# Yield Explanation

Our USS token earns yield from staking JitoSOL, which combines SOL staking yield with MEV rewards. eUSS generates *enhanced* yield from two sources: USS' yield on the long side and earned funding fees from the short side.

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## SOL Staking Yield

### SOL Staking

Solana is a proof-of-stake (PoS) blockchain network. On the Solana network, validators, which are individuals or entities running specialized computers, play a vital role in maintaining and securing the blockchain. They process incoming transactions, vote on, and add new blocks to the blockchain. Because validators globally receive information at different times, it is important for validators to come to an agreement on which transactions and data to add to the chain.

This agreement is reached through the consensus mechanism. Every validator can participate in consensus by voting for blocks they believe should be added to the blockchain, thereby confirming valid transactions within them. However, votes are stake-weighted, meaning validators with more stake have more influence in determining the consensus outcome.

Staking is a process in which SOL holders assign SOL tokens to a validator, increasing their voting weight. This process, known as "delegating," **does not transfer ownership or control of tokens**. Token holders maintain control at all times. Delegating tokens indicates trust in the validator. As validators accumulate stake delegations, it proves their trustworthiness to the network, and their votes are weighted proportionally to the attracted stake.

Users can earn yield by delegating their tokens to a validator. Because the validator does not have ownership of the tokens, staking is a safe way to earn yield.

### What determines SOL staking yield

Solana staking yield, or the rewards earned by staking SOL tokens, is determined by several factors:

* **Inflation Rate**: The Solana protocol has a built-in inflation mechanism. Solana's inflation effectively means that non-stakers pay stakers for delegating their SOL to ensure network security. The total supply of SOL increases at a fixed rate over time, which determines the amount of new SOL generated as rewards. This rate can be adjusted through governance. Solana aims to achieve a long-term inflation rate of 1.5%.
* **Total Staked SOL**: The percentage of the total SOL supply that is staked influences individual staking rewards. If a larger proportion of the total supply is staked, the rewards per staked SOL decrease, and vice versa.
* **Validator Performance**: The performance and reliability of the validator node to which you delegate your SOL can affect your rewards. Validators with high uptime and reliability tend to yield better returns.
* **Network Participation**: The overall participation rate in staking impacts the yield. Higher network participation usually means that rewards are distributed among more participants, potentially reducing individual yields.

### JitoSOL

Jito functions as a liquid staking protocol on Solana, using a stake pool model. A stake pool comprises one or multiple validator nodes. When users deposit their SOL tokens with Jito, they delegate their tokens to the stake pool and, in exchange, receive a liquid stake pool token called Jito Staked SOL (JitoSOL). As of May 2024, there are 154 validators in Jito's stake pool with more than $1.5 billion worth of staked SOL.

There are three main reasons why we choose to stake with Jito in the first stage of Setora Labs:

* Enhanced Yield: Beside the traditional staking yield, JitoSOL stakers also earn additional MEV rewards. Jito has built a suite of products enabling its validators to capture MEV revenue while eliminating unproductive network spam. Additional profits earned from the MEV is then shared with Jito stakers.
* Security: Jito has been audited extensively seven times by reputable auditors such as Ottersec,  Neodyme, and Kudelski.
* High-validators: A stake pool’s validator set is the key driver for that pool's yield and performance. Jito has the highest-quality validator pool in the space thanks to its scale and rigorous screening process.

## SOL Perpetual Funding Fee

When eUSS protocol buy or short SOL perpetual contracts, we are entitled to receive variable funding fees, depending on the market. Please check out the [Perpetual Contract](https://setora-labs.gitbook.io/setora-labs-or-synthetic-dollar-using-solana/documents/how-uss-and-euss-work/euss-underlying-derivatives-perpetual-contracts) and the [Historical Yield](https://setora-labs.gitbook.io/setora-labs-or-synthetic-dollar-using-solana/documents/how-uss-and-euss-work/euss-underlying-derivatives-perpetual-contracts) section to learn about historical funding rates and how funding fees are calculated.

USS does not earn funding fees because shorting spot SOL does not generate yield.
