Uncovering the current situation of Solana validators: A few have collected tens of millions of dollars, while thousands of nodes are struggling to s

Original author: Frank, PANews

Solana has been leading in data in all dimensions recently. Previously, PANews wrote an article about the rapid development of its ecosystem liquidity staking track. In addition to these projects, the validators behind Solana seem to have always been relatively mysterious. How much can you earn as a validator on Solana? What is the level of investment? PANews has done some research on this business.

The consensus mechanism adopted by Solana is a combination of Proof of History (PoH) and Proof of Stake (PoS). Token holders can pledge their tokens to validators of their choice. The more tokens a validator has, the higher the proportion of blocks he or she will lead. At the same time, users who participate in staking can also receive block rewards in proportion.

Typically, validators can decide at their own discretion to charge stakers a staking commission of 8% to 10%, while those validators who choose not to charge commissions and have a more stable network are more favored by stakers.

Solana has two types of verification nodes, one is the validator node that participates in voting and bookkeeping, and the other is the RPC node. RPC nodes can provide data access interfaces for developers and applications, and have lower configuration requirements. However, RPC nodes do not directly participate in network verification and cannot obtain block rewards.

In comparison, validator nodes have higher requirements for hardware bandwidth, memory, storage, etc. Therefore, they are generally deployed in data centers around the world, making them a business that is difficult for ordinary users to access.

Costs at least $60,000 per year

Specifically, the main costs for validators are as follows.

hardware:

Hardware cost is one of the biggest costs of becoming a Solana validator. The official Solana recommended configuration is a 12-core/24-thread CPU, 256 GB/512 GB of memory, and more than 1 TB of disk. This configuration is far beyond the average home computer, especially in terms of memory. The price of this item alone is basically more than 10,000 yuan. In addition, a stable 1 GB transmission bandwidth is required. Therefore, most validators choose to rent a server. According to the Helius article, the rental fee is between 370 and 470 US dollars. The annual cost is about 4,500 to 5,600 US dollars.

The bandwidth fee is often determined by the amount of stake. The more times you lead blocks, the higher the bandwidth fee.

On-chain voting:

Solana requires voting on-chain to reach consensus, and these voting transactions incur the same fees as other transactions on the network. During each epoch (432,000 slots), validators are required to vote, and each voting transaction costs 0.000005 SOL (voting is a privilege, and there is no associated priority fee). This equates to a total fee of about 2-3 SOL per epoch. Given that an epoch typically spans 2-3 days (usually closer to 2 days), the annual cost of voting transactions is about 300-350 SOL, which translates to about 1 SOL per day. At $182, this comes to about $54,600 to $63,700 in fees. At higher SOL prices, this cost is usually one of the largest.

In general, the annual cost of Solana is at least about $60,000. This amount of capital investment is not a small amount for ordinary users, and it does not include the labor costs of operating and maintaining the server.

Returns may be negative

Although the investment is not small, what are the benefits of being a validator?

Solana validators income comes from several parts, including inflation income, whole block rewards, and MEV.

Inflation income : Inflation income is the SOL token reward obtained by participating validators. The inflation rate of SOL tokens was initially set at 8%, and then it was reduced by 15% every year. The inflation income of the validator is also related to the staking ratio of the entire network. The lower the total staking ratio, the higher the staking income of the validator. The current comprehensive inflation income is 5.52%. According to the 8% commission charged by general validators, the annual staking income for obtaining a staking share of 10,000 SOL is currently about US$8,000.

Whole block reward : Each validator has a certain chance to become a block leader, and the number of times he is elected also depends on the amount of SOL staked. Taking 10,000 SOL staked as an example, the number of times he is elected in each epoch (usually 2 days) is about 11 times. The income of this part is about 52 SOL (the current average block reward is about 0.0332 SOL) for the whole year, which is about 9,400 US dollars.

MEV Reward : Maximum Extractable Value refers to the profit that a validator earns through the ability to arbitrarily include, exclude, or reorder transactions in the blocks it generates. On Solana, validators designated as leaders have full control over the packaging and scheduling of blocks. Searchers can send bundles to leaders through an off-chain auction mechanism for inclusion in blocks, while paying a certain tip. If a validator runs the Jito-Solana client, this part of the profit can be collected, but this income also depends on whether it can be elected as a leader multiple times. The average MEV reward per block is currently about 0.0427 SOL, and in the Jito client, this income is generally shared with the staking users, and the validator charges an 8% commission. Based on this calculation, the income from this part of staking 10,000 SOL per year is about US$970 per year.

According to this ratio, if the pledge amount is only 10,000 SOL, the annual comprehensive cost is at least $60,000, while the income is about $18,370, and the loss reaches $41,630. It seems to be a deal that can only lose money.

However, the main reason for this loss is the insufficient amount of SOL staked. If the amount of staked SOL tokens is increased to more than 32,300, the loss can be turned into profit.

There are currently 2,724 validators on Solana, of which 857 have staked more than 32,300 SOLs. According to this calculation, the remaining more than 1,000 validators are in a loss-making state. However, the Solana Foundation also has a related support plan. For new validators, if the total stake of validators entering the Delegation Program is less than 100,000 SOLs, the SOL stake will be matched 1:1. However, according to this, validators still need to strive for at least 15,000 SOL stakes. If they stake out of their own pockets, the investment is currently no less than 2.73 million US dollars.

The largest validator earned $14 million

For those mature validators, the income of validators is already a sufficient profit. For example, Helius, which has just become the largest validator, currently has 13 million SOL tokens entrusted for stake. Helius does not charge any inflation commissions or MEV commissions, and this part of the income is fully fed back to the staked users. In this case, Heliuss block rewards will reach 14.05 million US dollars per year. If Helius also charges an 8% commission, the income will increase by another 14 million US dollars. However, perhaps it is precisely because of giving up this part of the income that more staked users choose to stake their tokens to Helius.

Moreover, large validators like Helius do not rely solely on block revenue. Helius also earns revenue by providing RPC node services and API access. The current subscription standards range from US$49 to US$999 per month. Helius has become one of the main RPC service providers in the Solana ecosystem.

It may be difficult to make a profit just by staking

For users who stake to such validators, they can usually get an annualized return of 6% to 8%. However, this is not a stable return that never changes. Usually, there is also the risk of a decline in the SOL token, penalties for unstable validator servers, and the risk that some bad validators will quietly increase the commission rate to 100%. However, judging from the data, the current staking ratio on the Solana chain is about 65.7%, which is in a leading position among public chains. It seems that participating in staking has become a collective choice for large SOL holders. However, this investment strategy is only feasible in the market where the SOL token is expected to rise. If the cost of holding SOL is too high, it is easy to wipe out all gains and turn them into losses in a decline.

In general, whether it is financial reserves or technical complexity, Solanas validator income has a certain threshold. But for those groups that have a certain appeal in the ecosystem and have financial strength, becoming a validator is indeed a relatively stable income. However, the excessively high threshold has also caused Solana to be questioned as being increasingly centralized or monopolized by a small group of people. For ordinary users, relying solely on staking and sharing of MEV rewards is hardly a reasonable means of resisting the risk of asset fluctuations.

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