What is Stake/Staking
Staking on Solana essentially means that SOL holders contribute their SOL toward the support of validators in order to secure the network and earn rewards. Unlike Bitcoin, which requires a lot of computing power, the network operates using a proof of stake method, where tokens are committed by users to a validator to support transaction processing and block creation.
The network is divided into epochs which are 48hrs in length. During these epochs validators will take turns proposing blocks. A turn is around 400ms and there is an opportunity of 432,000 opportunities within an epoch. Validators take turns in order to propose a block that consists of transaction data. Other validators validate and vote to confirm the validity of the block.
You don't need to run your own node to participate. Most users stake their SOL by delegating it to an existing validator, meaning you delegate to an existing validator which means you are effectively backing the operation of this validator. They will take your SOL and stake it and reward your proportional stake of their earnings, with rewards being roughly 7%. Rewards come from inflation and transaction fees. Rewards are issued every epoch which is a couple of days and are distributed based on the validator performance and the commission rate set by the validator.
Running a validator isn't an easy endeavor. Running a validator is technically challenging, requiring a significant amount of SOL (~5,000 to break even day 1), technical expertise and running an uninterrupted server. Currently, there are >1,800 active validators who are helping to secure the blockchain.
Native Staking vs LSTs
When you stake SOL natively you stake and delegate your tokens to a validator from within your wallet. Your tokens will be locked for 1 epoch and will begin earning staking rewards. If you want to unlock your tokens it will require waiting another epoch. The native staking protocol is simple to use and safe from risk. However, it does mean that your SOL will be locked up. This is fine for staking purposes but it will not help you to trade your SOL.
Liquid staking tokens (LSTs) have emerged to provide more flexibility for SOL holders. When you stake on an LST protocol such as The Vault ($vSOL), SolBlaze ($bSOL), Marinade Finance ($mSOL), or Jito ($JitoSOL), instead of delegating your SOL to a specific validator, you deposit your SOL into the protocol and get an LST (e.g. mSOL, or JitoSOL) that reflects your stake in the protocol. The value of this token grows over time to include the staking rewards. You can then use this token to perform various DeFi activities. For example, this token can be provided as collateral for a loan or provided in a DEX liquidity pool.
The LST protocols maintain large pools of SOL and stake them to a wide array of validators based on various strategies such as commission rate, performance and decentralization. Jito additionally captures MEV rewards in order to increase staking yields.
Ultimately, you can choose to stake in the natively way, or with LSTs depending on your needs. Staking natively is a good way to maximize staking yield with less risk, ideal for long term holders. Staking via an LST is more ideal for those who wish to keep their capital utilized in various places. Many users will use a combination of native staking and LSTs.
