Solana Validators Set to Receive 100% of Priority Fees Following Recent Governance Proposal
Ruholamin Haqshanas
Published on:
May 28, 2024 06:14 EDT
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2 minutes
Solana validators are in for a significant boost in rewards after a recent governance proposal was passed, granting them full priority fees from transactions on the network.
According to data from the Solana governance system, the proposal received a favorable vote of 77% on Monday evening.
Validators play a critical role in blockchain networks by running software to validate transactions and ensure the security of the network.
What Exactly Are Priority Fees in Solana?
Priority fees in Solana refer to additional charges that users can pay to speed up the processing of their transactions.
Under the previous system, half of the fees from priority transactions were eliminated, while the other half went to validators.
However, this setup raised concerns about validators entering into “side deals” with transaction submitters in order to receive more SOL tokens, as highlighted by the proposal creator, known as tao-stones, on the Solana governance forum.
By allocating all priority fees to validators, the aim is to incentivize them to prioritize the security and smooth operation of the network.
This change is part of Solana Improvement Document number 96 (SIMD-0096) and has been implemented through a feature called “Reward full priority fee to validators #34731.”
Following the announcement of the successful proposal, the SOL token has seen a 1.6% increase in the past 24 hours, trading at $166 during Asian afternoon hours on Tuesday, as reported by CoinGecko.
Laine, a Solana staking validator, noted that the SIMD-0096 proposal could have a negative impact on the Solana Network by making SOL more inflationary.
“The reality is that the current priority fee mechanism provides for side deals which create opacity and prevent free, transparent, and fair access to block space for all network participants,” she wrote in a recent post on X.
Despite the 4.6% yearly increase in issuance, Laine pointed out that priority fees were absent in May 2023, suggesting that the effective inflation rate would revert to approximately 9.9% annually.
Solana ETFs Could Be the Next Big Thing
Crypto investor and trader Brian Kelly has suggested that Solana could potentially become the next cryptocurrency to have a spot exchange-traded fund (ETF) in the United States.
During a recent episode of CNBC’s ‘Fast Money’, Kelly, who is also the founder and CEO of the BKCM Digital Asset Fund, posed the question, “The trade now is, who’s next?”
He then went on to suggest, “You’ve got to think about Solana as probably the next one. Bitcoin, Ethereum, and Solana are probably the big three for this cycle.”
However, Nate Geraci, president of The ETF Store, expressed skepticism, stating that a spot Solana ETF might not materialize until a Solana futures product is listed on a major exchange or until Congress establishes a clear regulatory framework for cryptocurrencies beyond Bitcoin and Ethereum.
On May 23, the SEC officially approved 19b-4 applications from VanEck, BlackRock, Fidelity, Grayscale, Franklin Templeton, ARK 21Shares, Invesco Galaxy, and Bitwise for issuing spot Ether ETFs.
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