How to stake your Solana with Defy

How to stake your Solana with Defy
Solana Ecosystem, Stake on Solan

What is Staking?

Staking a cryptocurrency is kind of like putting your money in a fixed deposit. You simply lock your crypto tokens and earn a stable return on them. Unlike a traditional FD, staking does not have a minimum lock-in period, and you can deposit more crypto tokens to the staked amount at any time. There is however a minimum “unbonding” period, which means it typically takes a few weeks to free up your staked tokens.

Now banks pay you an interest by lending the money you’ve deposited and gathering fees on that. Staking doesn’t work the same way. Bitcoin runs on something called a proof-of-work blockchain, which requires heavy computing to “mine” new BTC. An alternate type of blockchain is the proof-of-stake, which runs like a democracy and in which new tokens are released depending on inflation.

Staking is a concept available only on PoS blockchains and it involves depositing cryptocurrencies with validators, which are essentially computers that maintain the blockchain’s integrity and add new blocks to the chain (just like miners on PoW chains). The validators do not spend your staked tokens, but instead give you rewards along with voting rights for new proposals on the blockchain.

All transactions on the blockchain incur a nominal fee. The sum of all the transaction fees is spread among the validators, who in turn distribute it to stakers. And that’s where staking rewards come from. Investors typically see a yield of 10-15% from staking, but the exact amount depends on the cryptocurrency being staked.

In some cases, staking also makes you eligible for receiving free cryptocurrencies. Certain networks reward stakers with “airdrops”, which are free token handouts of new cryptocurrencies being launched on their blockchain.

Proof of Stake Consensus Mechanism

While Cryptocurrencies such as Bitcoin and Eth1 function on Proof of Work, the network uses a huge amount of computing power to validate transactions, so that no one spends the same money twice. Across the world, miners compete to solve a cryptographic puzzle first and the winner earns the right to add the block, for some crypto in exchange.

Proof of Stake functions differently, yet similarly to Proof of Work, where the users stake their money together in pools for a chance to add the new block, where the network chooses a validator based on the amount of time of holding that particular stake along with the size of the stake.

Advantages of Staking

Instead of simply Hodling down your crypto, waiting for the value to skyrocket, or just going #tothemoon, you can put your crypto to work, giving you another source of passive income. Staking also helps improve the infrastructure & efficiency, along with the security for the blockchain.

How to Stake Solana?

Staking on Solana is really easy.

  • You’ll need a Phantom Wallet or any wallet that accepts Solana and allows you to stake it.
  • Purchase some Solana (SOL) on Defy and transfer it to your wallet.
  • Once the amount gets transferred, click on your wallet where you see Solana added.
  • You’ll get the option to stake it, once you find the correct validator.
  • Select the amount that you want to Stake and you’re good to go.

Staking is the ideal use for the crypto that has been just sitting around in your wallet or exchange, as it gives you a passive income, ranging from 10-15% of the amount that you put in, which is still almost double than that of Fiat investments, so pick your move wisely, and most importantly, DYOR.