Institutional Solana Staking Strategies: How to Maximize Yield With Native Staking, LSTs, and Validators

As institutional capital flows into Solana through Exchange-Traded Funds (ETFs) and Digital Asset Treasuries (DATs), a critical question that each of these institutions must ask is how to optimize their yield with their SOL holdings.

Holding SOL generates zero yield while exposing you to inflation dilution. A $50 million SOL treasury with 60% staked and 40% held idle generates approximately $1.95 million in annual yield. If that same treasury could maintain 100% yield-generating positions with instant liquidity, it would earn $3.25 million annually. That $1.3 million gap represents pure opportunity cost.

This guide walks through the complete spectrum of Solana staking strategies, from basic native staking to operating your own validator. We'll explain how each approach works, what yields you can expect, and which strategy fits different institutional profiles.

Solana uses a Proof of Stake (PoS) consensus mechanism where validators process transactions and participate in consensus. Anyone can delegate SOL to validators, contributing to network security while earning rewards proportional to their stake.

Current Solana staking yield ranges from 6% to 6.62% APY for native staking. These rewards come from multiple sources:

• Inflation rewards (76% of validator revenue): Protocol emissions distributed by stake weight. Solana's inflation started at 8% annually and decreases by 15% year-over-year, targeting a long-term rate of 1.5%.
• MEV tips (14% of validator revenue): Maximal Extractable Value from optimal transaction ordering. Approximately 92% of stake-weight now runs the Jito client to capture MEV opportunities.
• Priority fees (9% of validator revenue): Users pay optional fees to expedite transactions during congestion. After SIMD-96, 100% of priority fees go to validators.
• Base transaction fees (less than 1%): Set at 0.000005 SOL per signature, split between the block leader (50%) and burn (50%).

During periods of high network activity, priority fees can reach $70-80 million per week across the entire network.

Native staking creates a structural problem for institutions. When you stake SOL natively, you enter an unstaking period of 2-3 days (one full epoch) before you can access your capital.

For ETFs, this is unworkable, as they must satisfy redemption requests promptly. For DATs and corporate treasuries, the constraints are similar: board decisions, strategic opportunities, and compliance requirements may demand immediate liquidity.

The typical institutional response has been to leave significant SOL idle or maintain large liquid buffers, resulting in lower returns and opportunity cost against DeFi deployment.

Native staking works well for:

• Individual holders with no liquidity requirements
• Long-term holders comfortable with the unstaking period
• Smaller positions where DeFi complexity outweighs benefits

For institutions managing investor capital with redemption obligations, native staking alone is rarely optimal.

Liquid Staking Tokens (LSTs) solve the illiquidity problem of native staking. When you deposit SOL into a liquid staking protocol, you receive a tokenized receipt representing your staked position.

These LST tokens accrue value over time as staking rewards compound. You can hold them to earn yield, trade them on exchanges, or deploy them into DeFi protocols. Most importantly, you can exit your position instantly by swapping your LST back to SOL, eliminating the 2-3 day unstaking period.

As of December 2025, the Solana ecosystem includes over 1,400 liquid staking tokens. Current APYs for major LSTs range from 5.75% to 6.93%:

The 120 basis point spread between the lowest (5.75%) and highest (6.93%) APYs stems from different operational strategies:

• Delegation approach: Some LSTs concentrate stake on high-performing validators; others prioritize decentralization by spreading stake widely.
• Trading fees: Multi-LST aggregators like INF earn additional revenue from facilitating swaps between different LSTs.
• Commission structure: Validator commission rates range from 0% to 10%. LSTs using lower-commission validators pass more yield to holders.
• Inflow timing: Newly deposited SOL must wait one epoch (approximately two days) before becoming active stake. High inflow periods temporarily dilute displayed APY.

Beyond solving the liquidity problem, LSTs unlock access to Solana's DeFi ecosystem. Your staked capital can generate additional yield while still earning base staking rewards:

Collateral for borrowing: Deposit LSTs into lending protocols like Kamino or Drift. Borrow stablecoins against your staked SOL. Deploy borrowed capital into additional strategies. Your LSTs continue earning staking rewards throughout.

Liquidity provision: Provide LSTs to decentralized exchanges. Earn trading fees on top of staking rewards while maintaining exit liquidity.

Yield vaults: Deploy LSTs into curated strategy vaults where managers optimize across multiple protocols, compounding your base staking yield with DeFi returns.

Example: Stake 100 SOL, receive 100 LST tokens, deposit as collateral, borrow 50 USDC at 60% LTV, deploy USDC into a 15% APY lending pool. You now earn ~6.5% on your staked SOL plus 15% on 50 USDC, all while maintaining the ability to exit positions when needed.

LSTs introduce smart contract risk that native staking avoids. Token holders should evaluate:

• Smart contract audit history
• Protocol track record
• Validator set quality and diversification
• Liquidity depth for exits
• Governance structure

The major LST protocols have undergone extensive auditing. The Solana SPL stake pool program, which underlies many LSTs, has been audited nine times. The largest LSTs have operated for 2-4 years with billions in total value locked.

For most institutional holders, LSTs represent the optimal starting point:

• Immediate liquidity for redemptions
• Comparable or higher yields than native staking
• DeFi deployment while earning base yield
• Operational simplicity

Major LSTs like JitoSOL, mSOL, and INF follow fixed delegation strategies. While this simplifies operations, it creates constraints for institutions with specific requirements.

ETFs may operate under regulatory frameworks requiring delegation to validators meeting specific criteria. Audit requirements may demand custom reserve ratios or reporting structures. Public companies may want their branded ticker visible across DeFi protocols.

Standard LSTs cannot accommodate these requirements. The solution is launching a custom LST that you control.

A custom LST gives you authority over:

• Delegation strategy: Choose which validators receive stake and in what proportions. Allocate to a single validator or spread across specific regions. Adjust as requirements evolve.
• Reserve ratios: Set the proportion of staked versus unstaked SOL. Higher reserves provide instant liquidity; lower reserves maximize yield.
• Permissioning: Implement deposit and withdrawal guards. Restrict participation to qualified investors. Enforce KYC/AML at the smart contract level.
• Fee structures: Define commission rates, deposit fees, and withdrawal fees.
• Technical integration: Connect with your existing custody providers, reporting systems, and compliance infrastructure.

Custom LSTs create new revenue streams beyond base staking yield.

When external parties delegate SOL through your LST, you earn commission on their staking rewards. This is separate from your own yield.

Example calculation: Your institution holds 5 million SOL and launches a custom LST. Over time, the LST attracts 10 million SOL from external delegators. At 6% base yield, that external stake generates 600,000 SOL in annual rewards. At a 2% commission rate, you earn 12,000 SOL annually from external delegations alone. At $150 per SOL, that represents $1.8 million in commission revenue.

Once your LST achieves liquidity, you can also provide liquidity to decentralized exchanges and earn trading fees. Your branded token becomes infrastructure throughout the Solana DeFi ecosystem.

Custom LSTs address institutional compliance challenges:

• Jurisdiction-specific delegation: Some frameworks require staking with validators in specific locations or meeting certain compliance standards.
• Audit trail customization: Build reporting capabilities directly into your infrastructure. Generate compliance reports automatically.
• Reserve management: Meet redemption obligations by setting appropriate unstaked SOL reserves calibrated to your regulatory framework.
• Custody integration: Integrate with qualified custodians like BitGo, Fireblocks, or Anchorage.

Several institutions have deployed custom LST strategies with Sanctum:

• DeFi Development Corp: Allocated holdings across multiple Sanctum LSTs for strategic diversification, extending brand presence to different ecosystem segments. Launched dfdvSOL with Sanctum in May 2025, which has grown to over 500,000 SOL staked.
• Forward Industries (NASDAQ: FWDI): Launched fwdSOL in December 2025, allocating 1.7 million SOL (25% of holdings). The custom LST enables staking yield while using fwdSOL as collateral for DeFi borrowing strategies.
• Jupiter: Launched jupSOL in April 2024, scaling to 4.8 million SOL staked with deep integration across Jupiter's trading and yield products.

→ Case Study: A Deep Dive Into JupSOL

• Bybit: Launched bbSOL as the first major exchange-backed LST on Solana, reaching 1.6 million SOL by leveraging its existing user base.

→ Case Study: Exploring Bybit’s bbSOL

Creating a custom LST requires:

• Technical implementation and security audits
• Liquidity bootstrapping (partnerships with aggregators can solve cold-start problems)
• Ongoing operational management
• Cost structure (some platforms offer near-zero marginal cost deployment with revenue-sharing models)

Operating a Solana validator unlocks the complete economic stack. Rather than delegating to someone else's validator, you become the validator yourself.

Validators earn from four distinct sources:

1. Inflation rewards (76% of revenue): Protocol emissions distributed proportionally by stake weight.
2. MEV tips (14% of revenue): Value captured from optimal transaction ordering via clients like Jito-Solana.
3. Block rewards (9% of revenue): When selected as block leader, validators collect 50% of base fees plus 100% of priority fees.
4. Commission: Validators set commission rates (typically 0-10%) on inflation rewards passed to delegators.

Example: A validator with 50 million SOL delegated earning 6% APY generates 3 million SOL in annual rewards. At 5% commission, the validator keeps 150,000 SOL ($22.5 million at $150 per SOL).

Operating a validator requires significant infrastructure and expertise. Validators start to become profitable at approximately 50,000 SOL in delegated stake.

Costs below this threshold typically exceed revenue:

• Startup costs: $5,000 to $15,000 for hardware, setup, and configuration
• Monthly expenses: $2,000 to $5,000 for infrastructure, voting fees, and maintenance
• Hidden costs: Emergency responses, security patches, performance optimization

At 50,000 SOL: With 6.5% base APY at 10% commission, plus MEV tips and block rewards, you approach break-even on a $5,000 monthly cost structure. Above this threshold, economics improve significantly.

Running a production validator demands:

• High-performance hardware with specific CPU, memory, and storage configurations
• Geographic redundancy across multiple data centers
• 24/7 monitoring with immediate response capability
• Frequent Solana client upgrades (sometimes multiple per month)
• Deep protocol knowledge and DevOps expertise

Most institutions underestimate the engineering resources required.

For protocols and high-volume applications, stake weight provides operational advantages beyond financial returns.

Solana's stake-weighted quality of service (swQoS) gives validators with more stake better transaction landing priority. During network congestion, your transactions get included while others wait. This can justify validator operation even before reaching traditional profitability thresholds.

Operating a validator also signals long-term ecosystem commitment, opening partnership opportunities and direct participation in network governance.

Most institutions face a build-versus-buy decision:

Self-operated:

• Full control over infrastructure
• 100% of validator economics
• Requires technical team
• Ongoing operational burden
• Upfront and monthly costs

White-label services:

• No infrastructure management
• Revenue split with provider
• Immediate deployment
• Professional 24/7 operations
• Typically zero upfront cost, aligned incentives through revenue sharing

The 50,000 SOL profitability threshold creates a chicken-and-egg problem. You need stake to be profitable, but attracting stake requires an established track record. The traditional approach of launching a validator and operating at a loss while building reputation can take months or years.

A more efficient path starts with launching an LST before deploying a validator:

Phase 1 - LST Launch: Deploy your custom LST, initially delegating to existing high-quality validators. Your token operates immediately with instant liquidity and DeFi integration.

Phase 2 - Stake Growth: Attract stake through DeFi integrations, delegation programs, and strategic partnerships. Your LST grows without you operating a validator yet.

Phase 3 - Validator Deployment: Once your LST reaches the 50,000 SOL threshold, deploy validator infrastructure (we offer white label validators at Sanctum). Your LST stake immediately delegates to your new validator. You're profitable from day one.

Phase 4 - Compounding Growth: Your validator captures the full economic stack, improving your LST's yield. Higher yields attract more stake. More stake increases validator profitability. The cycle compounds.

As you progress through strategies, risk profiles shift:

$10 Million Treasury:

• 80% in high-yield LSTs (liquid, DeFi-ready)
• 20% in native staking (long-term hold)
• Focus: Simplicity and flexibility

$50 Million Treasury:

• 50% in diversified LSTs (instant liquidity)
• 30% in custom LST (building brand, exploring commission revenue)
• 20% monitoring validator opportunity
• Focus: Beginning to capture additional revenue streams

$200 Million+ Treasury:

• 40% in custom LST (attracting external delegations)
• 30% delegated to own validator (full economic stack)
• 30% in DeFi strategies using LSTs as collateral
• Focus: Maximum yield optimization

Optimal allocation depends on liquidity needs, risk tolerance, regulatory requirements, and operational capacity.

The clear path is to start with liquid staking for immediate yield and liquidity, launch a custom LST when you need control and commission revenue, then deploy a validator once you cross the profitability threshold.

The question is how to execute. Building this infrastructure yourself means smart contract development, security audits, liquidity bootstrapping, validator operations, and 24/7 monitoring. Most institutions don't want to become staking infrastructure companies. They want the economics without the operational burden.

That's what Sanctum provides.

Start with INF. At 6.93% APY, it outperforms every major LST on Solana. The yield advantage comes from Sanctum's multi-LST aggregation model, which captures trading fees on top of base staking rewards. With 1.8 million SOL staked and integrations across Solana's major DeFi platforms, you get instant liquidity and immediate yield.

Launch your own LST on Sanctum's infrastructure. You get full customization (delegation strategy, reserve ratios, permissioning, fee structures) without building anything yourself. Sanctum handles the technical implementation; you maintain control over every parameter that matters for compliance and strategy.

Jupiter, Bybit, DeFi Development Corp, and Forward Industries all run their LSTs on Sanctum. Collectively, they've staked over 8 million SOL. The infrastructure is production-tested at scale.

Use the LST-to-validator pathway. Launch your LST first, grow stake through DeFi integrations and Sanctum's delegation programs, then deploy a white-label validator once you hit 50,000 SOL. Sanctum runs the infrastructure (redundant servers, 24/7 monitoring, all maintenance and upgrades). You keep custody of your SOL and capture the complete validator economics.

Zero upfront cost. Revenue-sharing model that aligns incentives completely. You're profitable from day one of validator operations, not months into a bootstrapping period.

Sanctum helped create the SPL stake pool program that underlies most Solana LSTs. The platform has been audited nine times. This isn't new infrastructure; it's the foundation much of Solana staking already runs on.

The integrated approach (INF for immediate yield, custom LST for control, white-label validator for full economics) has generated over $5 million in additional revenue for Sanctum partners.

If you're ready to move beyond idle SOL, contact Sanctum to build your implementation roadmap.

The 2-3 day unstaking period for native staking creates challenges for ETFs with daily redemption requirements. Most ETF structures address this through LSTs (which offer instant liquidity via DEX swaps), maintaining a buffer of unstaked SOL for anticipated redemptions, or using a combination where the majority is staked with a liquid reserve. Custom LSTs allow you to calibrate reserve ratios to your specific redemption patterns.

LSTs simplify NAV calculations because rewards accrue directly into the token price rather than arriving as separate distributions. For native staking, rewards must be tracked and valued as they're received. Your fund administrator will need pricing feeds for whichever LSTs you hold. Major LSTs have reliable oracle pricing across DeFi; smaller tokens may require additional pricing arrangements.

Yes, but only with native staking or custom LSTs. Standard LSTs follow fixed delegation strategies you cannot modify. A custom LST allows you to specify exactly which validators receive stake, enabling compliance with jurisdiction-specific requirements around validator geography, regulatory status, or operational standards.

Staking rewards are generally treated as income, though treatment varies by jurisdiction. LSTs may offer tax efficiency in some structures because rewards compound within the token rather than distributing as separate taxable events. For audit purposes, you'll need transaction records for all staking and unstaking activity, reward accruals, and fair value documentation. Custom LSTs can be built with reporting capabilities that integrate with your existing compliance infrastructure.

Most institutions present staking as a treasury optimization initiative. Key points for board materials: yield comparison versus holding idle SOL (typically 6-7% APY versus 0%), risk profile (no slashing on Solana, smart contract risk mitigated by audited protocols), liquidity provisions for redemptions, and custody arrangements. Starting with established LSTs like INF offers a lower-complexity entry point that may ease approval before moving to custom infrastructure.

Major LSTs can handle multi-million dollar exits with minimal slippage. JitoSOL, mSOL, and INF have deep liquidity pools across multiple DEXs. For very large positions ($50M+), you may want to assess liquidity depth across venues or negotiate OTC arrangements. Custom LSTs face bootstrapping challenges initially, but integration with Sanctum's liquidity layer provides access to unified liquidity across the LST ecosystem.

No. Unlike Ethereum and some other PoS networks, Solana does not currently implement slashing for validator misbehavior. Validators can lose rewards for downtime, but delegators' principal is not at risk. This makes Solana staking lower-risk from a principal protection standpoint, though smart contract risk exists for LSTs.

With established infrastructure like Sanctum's, a custom LST can be deployed in days. The timeline depends more on your internal compliance review and customization requirements than technical implementation. For validators, white-label deployment is similarly fast once the LST reaches the ~50,000 SOL profitability threshold. Self-operated validators require longer lead times for hardware procurement, setup, and testing.

Market data as of December 2025. Staking APYs fluctuate based on network conditions, validator performance, and total stake. Past performance does not guarantee future results. Staking involves smart contract risk, validator risk, and other considerations. Consult with legal and financial advisors before making staking decisions.