This report covers Figment’s main Solana validator and its activity throughout the months of April, May, and June in 2024. On Solana, we are one of the largest independent protocol staking providers. All of the data utilized in this report is powered by Figment’s Data team unless otherwise stated.
To gain a complete understanding of a validator’s performance, it is crucial to consider various factors and evaluate their performance over an extended time frame. Comparing individual validators over a brief period does not provide an accurate representation due to selective data, transaction fee volatility, and validator selection randomness.
Metrics:
- ~65% of the SOL Circulating Supply is Staked (source)
- Figment’s average SRR throughout Q2 was 7.7%, which is higher than the network average SRR of 7.5%
- 12,619 Unique wallets Staked to Figment’s Validator (source)
- Slot Success Rate 97% (source)
- Slot success rate is a metric that measures a Solana validator’s efficiency in producing blocks. It is defined as the percentage of a validator’s assigned slots that result in successfully created blocks that are included in the Solana blockchain.
Types of Rewards on Solana
Solana validators receive three kinds of rewards for producing blocks on the network: inflationary, MEV, and block rewards.
Solana Staking Rewards
Solana’s staking rewards are designed to incentivize validators and delegators to participate in consensus. By staking their SOL tokens, participants help secure the network and earn a share of the network’s rewards, which come from three sources: inflation, MEV, and block rewards.
Types of Solana Staking Rewards
Inflationary Rewards
The primary source of staking rewards on Solana is token inflation. Like most Layer 1 blockchains, Solana has an inflationary component that rewards stakers and validators with new token issuance at the protocol level for securing the network. Validators earn these rewards by submitting valid votes on blocks when selected as the slot leader, and the rewards are distributed based on the validator’s stake-weight (percent of network staked to a validator) at the end of each epoch.
Solana Token Inflation Emissions Schedule
At Solana’s genesis block (March 16, 2020), the inflation schedule started at 8% emissions and has decreased by 15% every 180 epochs (~1 year) since. This emission reduction schedule has a long-term inflation target of 1.5%, and with existing projections network inflation should reach that target at roughly year 12-13 after the genesis block. The reduction in staking rewards coupled with fee burns over time will have a net deflationary effect on the SOL supply, which incentivizes Solana token holders to delegate their tokens while staking reward rates remain high. Today (June 2024), inflation is estimated to be ~ 5.237%.
Below are Solana’s Inflation Schedule & Total Supply Charts:
How Solana Validators Earn Inflationary Rewards
There are many factors at play when it comes to earning inflationary rewards on Solana.
Validators that have more SOL delegated to them (stake-weight), experience a higher likelihood of being selected to produce blocks and may be the beneficiary of more inflationary rewards compared to validators with lower stake-weight. The probability of being selected as the leader for a slot is directly proportional to the validator’s stake-weight relative to the total SOL staked on the network.
Specifically, a validator’s probability of being selected as the leader is calculated as:
(Validator’s Stake-Weight) / (Total SOL Staked on Solana Network)
This linear relationship incentivizes validators to accumulate more ‘stake’ to increase their chances of being selected and earning more rewards. In other words, there is no penalty/decreasing rewards as validators accumulate more stake.
Jito MEV on Solana
Jito is the first customized Solana validator client that integrates a MEV (Maximum Extractable Value) marketplace directly into its codebase. It is a fork of the official Solana Labs validator client but with additional functionality designed to capture and distribute MEV rewards. By delegating to validators running the Jito client, delegators can expect to receive 10-15% in additional Solana rewards.
The primary objective of Jito is to enhance staking rewards for both validators and stakers by enabling them to participate in MEV opportunities. But how does this process work exactly?
MEV Searchers who have identified opportunities can submit a bundle of transactions to the Jito MEV marketplace and place a bid for those transactions to be included by the slot leader. In competition with other searchers bids, the slot leader selects the highest bidder in an auction and those transactions get included in that particular block. The highest bidder then pays an MEV tip to the slot leader for their transaction inclusion which is passed on to the validator and its stakers. When you stake your SOL to a validator running the Jito client, like Figment, you become eligible to receive a portion of these additional MEV rewards earned by the validator.
Solana Block rewards
Block rewards are a combination of base fees & priority fees paid out to a validator when they successfully propose a block as the slot leader.
- Base Fee is 0.000005 SOL (5,000 lamports) per signature
- Priority fee is determined by the sender and increases with transaction demand
In Solana’s current state, 50% of priority fees, base fees, and vote fees are burned. After the passing of SIMD-0096, Solana is set to implement protocol changes that would allocate 100% of priority fees to the block proposer (slot leader) instead of burning the other 50%. This proposal aims to economically incentivize validators and encourage more validators to join the network. SIMD-0096 will be implemented with Agave 2.0 or validator upgrade v2.0.0 per the feature gate activation schedule which is estimated to be available September-October 2024.
Solana Rewards
Our focus will be on the period spanning from Epoch 596, which concluded on March 31st, to Epoch 636, ending on July 1st. This timeframe provides a comprehensive view of Solana’s staking ecosystem performance during Q2.
For Solana staking rewards throughout the second quarter of 2023, focusing on the period from Epoch 596 (ending March 31st) to Epoch 636 (ending July 2nd). This timeframe provides a detailed snapshot of Solana’s staking rewards performance during Q2, encompassing all three types of rewards: inflationary, MEV, and block rewards.
With approximately 65% of the circulating SOL supply staked, the network demonstrates strong staking participation. Figment’s validator performance during this quarter was positive, with an average Staking Reward Rate (SRR) of 7.7%, surpassing the network average of 7.5%. Figment’s outperformance of the network can be partially attributed to Jito MEV rewards, which we will explore in the next section.
MEV on Solana
During Q2 2024, Figment’s Solana validator continued to leverage the Jito MEV marketplace, resulting in a boost to overall staking rewards. Out of the total rewards earned by Figment in Q2, Jito MEV accounted for 12.4% of the rewards.
The substantial contribution of MEV rewards highlights the effectiveness of Figment’s strategy in adopting the Jito client. By participating in the MEV marketplace, Figment has been able to capture additional value for its delegators beyond the standard inflationary and block rewards. This boost from MEV played a role in helping Figment achieve a higher average SRRs than the network throughout Q2.
This performance underscores the importance of MEV in the evolving landscape of Solana staking rewards and demonstrates Figment’s commitment to optimizing rewards for its delegators.
Stake SOL with Figment
Figment is the leading provider of staking infrastructure. Figment provides the complete staking solution for over 500 institutional clients, including asset managers, exchanges, wallets, foundations, custodians, and large token holders, to earn rewards on their digital assets. On Solana, Figment is one of the largest non-custodial staking providers of staked SOL. Institutional staking services from Figment include seamless point-and-click staking, portfolio reward tracking, API integrations, audited infrastructure, and slashing protection. This is just one part of Figment’s mission to support the adoption, growth, and long-term success of the digital asset ecosystem. To learn more about Figment, please visit figment.io.
When it comes to Staking Solana, Figment offers:
- Collect More Rewards: Figment supports Jito MEV relay.
- Point-and-Click Staking: Experience the best staking interface for SOL with access to the Figment app. View your staking positions in real-time as well as stake, unstake, and view rewards. Track your portfolio across multiple networks and download detailed reports.
- Optimized Rewards Reporting: Access detailed and comprehensive rewards statements in various formats.
Figment offers point-and-click staking, insights dashboards, rewards tracking, and statements—providing a seamless Solana staking experience. Individual users maintain control with true non-custodial staking while institutions benefit from Figment’s robust infrastructure that provides security and optimized rewards. Sign up now and start staking Solana.
The information herein is being provided to you for general informational purposes only. It is not intended to be, nor should it be relied upon as, legal, business, tax or investment advice. Figment undertakes no obligation to update the information herein.