Solana has passed a proposal known as SIMD-0096, allowing 100% of priority fees to be allocated to network validators. This decision marks a departure from the previous model, where fees were split 50/50 between being burned and rewarding validators.
Solana Approves 100% Priority Fee Allocation
The latest voting has ended with the result of 77% of votes for the proposal, which shows the support from the side of validators. This change is intended to increase the rewards for validators, which are the nodes responsible for the network’s reliability and performance.
BREAKING: Voting has concluded for the @solana proposal to allocate 100% of priority fees to validators, with 77% of votes in favor, moving away from the previous 50/50 split between burning and rewarding. This change is now set to take effect. pic.twitter.com/hTMKdA0p1p
— SolanaFloor (@SolanaFloor) May 27, 2024
In a statement made by Solana Labs Co-Founder, Anatoly Yakovenko, this update could enable stake pools with programmatically frozen tokens to be able to obtain all the tips and priority fees.
For now, it will take several months to adopt this new allocation model as it is not available in the current version of Solana’s Mainnet-Beta software. Subsequent releases, such as 1.17 and 1.18, should include this feature as well as other enhancements such as the SIMD-0123 proposal to further optimize block reward distribution.
As a result, this delay creates a window in which the fee distribution system can be further developed and integrated as proposed in the SIMD-0123.
Community Response and Implications
Priority fees in the Solana network are charged by users that want their transactions to be processed faster, especially during the rush hours. In this way, validators prioritize these transactions to guarantee the proper functioning of the network.
Prior to this, 50% of these fees were burned, which some deemed as having a deflationary impact on the Solana token (SOL). All priority fees will go to the validators under the new model, which could increase their revenue but at the same time may also raise concerns over more tokens being created and resulting in inflation.
Therefore, the decision has elicited divergent reactions within the Solana community. Some members and validators have raised concerns over inflationary pressures that may result from the transition from burning fees to rewarding them in their entirety to validators.
SIMD-0096 net change to inflation is just 4.6%
Many dissatisfied comments happening relating to the SIMD-0096 proposal about validators enriching themselves and removing burn which harms deflationary mechanism.
Our role here is primarily to help facilitate the vote, regardless…
— Laine
stakewiz.com (@laine_sa_) May 10, 2024
A validator, Stakewiz, has voiced his opinion regarding the problem of Solana token expansion and its connection with inflation, predicting a 4.6% boost. They have emphasized that the activation should be gradual, and the activation of SIMD-0096 should be done simultaneously with the activation of SIMD-0123 to avoid any adverse financial effects.
On the other hand, there are those in the community who support the change, saying that it will do away with off-chain side deals that are hard to follow, and will make the fee structure more transparent and fair.
Solana Price Trend
Amid this development, the Solana (SOL) price has seen a bullish shift with the price exchanging hands at $170.53, a 5.56% surge from the intra-day low.
Concurrently, SOL’s market capitalization and 24-hour trading volume surged by 5.59% and 9.47% to $76,662,006,334 and $2,633,171,068, respectively.
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