How to Increase Solana Staking Rewards

Learn about several strategies to increase Solana staking rewards. Put liquid staking tokens to work by providing liquidity, lending, options vaults, or borrowing USDH.

This post is Hubble’s fourth article on staking crypto. If you missed our previous posts about crypto staking, it would be a good idea to check them out to get a better understanding of the strategies to increase Solana staking rewards described here:

In this article, we'll focus on increasing SOL staking rewards. Increasing Solana staking rewards is possible by using liquid staking tokens and putting them to work by participating in several different protocols and strategies.

This article is not financial advice nor an endorsement of the protocols mentioned herein. Always research any position you take when participating in decentralized finance (DeFi).

Earn Rewards by Borrowing USDH with Lido Finance’s stSOL

Hubble Protocol allows users to borrow USDH against a wide array of assets, including Lido Finance’s liquid staking token, stSOL. Users who deposit stSOL to borrow USDH can earn LDO rewards when borrowing above a 40% loan-to-value ratio.

hubble protocol, lido finance, stsol, usdh, liquid staking token, staking yield, earn rewards
Borrow USDH with stSOL and earn LDO rewards.

When users borrow USDH, they can use their stablecoins in all sorts of ways to earn yield. What’s special about borrowing USDH with stSOL is that it’s like users are earning from borrowing instead of paying fees themselves!

Increasing Solana Staking Rewards by Providing Liquidity for Trades

Kamino Finance, which Hubble Protocol incubated,  provides an excellent opportunity for earning additional yield on liquid staked tokens. For example, as shown in the vault below, users can provide stSOL that will be used to facilitate trades between SOL and stSOL on Orca’s concentrated liquidity Whirlpools.

hubble-orca-solend-raydium-friktion-katana-psyoptions-francium-tulip-atrix-port finance-kamino-concentrated-liquidity-min
Earn optimized fees and rewards from trades between SOL and stSOL.

Looking at the vault statistics, most of the APY earned from the SOL-stSOL vault is based on LDO, Lido Finance’s native token, and the rest are generated from fees paid in SOL and stSOL by traders on Orca. Subtracting Lido’s generous incentives, there is around 4% APY produced solely from real yield and economic activity.

The fees earned from providing liquidity vary and depend entirely on market activity, so the more users trading SOL and stSOL through this pool, the more stSOL that liquidity providers (LP)s) can capture.

By providing liquidity for trades between SOL and stSOL, it’s possible to increase yield while holding stSOL, which grows in value while holding it. In a previous article on liquid staked tokens and DeFi, it was mentioned that users could earn APY from staking as well as APY from DeFi, and Kamino is a prime example of this feature.

Other protocols where users can directly provide liquidity for trading liquid staked tokens include:

Earning Yield from DeFi Options Vaults

DeFi options vaults allow users to take positions in automated options strategies. These vaults generally automate covered calls and secured put strategies on users’ behalf. Users may have to lock their liquid staking tokens into the options vault smart contract for the duration of the strategy, with payouts/withdraws occurring weekly.

defi-options-vault-friktion-katana-psyoptions-francium-tulip-atrix-port finance
DeFi options vaults on Friktion.

Options vaults are slightly riskier methods to generate additional yield on liquid staking tokens, since the market could move faster than predicted, and the strategy could fail. There are several different options for  participating in options vaults on Solana, including:

Earning Additional Yield on Liquid Staking Tokens by Lending

The last method for increasing yield on liquid staking tokens is lending. It’s also the strategy with the least yield potential, since not many users are willing to borrow an asset programmed to increase in value over time, so the rates for lending mSOL or stSOL, for instance, on Solend and Port Finance, are quite low.

lending-liquid-staking-tokens-earn-yield-katana-psyoptions-francium-tulip-atrix-port finance
Leveraged yield farming on Francium with mSOL.

However, users may want to borrow liquid staking tokens to participate in leveraged yield farming (LYF). Protocols like Francium and Tulip each offer users ways to set up different strategies to optimize yield farming through borrowing different assets, including liquid staking tokens.  

With LYF, other users are participating in strategies mentioned above that provide liquidity in return for fees and rewards, but they’re adding leverage to their position to either long, short, or go delta-neutral on the tokens in the strategy. It’s possible to earn from their strategy and generate yield by lending on Francium or Tulip.

Earn Yield on Top of Yield Through DeFi Composability

The development of liquid staking tokens is an amazing achievement in DeFi that combines the optimization of capital efficiency with maximizing network decentralization. Then, the magic of DeFi composability makes it possible to increase yields earned from liquid staking tokens by putting them to work.

By providing liquidity, participating in options vaults, or lending, users can earn additional yield on top of their staking rewards. These yields can come in the form of other project tokens or additional liquid staking tokens from fees, and they can add up to major gains if everything goes the right way over time.

It should be noted that sometimes things can go wrong, and if any of the protocols mentioned in this article are hacked, users can lose their funds. Therefore, the additional risk added to the additional rewards for putting liquid staking tokens should be factored into any decisions made with a well-balanced portfolio.

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