Solana validators approve 100% priority fee distribution: Key details

The adoption of a major proposal, SIMD-0096, marks a recent development in the Solana network. The distribution of priority fees is intended to be altered by this new proposal, which was approved by 77% of the validators. In the past, these fees were divided into equal halves. One half was incinerated to combat inflation, while the other half was distributed to the validators. To increase efficiency and align incentives within the network, validators will now receive 100% of such fees under the new system.

The proponents of SIMD-0096 argued that the earlier structure appeared to have created a possibility for secret dealings between transaction submitters and block producers, which could have compromised the system’s efficiency and security. The proposal aims to improve the network’s overall health and security by directly rewarding the validators with all priority fees. A diverse group of Solana validators, including notable entities like Everstake, Helius, Jito, Leapfrog, Stakehaus, and more, supported the decision.

Bonk, Solend, and Pico have emerged as some of the most successful projects. Sol means Sol for short in the Solana community. However, these projects have faced significant criticism from surprising adversaries like Step Finance, GREED, Triton, Solana Compass, Orangefin, Shinobu,  AG, Edgevana, and Pumpkin Pull. This indicates that the community’s division prevents any stakeholder from deciding on the next course of action.

Some critics, such as Hanko Baggins of Bandito Stake, have voiced serious concerns about eliminating the burn mechanism. This feature was first added to combat any evidence of inflation in the network. Critics have pointed out that, while validators may gain from higher fees in the near term, removing this lever could be detrimental to the network’s long-term viability and lead to SOL’s price falling due to inflation.

Anatoly Yakovenko, Solana’s co-founder, responded by directly labeling the current system as faulty and referring to the understood priority fee burn as a “bug.” He further said that this approach is unfair because users must pay twice the priority fee to outbid tips. These tips are not burnt like priority fees but rather awarded directly to validators.

Continuing the discussion, Laine from Stakewiz also pointed out that the proposed changes can lead to an increase in Solana’s overall issuance rate of 4.6%, and it will reach a level from a year ago. This is all part of a more significant effort to improve the distribution of block rewards within the network. Other proposals, including SIMD-0123 and SIMD-0109, are also under development to enhance the distribution of block rewards and add a native tipping system.

While SIMD-0096 has been passed, it is unlikely to be implemented anytime soon because the current Solana Mainnet and future updates are not suitable for it. As a result, the corresponding proposals should be reviewed and refined during the transition time. Any changes to the network’s economic incentives will take into account the impact on long-term stakeholders and the larger Solana ecosystem.

Trevor Holman

Trevor Holman follows crypto industry since 2011. He joined CryptoNewsZ as a news writer and he provides technical analysis pieces and current market data. He is also an avid trader. In his free time, he loves to explore unexplored places.

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