Solflare Suspends SOL Staking Rewards After Validator Key Loss

Solflare, a Solana-based wallet, has suspended staking rewards for SOL after a third-party provider lost control of Solflare's validator keys. The team reported on X that the incident did not occur on Solflare's side, and users' delegated stakes remain secure: they are on their own staking accounts and controlled by their keys.

Solflare will add a new validator along with users' stakes, which is why reward payouts are suspended. The company is developing a compensation plan for everyone who will migrate and promises to conduct the migration within the app.

Solflare co-founder Vidor Gencel called the situation unfortunate but emphasized that users' funds are not lost. According to him, the validator operator lost control of the validator keys, and Solana's architecture is designed so that validator keys cannot manage delegated stakes.

The number of affected users and the volume of staked or delegated SOL that needs to be migrated is not disclosed. The incident is similar to the case with MetaMask's staking infrastructure, which had to withdraw ETH from staking.

In proof-of-stake networks, users delegate SOL to validators, and validators share rewards. The growing demand for staking means more SOL is locked up, and potential selling pressure decreases. However, in October, demand for Solana staking weakened: net outflows amounted to 2.4 million SOL, nearly $300 million. This coincided with a 15% drop in SOL, from approximately $123 to $105. Outflows intensified in mid and late October, threatening the psychological support at $100. If demand continues to weaken, SOL may fall below $100.

The Solflare incident is not unique: attacks affect various segments of the crypto market—from staking infrastructure to hardware wallets.