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LearnCrypto 101

What is staking?

Jonathan G.
what is staking

    For proof of stake (PoS) blockchains such as Solana and Ethereum, staking is key.

    If you're not that familiar with staking in general, and liquid staking in particular, don't worry—we got you covered!

    What is staking?

    Blockchains such as Solana and Ethereum utilize a consensus mechanism called Proof of Stake (PoS), managed by validators that verify and secure transactions.

    On both Solana and Ethereum, individuals or entities known as "stakers" can lock up a specific amount of SOL or ETH directly with validators as collateral to support the consensus mechanism.

    This process is commonly referred to as "staking."

    Stakers, in return for their participation, can earn passive yield on their staked SOL or ETH, alongside staking rewards usually distributed as additional tokens. The quantity of rewards stakers receive can vary based on factors such as staking duration and the amount of SOL or ETH staked.

    This economic incentive is crucial, as it encourages the establishment of higher-quality validators, which in turn can work efficiently, achieve consensus, and enhance the networks’ overall decentralization and security.


    What is liquid staking?

    Liquid staking addresses the limitations of traditional staking.

    In traditional staking, stakers lock their SOL or ETH directly with a validator, rendering their staked tokens inaccessible for trading, spending, or transfers.

    Liquid staking tackles this liquidity constraint by allowing staked assets to be traded.

    As such, holders stake their SOL or ETH to a smart contract or stake pool, instead of directly with a validator.

    In exchange for staking, participants receive a distinct token representing their staked SOL or ETH, known as a Liquid Staking Token (LST) or Liquid Staking Derivative (LSD). This new token retains the ability to be traded, leveraged in DeFi applications, or transferred—all while earning staking rewards.

    liquid staking

    Staking on Solana

    On Solana, users can either directly stake their SOL with validators, or liquid stake their SOL to a smart contract/stake pool.

    Let’s take a look at some direct and liquid staking options on Solana:

    Direct staking

    • Supermajority: The largest validators on Solana, those with the most SOL locked, are part of the so-called “supermajority”. The supermajority holds ⅔ of the entire SOL supply, allowing it to reach consensus, i.e. manage the proof of stake (PoS) mechanism, independently. The supermajority is determined by the Nakamoto Coefficient. The higher the Nakamoto Coefficient, the more decentralized a blockchain is—which is beneficial, as it simultaneously decreases censorship and increases security. Find and stake with validators from the supermajority.
    • Superminority: If you'd like to help improve the decentralization of Solana, you can choose to stake your SOL with validators outside of the supermajority. By doing so, you help these validators increase their stake, i.e. you help them grow in size. When more and more smaller validators grow in size, the larger the Nakamoto Coefficient gets, and the more decentralized the Solana network becomes. Proven validators in the superminority: Stakefish, Cogent Crypto, Overclock, Step Finance, and Validator.com.

    Liquid staking

    The LST ecosystem on Solana is dominated by 3 large providers: Jito, Marinade, and BlazeStake.

    For a more detailed take on these providers, read our Solana liquid staking guide.

    Staking on Ethereum

    Now, let’s take a look at Ethereum.

    Contrary to Solana, users can’t directly stake ETH to a validator. That’s because validator stake can only be flexible on Solana, while validator stake on Ethereum is fixed at 32 ETH.

    • Liquid staking

    The liquid staking ecosystem on Ethereum, however, is vibrant and dynamic.

    Having said that, Lido maintains a dominant position with a market share of > 70% of TVL, a position it has consistently held since The Merge. Other significant LST providers include Rocket Pool with ~9% market share, Binance (~6%), and Frax (~2%).

    For context, Solana's stake TVL stands at ~$22.4B, while Ethereum's stake TVL stands at ~$57.4B. Or: Solana’s stake TVL is only 39% of Ethereum’s stake TVL—although 71% of the SOL supply is staked, versus 23% on Ethereum.

    Regardless, by staking SOL or ETH, either direct or liquid, users help both Solana and Ethereum to further decentralize—a noteworthy common goal.

    How to stake with Phantom?

    You can use your Phantom wallet to stake either SOL or ETH on Solana and Ethereum, respectively.

    • Solana direct staking with Phantom
      • Open your Phantom wallet
      • Click on the Solana (SOL) asset tab and select “Start earning SOL”
      • Search for Stakefish, Cogent Crypto, Overclock, Step Finance, or Validator.com and select the provider you’d like to stake with
      • Next, complete the form field and click “Stake”
      • After you confirm the transaction, your staked SOL position will be displayed
    Phantom liquid staking

    Solana liquid staking with Phantom

    We’ll use Jito as an example:

    • Go to jito.network
    • At the top-right of your screen, click “Stake”
    • Connect your Phantom wallet
    • Key in your details in the form field and click “Deposit SOL”
    • After you confirm the transaction, you’ll receive jitoSOL
    Jito liquid staking

    Ethereum liquid staking with Phantom

    We’ll use Rocket Pool as an example:

    • Head over to stake.rocketpool.net
    • Connect your Phantom wallet and confirm the T&Cs via the toggle
    • Next, fill out the form field and click “Stake”
    • After you confirm the transaction, you’ll receive rETH
    Rocket Pool liquid staking

    How to bridge tokens to Solana with Phantom?

    If this is your first time using Solana, you might have most of your assets on other blockchains, such as Ethereum and Polygon. Not a problem. With our Cross-Chain Swapper, you can bridge tokens across Solana, Ethereum, and Polygon right in your Phantom wallet.

    How to set up a Phantom wallet?

    If you’d like a friendly multichain wallet for crypto, DeFi, and NFTs, try us out. We offer browser extensions for Firefox, Chrome, Brave, and Edge, as well as apps for iOS and Android.

    First, download Phantom. Then, create a new wallet.

    If you’d like to fund, or send funds to, your Phantom wallet, you can do so via the “Buy” button on your asset tab. We offer various funding options such as MoonPay, PayPal, and Robinhood to make it easy for you to fund your wallet.

    Once you do that, you're ready to go.

    Disclaimer: This guide is strictly for educational purposes only and doesn’t constitute financial or legal advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.