Solana Staking Rewards & Validator Economics — how does it work?

Who participates in Proof of Stake?

Primarily we have two participants in Solana’s native proof of stake system:

  • Delegators (i.e. the regular users who stake their SOL)
  • Validators (node operators that run voting nodes and have stake delegated to them)

What kind of rewards & income exist?

For delegators:

  • staking rewards
  • commission
  • block rewards

Where do staking rewards comes from?

Solana operates in epochs. An epoch is a period of time defined as 432,000 slots. A slot is an opportunity for a validator to produce a block (not every slot contains a block as sometimes validators miss their slot for various reasons).

Inflation schedule over time
Source: Solana Docs

How are staking rewards calculated?

Well, now we know the total SOL from inflation that’s available, but how is this actually distributed and why do some validators have higher APY than others?

Distribution of vote success scores

Where does commission come from?

Ok, so you got your staking rewards, but you’ve had a commission deducted. Or you operate a validator and want to know where that commission you earn comes from… let’s look into that.

Where do block rewards come from?

And now, finally, to block rewards. These aren’t relevant to delegators, as they don’t receive them. Block rewards go exclusively to the validator who produced the block.

Conclusion

Solana’s economics can be a bit complicated, and understanding where all the fees and rewards come from or flow to might cause your head to spin. It’s an elegant system once broken down, and we hope this article has helped outline how things work and helped you understand things a little clearer.

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Michael Hubbard

Michael Hubbard

Entrepreneur, blockchain enthusiast, web developer, business analyst, avid traveller, Always looking for the next adventure!