Solana Validators to Get 100% Priority Fees — Massive SOL Inflation Ahead?

LUCKNOW (CoinChapter.com) — Solana’s community has approved a governance proposal to allocate 100% of priority fees to validators. The proposal, known as SIMD-0096, passed with 77% of votes in favor, according to on-chain governance data released on May 27.

Validators are crucial participants in the Solana blockchain network. They run software to confirm transactions and maintain the network’s security. Priority fees, on the other hand, are additional fees users can pay to have their transactions processed more quickly during times of high network congestion.

Previous 50/50 Split Incentivized “Side Deals”

Previously, the network split priority fees, with 50% being burned (removed from circulation) and the other 50% going to validators. However, the proposal creator tao-stones argued this incentivized validators to make opaque “side deals” with users to secure more fees.

Allocating 100% of priority fees to validators ensures they focus solely on maintaining network performance and security. Proponents argue this change will disincentivize potential ‘side deals’ and improve efficiency.

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Solana Community Divided on Inflation Concerns

While the proposal has been approved, it has also sparked a debate within the Solana community. Some members, including validators like Stakewiz, have raised concerns about the potential inflationary impact of introducing more SOL tokens into circulation without burning any fees. Stakewiz estimates that this change could increase SOL’s issuance by 4.6%, contributing to inflation.

One opponent to the proposal also said:

Solana’s inflation is about to increase as validators vote to pay themselves more. More traffic on SOL network? More tokens from thin air go to validators that will dump on you.

However, others in the community support the proposal, arguing that it will eliminate opaque “side deals” and make the fee structure more transparent and fair for users.

Gradual Implementation and Further Improvements

Implementing SIMD-0096 is not immediate, as it requires subsequent software releases (such as Solana’s versions 1.17 and 1.18) to incorporate the necessary changes. This delay provides an opportunity to develop further and integrate a more comprehensive fee distribution system, as proposed in SIMD-0123.

Solana’s co-founder, Anatoly Yakovenko, has stated that the update could enable stake pools with programmatically frozen tokens to receive all priority fees and tips. He also said that such a mechanism would take ‘6 months to 1 year’ to become operational.

SOL Price Reacts Positively

Amidst this development, the Solana (SOL) token has experienced a bullish price movement. At the time of writing, SOL is trading at $168.9, a 5.56% increase from its intraday low.

SOL’s market capitalization and 24-hour trading volume have also seen notable increases of 5.59% and 9.47%, respectively.

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