Solana: How to pick a validator
Updated 8 November 2021 to add information about stake pools
Updated 7 February 2022 to add information about stakewiz.com
Disclaimer: We run a Solana validator ourselves. If you find this article helpful and would like to support us by staking our validator you can find the details at the bottom of this page.
Jump to a section:
- What is staking (and stake pools)?
— Stake Pools
- How to choose a validator
— 0. Use the Wiz Score — Solana’s most comprehensive validator ranking
— 1. Commission & APY
— 2. Total Stake (“Halt Line”)
— 3. Data Center Location / Concentration
— 4. Validator information & public profile
- Conclusion
Solana is the Blockchain of the future with incredibly high tps (transactions per second) and a great team and development framework.
Given its strong position and rapid growth there has been a rapid influx in new token holders who are trying to get to grips with the eco-system and maximize their returns.
In this article I’m going to outline some of the criteria you should consider in choosing a validator to help you make an informed decision on where to stake your SOL.
While we run a validator the goal here is to provide objective information and not blindly sell you on staking us. In some of the criteria mentioned we will not perform as well as others.
What is staking (and stake pools)?
Solana is a Proof of Stake blockchain with a bit of Proof of History sprinkled in. The Proof of History aspect is technically interesting but irrelevant right now in the context of staking rewards.
In a proof of stake blockchain the transactions on the network are processed by “validators”, as opposed to “miners” in a Proof of Work blockchain.
Validators process transactions and update accounts and balances, then publish these on to the chain. Their authority to do so comes from “stake”.
Staking is essentially lending your SOL to a validator to give them more of a right to participate on the network, i.e. their stake weight increases.
The more stake a validator has the more leader slots they get and the more transactions they process. The idea is that validators with a lot of stake are trusted by a lot of network participants and hence trustworthy.
So what’s in it for you? Validators process transactions and earn transaction fees as a reward, these increase proportionate to stake and most of these rewards are paid to the delegator (the person staking, i.e. you). Validators can set a commission percentage for how much they want to keep as their fee, though currently many run on 0% to attract more delegators, essentially making a loss.
An example:
You stake 100 SOL with validator X. Their commission is set to 5% and based on their performance they achieve an APY of approximately 8%. An epoch on Solana lasts 2–3 days and rewards are paid out at the end of an epoch. Let’s assume the most recent epoch took exactly 2.5 days and there are 365.25 days in a year:
100 SOL * (0.08/365.25*2.5) * (1–0.05)= 0.05202 SOL
At the end of the epoch you would have earned 0.05202 in staking rewards after the validator’s 5% commission deduction. Today the SOL price is around $140, so this is about $7.20.
There are also stake pools. The difference to direct staking is that you are not using the on-chain delegation mechanism to assign your SOL to a validator via a stake account. Instead you deposit your SOL into the stake pool, in return you receive their native token. This is also referred to as liquid staking.
The benefits of this are that you have no waiting period to start earning rewards or if you want to liquidate your staking position. You can sell your pool tokens for regular SOL on the DeFi market. You can also use them to earn additional rewards, for instance by providing liquidity to trading pairs involving the pool token.
One of the downsides to stake pools is that you’re trusting them to run a secure pool programme that won’t be hacked, you’re trusting them not to rug pull and disappear with your SOL, and you might see slightly lower rewards as they spread the stake across many validators, some of which may charge higher commissions, and the pool itself might take a commission.
The good thing about stake pools however is that they generally have a good delegation strategy which supports smaller validators and helps decentralize the network. Ultimately it is up to each individual to determine whether they prefer direct staking (and remember, you can split your SOL across multiple validators yourself to diversify) or using a stake pool.
In conclusion staking helps secure the network by enabling validators to process transactions while earning you rewards.
How to choose a validator
If your SOL are held in a central exchange like Binance, Kraken, etc. you cannot stake them, but those exchanges might have their own internal mechanism by which you can earn rewards. This is not staking.
If your SOL are held in a wallet where you control the private key, then you can stake your SOL. Popular wallets include Phantom, Sollet and Solflare. These are compatible with Ledger devices as well which is the best way to store your crypto currencies.
You can also use the Solana command line tool if you’re very technically inclined.
In your wallet you will likely see list of validators and wonder how best to choose which Validator you should stake. These are the criteria we think are important:
0. Use the Wiz Score — Solana’s most comprehensive validator ranking
Since this article was first written we have released a website that creates a detailed score for every validator as a percentage. This score takes into consideration over a dozen factors, including three measures of data centre decentralization, stake weight, voting performance, block production performance, uptime, published information, operational history and more.
All of these are combined to create a single “smart” score, which we call the Wiz Score. Right now this is the most comprehensive scoring of validators in the Solana eco system and the score is geared towards healthy staking behaviours that benefit the network and the stakers.
You can click on the “Wiz Score” of any validator to see the detailed break down of their score. Over time the scoring will be refined and the scorecard always reflects the version of the score applied.
Check it out on https://stakewiz.com
1. Commission & APY
The validator’s commission affects the returns you will earn. The best value to look at however is not the commission alone but rather the validator’s Annual Percentage Yield (APY). This value indicates the returns you can expect on a compounded annual basis, factoring in the commission as well as the validator’s performance (i.e. how well they vote on each block).
The easiest place to check APY is stakeview.app, you can also look at previous epochs to get a feel for past performance, since the default view is a real-time estimation and fluctuates regularly.
2. Total Stake (“Halt Line”)
The Solana network depends on a broad array of validators contributing to the network and stabilising it. The more validators receive leader slots the less impact a single bad node can have and the better for the network’s health, censorship resistance and decentralisation.
The “halt line” refers to an imaginary line on a list of validators ranked by stake. The validators above this line collectively control 33% of the total stake on the network and could stop the network if they all stopped validating at once. This is of course unlikely but it’s a somewhat useful indicator of which validators to avoid when making staking decisions.
You can see the halt line on solanabeach.io, the validators above the line are automatically hidden in order to promote the ones below, currently there are 19 nodes above the halt line (and about 980 below).
3. Data Center Location / Concentration
Another important factor is how concentrated a single data center becomes with Solana validators. If that data center were to suddenly go offline due to natural disaster or similar catastrophic event (e.g. the fire OVH experienced earlier in 2021), or because the hosting company decides to ban Solana nodes, this would would have a major adverse effect on the network if too many nodes are located in that data center.
You can view which data center a validator is in on validators.app and by clicking on the data center name on the validator’s detail page you can see how many other nodes are in that same data center as the validator you’re considering.
Our data center partner Maxihost has several state of the art data centers in multiple cities and ensures we have access to the best hardware and networking at all times. Checking which data center your validator is in can give you an indication of what reliability you can expect.
4. Validator information & public profile
You’re entrusting the validator with the “weight” of your stake, so you want to ensure they are reliable and know what they are doing. One way of getting a feel for this is by understanding their profile and looking at the information they provide as well as the communication methods available to reach them.
The top validators all have websites with information, as well as ways to contact them via Twitter, Discord or Email.
Information to look out for includes their fee strategy (if currently 0%, until when), details on their team and experience, the type of hardware they use, transparency about their practices in general, and consistency of the information across platforms.
All the aforementioned platforms will let you see the validator description as well as the website (if one is published) of the validator, so you need to do some digging to find whether you like the validator you’re choosing and trust them to provide solid returns.
We have a dedicated page on our website with the status of our validator, our public keys as well as an FAQ for anyone wanting to find out more.
Conclusion
There is no hard and fast rule on how to pick the best validator. You must decide what criteria matter the most to you. For many this will be pure returns, or APY. Best APY does not come from the highest staked validators however, so the names you see at the top of many lists aren’t always the best choice.
If you care about the network and decentralisation, censorship resistance and supporting new or smaller validators, then you will factor this into your decision making. Joining a stake pool can also achieve these goals, most stake pools publish their delegation strategy so make sure you read up on this and gain an understanding of how your SOL is being spread across the network.
Hopefully the above provides you with some insight on what to look for and where to look for it. If you have questions for us you’ll usually find us on the Solana Discord server under the username laine_sa.
Please support our validator if you’re looking to stake somewhere
If you liked this article and would like to support our validator please consider staking with us, we’re committed to the Solana ecosystem and are trying to bring value to others through our website Stakewiz, these articles on Medium as well as active participation on Discord, Twitter and Reddit. We’re in a low-concentration data centre, have 2% commission and are one of the highest performing validators in terms of APY.
Our vote key is GE6atKoWiQ2pt3zL7N13pjNHjdLVys8LinG8qeJLcAiL or you can search for “Laine” in the validator list in your wallet, or see more info on https://laine.co.za/solana
