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CF Benchmarks launches the first regulated Solana Staking Reward Rate indices

CF Benchmarks is excited to announce that the latest regulated benchmarks to be added to our CF Staking Series are the first institutional-grade indices of Solana staking rewards.

Ken Odeluga

• 3 min read
CF Benchmarks launches the first regulated Solana Staking Reward Rate indices

CF Benchmarks is excited to announce that the latest regulated benchmarks to be added to our CF Staking Series are the first institutional-grade indices of Solana staking rewards.

Chiefly, these comprise the two key benchmarks below:

Additionally, CF Benchmarks is incepting several index variants known as the CF SOL Staking Blend Baskets. These represent the portfolio performance of specific ‘blends’ of staked SOL assets, and non-staked SOL assets. Assets in each variant are of fixed weight, and each blend is rebalanced quarterly.

The growth of Solana

The Solana blockchain has evolved rapidly since its proposal in a whitepaper by developer Anatoly Yakovenko in 2017, followed by its launch in 2020.

Solana's raison d'être largely grew from the search by the crypto community for a Proof of Stake (PoS) network that would avoid the challenges faced by Ethereum; chiefly limits on throughput, and volatile transaction costs.

Solana quickly attracted decentralized finance (DeFi) applications aiming to provide scalable and efficient financial services.

By late September 2024, the network was ranked by data aggregator DefiLlama as 2nd in terms of Total Value Locked (TVL), with a TVL value of $11.60bn.

The network's native token SOL is the third-largest asset by free float market capitalization within CF Benchmarks' CF Ultra Cap 5 index.

Need for institutional SOL staking reward rate grows more acute

Even before the recent re-election of Donald Trump as U.S. President, several investment management firms filed applications to list exchange traded products on U.S. exchanges, that would invest in spot Solana.

That’s despite the fact that, just like the Ether ETFs already listed there, funds in that jurisdiction investing in PoS assets are not currently permitted to stake their holdings, nor provide exposure to staking rewards.

Nevertheless, with Trump re-elected, amid expectations of a more crypto-friendly regulatory regime, hopes are rising that listed funds investing in PoS tokens have a higher chance of regulatory approval for staking.

Risks

However, institutional participants seeking to reap the considerable benefits of staking SOL, face risks related to the unavoidable dependence on third-party data, with ample scope for concerns about data reliability, accuracy, representativeness and integrity.

The Regulated Solution

CF SOL Staking Reward Rate indices strongly mitigate such risks.

As regulated benchmarks under the UK Benchmarks Regulation (BMR), CF SOL Staking Reward Rate indices are designed to promote replicability, representativeness and manipulation resistance, for financial product providers engaging in non-custodial staking on the Solana blockchain, with institutional-grade Constituent Staking Service Providers (SSPs).

In order to maintain the inherent standards of market integrity, data reliability and accuracy of a regulated benchmark, the CF SOL Staking Reward Rate only observes a carefully selected subset of eligible professional validators, excluding validators that have not consistently maintained the requisite standards.

CF SOL Staking Reward Rate Methodology summarized

  • The CF SOL Staking Reward Rate Index is calculated daily, aiming to represent the reward rate obtained when staking SOL on its native blockchain. The rate is formulated in annualized percentage form
  • Constituent Staking Service Providers (SSPs) monitor the staking rewards of their clients (known as delegators) and these are shared with the index calculation agent, CF Benchmarks. Note that rewards are distributed by the Solana protocol net of SSP fees.
  • Note that rewards are derived not only from staking, but also from participation in all core validator activities on the Solana blockchain
  • Reward tokens must be in the form of the digital asset that’s native to the blockchain (for SOL_SRR, that is SOL)

Read the full CF Staking Series Methodology Guide here.

Institutional deployment options for SOL staking

The flexibility offered by our suite of SOL Staking Reward Rate indices, together with their transparency, accuracy and high standards of market integrity, opens a wide range of institutional deployment options, or use cases.

We outline the key ones below.

  • Internal performance benchmarking for managers of SOL holdings as a component of products offered to clients, or by capital markets participants, e.g. market makers, providing liquidity in staked SOL
  • Investment managers can devise funds tracking the CF SOL Staked Return Index, or one of the SOL Staking Blend Baskets, secure in the knowledge that the benchmarks represent the most accurate pricing possible of staked SOL returns
  • Market makers may deploy the CF SOL Staking Reward Rate Index when acting as the direct contract counterparty in swap contracts
  • Staking Service Providers may utilize CF SOL Staking Reward Rate indices as market benchmarks, for balance sheet management, internal risk, or reporting purposes, among others

Conclusion

In summary, our new CF SOL Staking Reward Rate Index and its supplementary sub-series benchmarks, the CF SOL Staked Return Index, and CF SOL Staking Blend Baskets, introduce a higher standard of trustworthiness, flexibility and price integrity for the most important aspect of SOL staking for institutional participants, the reward rate itself.

More information

 

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