Solana
How Solana’s latest fee proposal could affect SOL’s inflation
Solana validators are now to get 100% of the priority fees, which has sparked concerns about the inflationary effect on SOL.
- A recent proposal voted for a massive fee design change for validators.
- Validators are now to get 100% of priority fees on Solana.
A recently passed proposal on the Solana [SOL] network mandates that validators will now receive 100% of the priority fees. This change comes as network fees have increased, raising concerns about its potential impact on SOL.
Solana validators to get more fees
A proposal presented to the Solana community suggested that validators should receive 100% of the priority fees on the network. On 27th May, voting concluded with 77% in favor of the proposal, known as SIMD-0096.
Also, this new model differs from the previous one, where fees were split 50/50 between being burned and rewarding validators.
However, it will take several months to implement this new allocation model. It has yet to be available in the current version of Solana’s Mainnet-Beta software.
Furthermore, future releases, such as versions 1.17 and 1.18, are expected to include this feature. Also, other enhancements, such as the SIMD-0123 proposal, which aims to optimize block reward distribution, will be included.
Priority fees on the Solana network are charged to users who want their transactions processed faster, especially during periods of high trade traffic.
This system ensures that validators prioritize these transactions to maintain the network’s efficiency.
Could Solana become more inflationary?
Before and after the passage of the new Solana proposal, some community members have expressed concerns about its potential inflationary impact on SOL.
Under the current arrangement, 50% of the fees are burned, reducing the amount of SOL in circulation and making SOL more deflationary, which should theoretically increase its value.
However, a validator provided an analysis indicating that the net inflation rate will rise to 5.2% from the current compound inflation rate of 4.97% once the proposal is fully implemented.
How the fees on Solana have trended
An analysis of Solana’s fees on DefiLlama showed a significant increase around March, peaking at over $3 million on 17th March.
After a steep decline that brought fees below $1 million, they have since risen again, with $1 million now serving as a threshold.
Source: DefiLlama
As of this writing, fees are over $1.8 million, indicating a recent surge in network transactions, resulting in higher fees.
SOL moves between gains and losses
AMBCrypto’s analysis of Solana’s daily timeframe price trend showed that SOL saw an increase of over 4% on 27th May.
Source: TradingView
Read Solana (SOL) Price Prediction 2024-25
It rose by 4.15% from approximately $163 to over $170 by the end of the trading session.
However, more than 2% of that gain has been lost since then, and SOL is now trading at around $166.
