$SOL is the native coin of the Solana Blockchain. Other than staking, holders use $SOL for payment of transaction fees. Additionally, the coin is also available on Crypto exchange platforms like Coinbase.
What is Staking?
Staking is the process by which token holders assign their tokens to validators. Resultantly adding to the validators’ stake-weight.
Holders have ownership over the delegated tokens.
Staking $SOL is beneficial as it helps you secure the network, and in the process, one can earn rewards.
To stake, you need to transfer your tokens to validators who operate transactions on the network. Validators are people or entities who run programs on specialized computers. Additionally, the more a validator transacts, the more the rewards they will receive.
One can stake tokens from an account even if your tickets have a lock-up. These tokens can’t get withdrawn to another wallet address until the lock’s expiry. Despite this, holders can work with validators and still earn rewards.
Risks of Staking $SOL
Validators risk getting slashed. Slashing is a process of destroying a delegators’ stakes because of malicious actions by them.
This process acts as a method of warning validators from committing any crime. The reasons being, slashed accounts are at risk of a bad reputation.
In addition, token holders risk losing the tokens they entrusted to validators. Importantly, slashing happens when there is a network restart as it is not automatic.
What is Proof of Stake?
For the network to reach a consensus fast and efficiently, blockchains are looking for solutions. Solana uses Proof-of-Stake. With this method, validators vote to choose which blocks to add or block from the network.
In addition, the stake-weight of a particular validator influences the vote outcome.
$SOL Staking Rewards
Once every two days, computing stake rewards occur and are given out. Holders make their deposits to the account that earned the stakes.
The yields one gets from staking tokens depends on several factors, including;
- Inflation rate at the moment
- Total $SOL stakes
- Validator’s commission fee and uptime
Conclusion
With more holders staking their tokens with various stakeholders, there is an increase in stakes across the blockchain. This increases safety.
Click here to read more Crypto news.