana, this could be a substantial component of its future success.
Often referred to as the Ethereum killer, Solana has significantly impacted the cryptocurrency industry. The unique hybrid model of proof of history (PoH) and proof of stake (PoS) set it apart from most other cryptocurrencies. It is, however, unlikely that Solana (SOL) can topple Ethereum (ETH) from the #2 position, but as the #10 listed token, Solana (SOL) has leap-frogged over many more established cryptocurrencies.
Staking Solana (SOL) is easy. It's available on most leading cryptocurrency exchanges. You can stake SOL, buy it, sell it and trade it as you wish. If you intend to stake Solana (SOL), plan a long-term strategy so you can compound rewards and make the most of your Solana (SOL) holdings.
Please note that the above information is not providing advice on tax, investment, or financial services. We provide the above information without considering risk tolerance and a specific investor's financial circumstances.
Trading or investing in financial instruments such as cryptos may not be suitable for all investors. It does involve risk and the possibility of a loss of capital. There are no guarantees for profiting from cryptocurrencies, and it's advisable only to risk what you can comfortably afford to lose.
eToro – The Best Platform To Buy Solana
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Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
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FAQs
Is there any risk to staking Solana (SOL)?
When delegating your $SOL tokens, there is little risk, but there is a risk of slashing (losing your token holdings). If your designated validator is found guilty of malicious behaviour, you could lose up to 100% of your $SOL holdings. Slashing could result from a validator signing illegal transactions or voting for illegal forks. If you are concerned about the risks of slashing, the best advice is to choose a reliable, Solana verified validator.
What is the Solana Foundation Delegation Program?
Solana wants to incentivise Validators to join the network, and it supports the robust community of independent Solana validators. The Solana Foundation delegates a stake from the treasury to promote the network's decentralisation. Validators interested in joining the network can apply to the Solana Foundation for a stake delegation. Acceptance is subject to specific decentralisation and performance criteria, and the size of the delegation depends on the validator's performance. To learn what is required, check out the delegation criteria page.
Can I trade Solana (SOL)?
Yes, you can trade Solana (SOL) on platforms where $SOL is pegged to various stablecoins and BTC, such as: - Binance – SOL/USDT, SOL/BTC and SOL/USDT; Coinbase – SOL/USD;·FTX – SOL/USD; Huobi Global – SOL/USDT
Is it worth investing in Solana (SOL)?
We can't advise investing in Solana (SOL) because it must be a personal choice. But crypto experts suggest that Solana has growth potential. As the #10 listed cryptocurrency, the price of $SOL could see new highs in 2022. The benefit of investing in Solana (SOL) for the long-term is the ability to stake your $SOL tokens and earn rewards.
Is Solana an Ethereum killer?
Good question. In less than two years, Solana (SOL) made staggering progress in the cryptocurrency world. Its qualities are superior to Ethereum for the time being, but that can change in 2023. Fast speeds and low fees attract developers and institutional interest from investors who prefer Solana over Ethereum. However, let's consider the multiple numbers of applications built on Ethereum that still rely on the functioning of the Ethereum blockchain. Ethereum also has a first-mover advantage, deploying smart contracts, which might give it the edge over Solana. Solana has also experienced intermittent blockchain congestion issues over the last year and quite recently, causing a bit of reduced confidence from crypto enthusiasts and investors. So much depends on the successful completion of the Ethereum 2.0 upgrade when the costs, transaction speeds, and energy efficiency may be better than Solana. That could make Ethereum the biggest blockchain in the cryptocurrency world. Solana may have the edge right now, but it's unlikely to stay that way. It's questionable that Solana is the Ethereum killer because Ethereum 2.0 may vastly outperform Solana.
Where can I buy Solana (SOL)?
Solana (SOL) is listed on most leading cryptocurrency exchanges such as Coinbase, Binance, Poloniex and Kraken. You can also buy and sell Solana (SOL) on eToro, the world's leading social trading platform.
Does Solana have a thriving community?
Yes, below are the links for the various channels for Solana: