An epoch is the time in which the staking rewards and inflation are issued. Rewards accrued in a given epoch are issued to all validators and delegators in the first block of the following epoch. An epoch is the amount of time that staking rewards are issued to all validators and delegators at the beginning of a new epoch. This is approximately 2 days long.
How to Participate in an Epoch
Each staking wallet can choose how many tokens to stake, and where. However, staked tokens must be held for a minimum of 7 days in order to receive staking returns.
Rewards are accrued on a daily basis while staked tokens retain their locked position. Rewarded earnings vary based on the validator(s) staked, the total staked tokens on the network, and an individual validator’s uptime and commission (fee).
Token stakers are rewarded for locking SOL to staking contracts on Solana’s Mainnet Beta. They are issued staking rewards in exchange for their staked tokens’ security, transaction processing work, and staking participation. The staking rewards are part of the current 8% annual inflation rate, which is decreasing each year by 15%, eventually reaching a stable 1.5% annual inflation rate.
The SOL stake lifecycle is broken down into three stages: Phase 1 consists of the first 15 days after the block reward has been reduced. The primary purpose of this phase is to allow stakers who created their wallets before the reduction and don’t want to wait any longer than they have already done so to cash out their earnings via obtaining new coins from staking for a transitional period of 15 days. Phase 2 is staking with staked coins, stakers will be rewarded staking returns on staked coins. Phase 3 is staking with unstaked coins, allowing users to stake SOL without confirming the previous staked block, this allows stakers to compound their staking rewards by stacking them on top of staked blocks.
- Warmup: Staking works as a way to reward those who contribute to the network. To begin influencing the consensus process and start earning rewards, staking must be activated first. This is determined by how much SOL is beginning to stake compared with all of the other SOL that has been staked previously. Each epoch, up to 25% of the SOL already in play can warmup and begin earning staking payouts. In the best-case scenario, when a substantial amount of SOL is at stake and little new stake is entering, this will usually imply that stake will become active in the coming epoch as long as the staking transaction was sent. Stake will increasingly activate over time, for example at the start of a network. The percentage of stake that enters the validation stage each epoch will decrease as the stakes accumulate.
- Validation: The stake earned in this stage can be utilized to influence validator voting power and is, as a result, eligible for both rewards and penalties, which will be discussed further on.
- Cooldown: Before a staked SOL can be liquidated, it must first go through a period in which stake is still eligible for punishment. This follows the same pattern as the warmup phase, with a maximum of 25% of the SOL being able to pass the cooldown phase per epoch.
Key Take Aways
- Using on-chain governance, Solana’s validators voted to enable staking rewards and inflation, which are now live.
- On the mainnet, SOL token holders can earn rewards and help secure the network by staking tokens to one or more validators on Solana’s Mainnet Beta.
- Anyone who has SOL may stake using a stake-supporting wallet such as SolFlare.com, which works with the Ledger Nano or a native SolFlare key file.
- Staking returns/yields are dependent on the current inflation rate, the total number of SOL staked on the network, and an individual validator’s uptime and commission (fee).
- Solana’s initial inflation rate is 8% each year, declining from 15% yearly to a long-term fixed inflation rate of 1.5%.
Staking rewards on Solana are determined by a number of variables, some of which are connected to the chosen validator, while others are related to the global network state. Rewards are immediately added to the active stake in order to compound, necessitating that the cooldown phase pass before withdrawing any profits.
In this article you learned how staking can earn rewards and help secure the network. You also learned about staking on Solana, which is a cryptocurrency that uses a delegated proof-of-stake consensus mechanism to validate transactions. If you have any questions about staking or want more information, please feel free to learn more about the Solana Network and how you can participate! We will be happy to answer your questions and provide you with further insight into staking SOL tokens.