Recent Governance Proposal Benefits Solana Validators
Recently, a governance proposal passed that will significantly impact Solana validators, increasing their rewards. According to data from the Solana governance system, the proposal, which grants validators 100% of priority fees from transactions on the network, received an overwhelming favorable vote of 77% on Monday.
“Validators play a crucial role in blockchain networks by running software to validate transactions and ensure network security.”
In Solana, priority fees are charges that users can pay to accelerate the processing of their transactions. Under the previous system, only half of these fees were awarded to validators, leading to concerns about potential “side deals” with transaction submitters to acquire more SOL tokens. By allocating all priority fees to validators, the goal is to incentivize a focus on network security and efficiency.
Impact of the Governance Change on Solana
The new arrangement is detailed in Solana Improvement Document number 96 (SIMD-0096) and has been implemented through the feature named “Reward full priority fee to validators #34731.” Following the approval of the proposal, the SOL token saw a 1.6% increase in value within 24 hours, trading at $166 during Asian trading hours on Tuesday, as reported by CoinGecko.
“The reality is that the current priority fee mechanism provides for side deals which create opacity and prevent free, transparent and equitable access to block space for all network participants.” – Laine, Solana Staking Validator
However, concerns have been raised regarding the potential impact of this governance change on the inflation rate of SOL. Laine, a Solana staking validator, highlighted that the absence of priority fees in May 2023 could lead to an effective inflation rate of approximately 9.9% annually, despite the overall increase of 4.6% yearly.
Crypto investor Brian Kelly has suggested that Solana has the potential to become the next cryptocurrency with a spot exchange-traded fund (ETF) in the US. On CNBC’s ‘Fast Money’, Kelly mentioned, “You’ve got to think about Solana as probably the next one,” placing it alongside Bitcoin and Ethereum as the leading cryptocurrencies for the current cycle. Nate Geraci, president of The ETF Store, expressed doubt, indicating that a Solana ETF may not materialize until a regulatory framework is established by Congress for cryptocurrencies beyond Bitcoin and Ethereum.
Notably, the approval of various spot Ether ETFs by the SEC on May 23, including those from VanEck, BlackRock, Fidelity, and others, signals a growing trend towards mainstream adoption of digital assets within the traditional financial sector.
