Solana Community Passes Proposal to Double Validators’ Priority Fees

5 months ago 3

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The Solana community recently concluded a pivotal governance vote. About 77% of validators backed the Solana Improvement Document (SIMD)-0096, which shifts how priority fees are managed.

This decision ends the practice of burning 50% of priority fees, a method previously thought to imbalance validator incentives and network security.

Why Some Validators Opposed the Proposal

Several validators supported this amendment, including Everstake, Jito, Helius, Bonk, and Solend. The change directs 100% of priority fees to validators.

Consequently, this proposal is designed to deter the practice of side deals with block producers. Such arrangements ensured faster transaction processing at the cost of network efficiency.

However, the vote sparked controversy. Opponents, such as Bandito Stake, Laine, Step Finance, Solana Compass, Orangefin, and Triton, expressed concerns. They highlighted potential long-term effects on Solana’s tokenomics, particularly the inflationary impact of removing the burn mechanism.

“While our bags would significantly benefit from the increased fees, I am not comfortable with removing the burn mechanism. With that in mind, the burn mechanism has the potential to have a serious impact on the 1.5% yearly inflation that’s baked into Solana’s tokenomics,” Hanko Baggins from Bandito Stake wrote.

Moreover, some community members criticized the proposal as favoring validators’ profit over retail investors’ trust. Nonetheless, Anatoly Yakovenko, co-founder of Solana Labs, challenged this perception, explaining the current system’s flaws.

“That’s a bad analysis. Users currently have to pay 2x higher priority fees to outbid Jito tips. Jito tips aren’t burned so validators get 100% of the tip. To be included in the block, a user has to pay 2x priority. It’s just busted,” Yakovenko wrote.

Solana’s priority fees—additional charges users can pay to fast-track their transactions—will now fully compensate validators. This policy shift aims to enhance network security and efficiency by better-aligning validator rewards with network performance.

Despite the significance of this policy change, it has barely affected Solana’s market price. The cryptocurrency is currently trading at $167.61, up by 1.31% in the last 24 hours.

Following a turbulent price increase since late 2023, Solana reached a high of roughly $210 in March 2024. It now sits about 20% below this local top.

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