How Coinbase Calculates Solana Staking APY

When staking through a provider, understanding how earnings are calculated is critical. This article breaks down the two types of Solana staking APY Coinbase measures and how we calculate them.

Rewards sources on Solana

To understand our methodology for calculating Solana APY, it’s helpful to first be familiar with the types of staking rewards we include. Below are the three types of rewards we measure. Note that these explanations require a basic understanding of Solana staking mechanics; see our Guide to Solana Staking for a deep dive on this. 

Inflation rewards

These rewards come from newly minted SOL and are the primary native yield mechanism on Solana. Each epoch (~2.5 days), the protocol issues new supply according to Solana’s inflation schedule. These newly minted tokens are distributed once per epoch to validator vote accounts. Inflation rewards are allocated in proportion to each validator's stake weight and adjusted based on the validator’s voting performance. Validators earn vote credits for successfully voting on slots, and their reward allocation is scaled according to the number of credits accumulated relative to what was possible for the given epoch. This means that a validator with strong uptime and low vote latency will earn close to its full stake-weighted share, while a validator that misses or submits delayed votes will see its rewards reduced. From these rewards, validators take their commission, and the remainder is automatically distributed to delegators’ stake accounts.

Since inflation rewards depend, in part, on vote credits, we implement two strategies to optimize for maximum vote credit accumulation. Both strategies help our validators consistently earn their full share of inflation rewards.

1. The first is an emphasis on performant hardware, specifically the latest generation bare metal servers. This allows our validators to keep up with the high-throughput nature of Solana, enabling them to quickly replay transactions and vote on slots.

2. We focus on minimizing network latency. This entails a combination of running validators in data centers with optimized networking (e.g., dedicated fiber) and ensuring that our validators are geographically located in regions with high stake concentrations (e.g., Western Europe).

Jito tips (MEV rewards)

Jito tips are an additional reward source earned by a block producer for including a given ordered bundle of transactions. MEV arises when the ordering of transactions within a block creates profit opportunities, such as price arbitrage or liquidations. Through Jito’s offchain auction system, searchers (i.e., traders and bots seeking MEV opportunities) bid for priority in transaction ordering by attaching tips. These tips are paid directly to the block producer (validator), separate from transaction fees or priority fees. 

MEV rewards are distributed to the validator and its delegators after each epoch via the Jito tip distribution program. Similar to inflation rewards, validators take their commission, and the remainder of the rewards are distributed to delegators’ stake accounts. Note that a validator’s commission fee on MEV rewards can differ (percentage-wise) from its fee on inflation rewards. 

Priority and transaction fees (block rewards)

When submitting transactions, Solana network users (e.g., DEX traders, dapp users) pay a base fee and can attach a priority fee to increase the likelihood of faster inclusion. Base and priority fees are collected by the leader (validator) producing the block in which the transactions are included. Of the base fee, 50% is burned and 50% goes to the leader, while 100% of any attached priority fee goes to the leader. The base fee share and all priority fees flow into the leader’s identity account and are not shared with delegators at a protocol level.

How we calculate APY

We track two types of APY for our Solana validators: core APY and total APY. They are differentiated based on the types of rewards included in their calculations:

Core APY: Includes only inflation rewards. Isolating inflation rewards allows us to benchmark how our validator infrastructure and core operations are performing compared to others in the network. 

Total APY: Includes all three rewards types mentioned above–inflation, MEV, and priority and transaction fees. Note that, at the time of writing, priority and transaction fees are only distributed to validators. 

We calculate both by looking at the corresponding rewards earned over the period of an epoch. To do this, we first evaluate rewards earned during the epoch in terms of hours, then divide by 24 hours to arrive at an approximate length in terms of days. For example, if an epoch runs for 60 hours, we divide that by 24, which gives us 2.5 days. We then use this period length, measured in days, to calculate the number of times rewards will compound over the period of one year, which gives us APY.

We perform this calculation across every epoch. This method provides ongoing insight into how the APY changes, both for specific validators and the network. Below is the calculation we use: 

POW(1 + rewards_ratio_over_epoch, 365.0/compounding_period_in_days) - 1 , where rewards_ratio_over_epoch = (total rewards over epoch/start of epoch balance)

Below is a data comparison of Coinbase’s total APY and the market average between 06/13/2025 and 12/12/2025 (6 months of completed epochs): 

Coinbase Average: 7.50%

Market Average: 7.42%

Delta: 0.08%

SOL APY boosting

There are several strategies staking providers may use to “boost” their APY. We have included the common methods below. At the time of writing, Coinbase doesn’t engage in any of these boosting methods.

Vote backfilling client mods

This involves custom modifications to validator software, enabling validators to retroactively submit votes for slots they initially missed. Backfilling circumvents any reduction in vote credits caused by missed or delayed votes. This positively influences a validator’s inflation rewards share, boosting APY. 

Custom schedulers

Instead of relying on the default Solana scheduler, which processes transactions in a standard order, custom schedulers are optimized to capture more profitable transaction flows, such as those with higher priority fees or Jito tips. This allows validators to maximize fees and tips earned during leader slots, boosting APY. 

Private mempools (malicious arbitrage)

This setup uses validator configurations that route transactions through private channels rather than the public transaction pool. This gives the validator (or partnered searchers) exclusive access to profitable opportunities, such as arbitrage or liquidations, before they reach the broader network. ​​While this can boost APY, it reduces fairness and transparency in transaction processing, concentrating advantages within a subset of validators.

Slot lagging

This is a validator tactic whereby the block producer intentionally delays block production to observe more incoming transactions before finalizing its slot. This allows the validator to selectively reorder or include higher fee or more profitable transactions to boost its earnings. While this can increase APY, it introduces network latency, reduces overall throughput, and undermines the predictability of block production.

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Disclaimer

This document is intended only for sophisticated investors; it is for informational purposes only and does not constitute the provision of investment advice. Client assumes full responsibility for its trading activity and should consult its advisors for its specific situation. Coinbase is not registered as an investment advisor and Coinbase assumes no liability, obligation, or responsibility for client decisions regarding its Coinbase Prime Broker Account. Please consult your Coinbase Prime Broker Agreement and www.coinbase.com/Prime for additional details. 

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