What Affects APR in Solana

It’s evident from the different APR options offered by different validators that it is affected by something more than the validator’s willingness to provide certain conditions. Granted, this factor is also in the equation; however, there are a few technological and economic notions at play, most of which are performance metrics that heavily rely on the validator’s hardware, software, and involvement in the network’s affairs.

This article explores the most important of such notions grouping them based on whether their impact is direct.

Factors Directly Influencing Solana APR

First, let’s look at what factors can directly ensure a higher APR.

Vote Credits

Vote credits are what every validator earns each time they vote on a block that is eventually added to the blockchain or, in more technical terms, every time their vote account retires a slot from its lockout list, thus making said vote a root for the node. By the end of each epoch, the system uses all vote credits earned by all validators to determine how much SOL is issued to a particular validator from the list.

Put simply, the more times a validator votes on a block that ends up appended to the blockchain, the more vote credits it gets, and therefore, the more SOL it receives at the end of each epoch. 

Skipped Vote Percentage

In Solana, a validator can skip votes, though usually through no fault of its own.

• A validator can’t vote on a slot that never produced a block;

• A validator may vote on a “wrong fork” during a fork event, which will render their votes obsolete;

• A validator may face technical difficulties resulting in uptime plummeting.

The fewer votes are skipped for whatever reason, the higher the chances of getting more vote credits. 

Validator Fee

The validator fee is the service payment a validator takes from the rewards paid to delegators. Unlike most other factors listed in this feature, it is always at the discretion of a particular service provider and depends exclusively on how much they deem feasible to charge. This notion is, therefore, purely economic and is derivative of the overall market conditions, competition, and the validator’s business preferences.

Delinquency

A delinquent validator in Solana is a validator that remains inactive for some time. Short-term delinquency may occur due to unforeseen circumstances or technical difficulties (such as sudden power or connection outage or during a software update), so the system usually overlooks them. 

Long-term delinquency is, however, a very much different matter. If a validator neglects its duties for a considerable period, its stake gets slashed, i.e., it is, in fact, fined a serious amount of tokens. This eventually leads to a much lower APR as the funds become considerably more scarce. 

To monitor delinquent validators, it is recommended to use tools such as Solana Beach.

Running jito-client

Using jito-client provably increases the potential returns since it allows adding MEV rewards to the ones ensured by the network rules. 

MEV is the total amount of economic value that can be gained as a function of ordering transactions in a block. Running jito-client allows the validator to increase the resulting returns by effectively bulking this kind of reward with the regular rewards for validation (though, for technical reasons, they may be available for withdrawal under different conditions). 

MEV overview is available on Jito Explorer.

Factors Indirectly Influencing Solana APR

This group of factors is much narrower than the first one since there aren’t many things that indirectly affect APR.

Root and Vote Distance

Root distance is the median and average distance in block height between the validator and the latest block (also called the top of the block tower). Vote distance is basically the same but refers to the voting sequence (the lower the number, the nearer to the front of the group the node is).

The closer the validator is to the top of the tower, the higher its chances of submitting the block. The lower the vote distance, the sooner it will vote. The exact impact of those metrics is pretty hard to determine with sufficient certainty. Yet, its relation to the vote count discussed above is clear.

Software Version

Running an outdated version of the software can impact the overall performance. It is, however, not necessarily clear how exactly since it heavily depends on the specific features of each version. The rule of thumb is that the nodes shall always use the newest versions to operate appropriately, producing a steadier flow of rewards.

Final Thoughts

Some factors listed above depend on a validator’s actions, while others are reasonably outside of its control. Still, when choosing where to stake Solana, one should consider both the current efficiency of the candidate validator and the history of its past performance. After all, reliability and a sense of responsibility are the core factors that ensure the rewards are steady and the APR is competitive.

Everstake offers a ~7% APR for Solana. We have one of the largest delegator communities in the ecosystem, ensure nearly 100% uptime, upgrade our nodes on time, and have 24/7 technical support. You can maximize your earnings while contributing to the growth of the Solana ecosystem; stake your SOL with Everstake.