Will Solana Make You Rich?

Solana has recently been on a tear seeing its price rise from roughly $1.50 in January 2021 to more than $215 in September, making it the sixth largest cryptocurrency in the world with a market cap over $60 billion.

To recap, Solana is an open-source blockchain platform for decentralized apps maintained by the Geneva-based Solana Foundation, and built by developers at San Francisco-based Solana Labs.

The Easiest Way to Collect Profits on Solana

SOL’s price chart over the past year

If you had invested $1,000 in Solana back in December 2020, it would have been worth $133,750 in September 2021.

The easiest way to get rich with Solana is to invest. While massive multiple opportunities are closing there is still considerable room for a Solana investor to see an increase upwards of 800% in an SOL investment over the next few years as Solana closes the gap between itself and Ethereum’s market cap. 

How Others are Making $10,000,000’s a year on Solana

In order to validate transactions on Solana, validators need to stake SOL tokens. Solana then rewards validators for their efforts in SOL.

It’s believed that the Solana Foundation/founders are staking new validators starting at about 200,000 SOL tokens. Based on some rough estimates, the hardware costs to get setup as a validator is in the $5,000 — $6,000 range if you include a GPU. 

Right now silicon is very hard to come by which is a problem. Incredibly inflated prices on GPUs, somewhat less but still terrible prices on CPUs.

Solana’s token distribution

According to Solana’s guide, commissions can be set by the validator and for public validators they range between 0 and 10%. So as an example, the current Solana network rewards are around 8% of stake annually.

If a validator has 50,000 SOL in stake delegated to it across the network, then each year it would generate roughly 50000*.08= 4000 SOL in rewards for its stakeholders. Rewards are paid every epoch, and there are roughly 134 epochs in the year.

Depending on the commission the validator charges, it could earn

  • 4000 * .10 = 400 SOL annually at 10% commission ~ $68,000
  • 4000 * .08 = 320 SOL annually at 8 % commission ~ $54,400
  • 4000 * .05 = 200 SOL annually at 5% commission ~ $34,000

Yet in the same period it would need to pay 134*3 = 402 SOL to the network to be eligible to vote.

This means any validator with less than 50,000 in stake from other parties is running at a loss, and likely hoping to grow their delegated stake before it becomes unsustainable. Presently there are 132 validators losing money on the network out of 1,002 total validators

Quality of Solana engineers and validators in 400ms slots.

Of course this calculation doesn’t account for the staked amount the validator actually owns, as they will receive 100% of the rewards. So while 50,000 SOL is the breakeven point for a validator charging 10% commission, a validator needs to own ‘just’ 5000 SOL staked to its own network to break even. At current rates that is still around $750k worth of SOL, which few of us have sitting around waiting to invest.

Instead, most validators will need to focus on marketing their validator, just like any other business startup. If they can hustle to attract stake to their validator then they can build a sustainable business, but they must be prepared to spend SOL in the short term until their stake grows to a sustainable level.

On the flip side, the validators at the top of the list are earning handsomely. The top validation network by size of stake is Chorus One, which currently has roughly 15 million SOL staked to its validator and charges a fee of 8%.

Chorus One’s total stake in Solana amounting to over $2 billion

From that number we can estimate they make a profit of $18 million per year, although this is likely ignoring the costs of their hosting infrastructure, dev ops staff and other costs that come with scale, as well as over simplifying: SOL may be worth $180 today, but for most of the year the price of the coin — and the amount staked on the network — has been considerably lower.

The Bottom Line

If you have nearly $750,000 worth of SOL laying around it could be very profitable to start entering the validator business before we see the SOL price go up even more. 

If not, SOL is a solid investment which could see multiples upwards of 8X over the next few years if the tech scales properly. 

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