Solid SOL yields: What’s the best place to stake Solana?

It didn’t take long for Solana (SOL) to become one of the most talked-about crypto projects. Launched in 2020, this smart contract blockchain quickly grew into a multi-billion-dollar ecosystem with diverse decentralized applications (dApps), non-fungible tokens (NFTs), and even its own smartphone. As a proof-of-stake (PoS) network, Solana lets anyone who holds its native cryptocurrency, SOL, earn passive staking rewards while helping secure the blockchain. 

Thanks to its rapid growth, there are now more ways than ever to stake SOL, either directly on-chain or through third-party providers. The variety of options makes it easy to start earning Solana staking rewards, but it also makes it harder to choose the platform that’s right for you, depending on your goals. In this guide, we’ll tell you how to earn passive income with SOL and highlight some of the best places to stake Solana.

What’s Solana staking?

PoS blockchains like Solana (SOL) rely on a decentralized community of node operators to power the network. To run a validator node on Solana, operators must lock up, or stake, its native cryptocurrency (in this case SOL) to validate transactions. Validators then earn SOL rewards whenever they check transactions for accuracy and add them to Solana’s ledger.

Anyone can set up a validator node, but the high costs, energy demands, and technical complexity make it unrealistic for most. But that doesn’t mean you need to run a validator to take part in staking on Solana. Both centralized and decentralized platforms allow SOL holders to delegate their tokens to validators and earn a share of rewards proportional to their contribution.

It’s important to plan staking around epoch cycles because Solana doesn’t process staking or unstaking requests right away. Instead, the network holds them until the end of an epoch, a fixed interval that determines when deposits and withdrawals go through. Epochs usually last about two days, and traders can check the time left in the current epoch on Solana Explorer.

These delays, known as “warmup” and “cooldown” periods, mean you can’t instantly access newly staked SOL or withdraw SOL you’ve unstaked. If you’re an active trader or you time rewards, that waiting period can influence when you enter or exit a position.

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Where are the best places to stake Solana?

You can stake SOL in a few different places, most often through centralized exchanges (CEXs), decentralized platforms, or self-custody wallets. Regardless of where you stake, the mechanics are the same: You delegate SOL to a validator and earn rewards. What varies are the tradeoffs in convenience, control, and complexity. Before choosing a method, it’s worth weighing these differences to find the option that fits your needs.

Centralized exchanges (CEXs) 

Because Solana often ranks among the top 10 cryptocurrencies by market cap, more brokerages that offer digital assets now provide dedicated portals for SOL staking. For example, it’s now possible to stake Solana on Coinbase, Gemini, and Kraken. 

Whatever the platform, users need to create an account, which typically involves sharing personal details to comply with know-your-customer (KYC) policies. Once signed up, traders can transfer SOL from another wallet into their CEX account or buy SOL directly on the platform. Most CEXs feature a staking tab on their homepages where users can deposit SOL and start earning rewards almost instantly.

The main advantage of staking on a CEX is simplicity. The user interface typically makes it easy to transfer SOL in and out of staking accounts and track rewards in real time. Many CEXs also have mobile apps, adding another layer of convenience. 

The tradeoff is that CEXs usually charge fees for staking services and often offer lower annual percentage yields (APYs) than other methods. There’s also a counterparty risk: Users rely on the exchange to select validators and safeguard their funds. Even with insurance policies, stakers could lose SOL due to hacks, validator misbehavior, or poor fund management. 

Non-custodial wallets

For investors who want more control over their SOL, self-custodial wallets connect directly with Solana staking services. Two categories of wallets exist: software-based “hot wallets” and hardware “cold storage” devices. Both allow users to send SOL to validators while retaining control of their private keys. A private key gives users direct access to their digital assets without an intermediary, which removes counterparty risk. But it also means no exchange-backed insurance. Many consider this setup less beginner-friendly, but it may offer higher returns and – unlike CEXs – gives users full ownership of their crypto. 

Cold storage wallets like Ledger offer an extra layer of security by keeping private keys offline, which reduces the risk of theft from hacks. Hot software wallets such as Phantom, Trust Wallet, and Exodus are known for their reliability, but they remain vulnerable to cyberattacks because they’re always connected to the internet. While it’s more costly and less convenient to stake Solana on Ledger devices or other cold wallets compared with hot wallets, some traders consider hardware units the best wallets for Solana staking because of their stronger protection against hacks.

Liquid staking

With billions in total locked value (TVL), liquid staking has become a major segment of decentralized finance (DeFi) and another option for staking on Solana. The idea is simple: Instead of locking up SOL and waiting passively for rewards, liquid staking protocols issue tokenized “receipts” that represent the value of your staked deposit. 

For example, the protocol Jito gives users JitoSOL equal to the amount of SOL they stake. Each JitoSol mirrors the market price of SOL, but unlike locked tokens, users can trade it, use it as collateral for loans, or deploy it in yield farming – all while earning staking rewards on the original SOL. When users want to unstake, they return their JitoSOL to Jito’s protocol and receive their SOL plus rewards back in their wallet. 

The main appeal of liquid staking is flexibility. It lets users put staked assets to work across DeFi while continuing to earn rewards. The tradeoff is risk. Liquid staking is still experimental, and everything depends on the security of the dApp’s smart contracts. Even reputable protocols can suffer bugs or hacks, potentially putting deposits at risk. It also requires more technical know-how than CEXs, since you’ll need a self-custodial wallet and a firm grasp of DeFi apps to use it safely.

Delegating to a validator

For the maximum control over Solana staking, some traders use Solana’s Command Line Interface (CLI). The CLI lets you create stake accounts, choose a validator, and delegate SOL without relying on an exchange or wallet service. 

However, using the Solana CLI requires significant technical skills. Setting up accounts and managing delegation with command-line tools isn’t beginner-friendly, and anyone unfamiliar with command-line operations or the intricacies of Solana’s blockchain will likely struggle. But for advanced users, the CLI offers the greatest control over validator selection and may also lead to higher APYs. 

Staking SOL? Stay tax compliant with CoinTracker 

Staking cryptocurrencies like Solana or Ethereum (ETH) is a popular way to hold onto coins while earning passive rewards. But staking rewards aren’t tax-free. Most tax agencies, including the IRS, treat them as taxable income and require detailed reporting each year. 

A straightforward way to stay compliant with tax authorities is CoinTracker. The software automatically records income from staking, yield farming, and mining and adds it to the right tax forms, such as Form 8949. 

With CoinTracker’s Portfolio Tracker, you can simplify crypto tax reporting and take the stress out of calculating your income. Get started for free today.

Disclaimer: This post is informational only and is not intended as tax advice. For tax advice, please consult a tax professional.