Staking cryptocurrency may seem straightforward at first glance, but it gets complex once you consider factors like new coins generated by each network, the locking periods that restrict access to your funds, and tax implications that arise even during market downturns. The coin promising the highest yield might not be your best investment choice…
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When investing $10,000 in Ethereum (CRYPTO:ETH), you would earn roughly $260 annually at a staking yield of 2.6%. In contrast, the same amount put into Solana (CRYPTO:SOL) or Avalanche (CRYPTO:AVAX) may yield nearly double that. However, each network creates new coins to support these rewards, and all three cryptocurrencies have experienced declines in 2026.
So, which staking alternative ultimately provides higher returns when you factor in new coin generation and the associated risks?
Solana and Avalanche Show Higher Staking Returns
Many individuals begin staking on exchanges touting impressive percentage yields, leading to the assumption that the coin with the highest numbers is the best choice. A user from the r/ethereum community aptly stated that staking is “fine, as a yield boost,” as we noted in October, and this viewpoint seems valid. Staking rewards can enhance your returns, but they fall short of compensating for a potential decrease in coin value.
| Coin | Price | Staking Yield | New Coins Generated Annually |
|---|---|---|---|
| ETH | $2,333 | 2.6% | Approximately 0.8% of total supply |
| SOL | $101 | 5.7% gross | Approximately 4.3% |
| AVAX | $8.83 | 5.5% on staked AVAX | Unverified |
These yields change daily. For comparison, a standard 12-month certificate of deposit (CD) offers 1.8%, and 10-year Treasury bonds yield 5%. Both options present significantly lower risk compared to a cryptocurrency, which could lose a substantial portion of its value within a year.
New Coin Generation Reduces Staking Yields
The concept of “inflation-adjusted yield” considers the rate at which a network produces new coins, as this new supply can dilute each holder’s stake. Ethereum validators generate about 2,600 new ETH daily, raising the total supply by roughly 0.8% annually. Consequently, the 2.6% staking yield effectively drops to approximately 1.8% when adjusted for dilution.
Solana’s position appears even less favorable regarding inflation adjustments. Its gross yield of 5.7% is offset by an inflation rate of around 4.3%, resulting in a net yield of about 1.3%. Initially, Solana had an inflation rate of 8%, which decreases by 15% each year to settle at a 1.5% minimum, potentially leading to lower staking yields in the future.
Avalanche’s situation is more challenging to assess. Around 249 million AVAX coins remain unissued, and this outstanding supply impacts staking rewards. Since we cannot confirm Avalanche’s yearly issuance rate, its inflation-adjusted yield is likely below 5.5%, though the specific figure is still uncertain.
It’s essential to remember that market fluctuations usually overshadow staking yields. For example, AVAX dropped 54% over the past year, meaning a $10,000 investment would have seen a loss of around $5,400, as opposed to only a $550 reward. AVAX also fell close to 10% in a week, trading approximately 94% below its all-time high.
Different Costs and Lockup Periods for Direct Staking, ETFs, and Brokers
Direct Staking on the Network
To become a validator on Ethereum, an investment of at least 32 ETH, roughly $74,700, is required. Validators who breach the network rules risk “slashing,” which results in losing a portion of their staked amount.
Avalanche delegators need 25 AVAX (approximately $220), whereas validators require 2,000 AVAX (around $17,700). Delegators encounter a mandatory lock-up of at least two weeks, and rewards are only available after this term. Instead of slashing, Avalanche reduces the rewards for validators who maintain online presence below 90% of the time.
Staking ETFs via a Brokerage Account
For those interested in Solana, the Bitwise Solana Staking ETF (NYSEARCA:BSOL) provides a net staking rate of 5.3%, yielding around $530 annually on a $10,000 investment. The VanEck Avalanche ETF (NASDAQ:VAVX) achieves a yield of 4.2% since it stakes only a portion of its AVAX.
More staking funds are likely to emerge in the future. According to IRS guidelines, specifically IRS Rev. Proc. 2026-20, dated October 6, investment trusts like spot crypto ETFs can partake in staking without compromising their tax status. However, this safe harbor is exclusive to the funds and does not alter the tax obligations of individual stakers.
Brokerage Staking
Interactive Brokers (NASDAQ:IBKR) introduced ETH staking on October 13 and retains up to 30% of the rewards as a fee. This reduction can bring Ethereum’s staking yield down from 2.6% to roughly 1.8%. Additionally, staked ETH at this brokerage is not covered by SIPC insurance, which protects clients in case of firm insolvency.
Whatever method you choose, the IRS counts staking rewards as taxable income upon receipt, even if the coin’s value drops subsequently.
Which Coin Offers Better Staking Returns in 2026?
While Solana may provide the highest coin rewards, Ethereum presents greater long-term value due to an inflation-adjusted yield around 1.8%, compared to Solana’s 1.3%. Avalanche claims a yield similar to Solana’s, but its uncertain issuance rate and significant price declines create volatility. Ethereum is better suited for long-term investors utilizing brokers or ETFs. Solana might appeal to ETF investors seeking staking income, whereas Avalanche may interest those willing to accept a two-week lock-up period.
However, a major risk is staking funds you may need before the locking period ends. A 10% market price drop during this time could erase more than a year’s worth of staking rewards. Should inflation for Solana continue to decrease at around 15% yearly, its yield could converge more closely to Ethereum’s, at which point fees and lock-up conditions may determine the final choice for higher returns.
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