Solana Inflation and Staking Rewards

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This post will outline incentives for Solana token holders to stake SOL and earn rewards by securing the network.

Stake your SOL and earn up to 8% in staking rewards using our simple step-by-step guide for staking with Solflare Wallet and Ledger Nano S/X.

Inflation has been enabled in Solana allowing SOL delegators to earn rewards for contributing to the security and decentralisation of the network.

We've gathered the most important information related to SOL staking and inflation below. For more details, visit p2p.org/solana.

Solana Inflation

In order to compensate node operators for state validation and delegators for locking their funds, every epoch (~2-3 days), protocol issues new SOL based on emission rate called inflation. Every epoch staking rewards are added to the active stake automatically. Inflation parameter is defined on a protocol level representing annual emission percentage. The exact value of new minted SOL is recalculated every epoch based on the total supply.

Solana token emission is distributed among validator pools based on their stake weight in the network. Every epoch a special program on Solana calculates the weight of all active stakes and assigns points that are used to proportionally divide SOL rewards among participants for that period.

A decision about inflation rate value is very important for sustainable network growth. It should incentivize participants to stake, cover costs of operating for validators and at the same time avoid over dilution of network users. For the first year annual emission will constitute 8%. In the following years inflation percentage will be decreasing by 15% per year until emission reaches ~1,5%.

Another revenue source is derived from transaction fees. It is expected to be relatively low for the first years. In current implementation 50% of transaction fees is burned while the rest goes to the current leader who processed the transaction.

SOL Staking Rewards

With the enabling of Solana inflation, SOL token holders are now able to earn rewards on their staked tokens.

In the beginning all Solana staking rewards will be distributed to validator pools. In the future, additional percentages from total issuance can be directed to the ecosystem development purposes and archivers, network participants who provide storage service downloading parts of the ledger and providing proof of replication of storing the segments.

The efficiency of Solana staking from an economic perspective depends on the overall participation. The total issuance is distributed to active delegators. If less than all SOL are staked, delegators will receive higher rewards than initial inflation.

For every epoch (2 days), the annual staking yield can be calculated using the formula:

APY = inflation * archiver_share * foundation_share / staking_ratio, where
staking_ratio = staked_tokens / total_supply

At time of launch, archiver_share and foundation_share are planned to be set to 0%, so 100% of emission will initially be going to validator pools. The first years will be the most attractive for Solana delegators representing an opportunity to increase the network share.

With the development of staking derivatives it will be possible to generate additional yield on top of staking rewards.

Special thanks to Eric Williams for valuable additions. Having trouble getting started? Please get in touch with a P2P representative by emailing [email protected] or ask for assistance in our Telegram chat.

About P2P Validator

P2P Validator is a world-leading non-custodial staking provider securing more than 3 billion USD value from over 10,000 delegators across 25+ high-class networks. We are early investors in Solana and have supported the network from the first block taking part in all stages of testing and voting.

Web: p2p.org
Stake SOL with us: p2p.org/solana
Twitter: @p2pvalidator
Telegram: t.me/P2Pstaking

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Alex Bondar

Research & Analytics at p2p.org.

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