- Solana governance prioritizes the approval of fees for validators.
- The purpose of this change is to address the issue of validators making side transactions.
- Previously, Solana validator earnings surpassed Ethereum.
In blockchain technology, validators play an important role in network security. It records all transactions on the chain correctly and ensures that all participants have equal access. However, recent proposals have highlighted that this may not always be the case in practice.
Most recently, Solana holders voted on a proposal to provide 100% priority fees to the network. This decision comes after several users reported issues with validators engaging in side transactions to increase their earnings.
Solana Vote allocates full priority fees to validators
On Tuesday, May 28, the Solana governance community voted to pass a proposal, documented as Solana Improvement Document No. 96 (SIMD-0096), to allocate 100% of transaction priority fees to validators.
This proposal, which received 77% approval, aims to solve the problem of validators engaging in side transactions with transaction submitters to increase their rewards. In the previous system, the network distributed priority fees equally between token burns and reward validators.
Validators are important participants in the Solana blockchain, running software that verifies transactions and ensures network security. The problem with side transactions emerged because validators had an incentive to prioritize off-chain transactions for additional rewards, bypassing the intended fee structure.
This proposal aims to eliminate these side transactions by giving full priority fees to validators. According to proposal author tao-stones, these changes will ensure that validators have appropriate incentives to maintain the security and efficiency of the network.
Solana holders complain that the proposal does nothing to solve their problems.
Despite receiving a majority vote, many Solana holders were not happy with the decision. Some holders argued that voting would increase validator income without doing anything to address the side deal problem.
On May 8, the total earnings of Solana validators surpassed those of Ethereum validators, even though Ethereum is a much larger chain. This is because Solana validators have higher maximum extractable value (MEV) opportunities that are not limited to transaction fees.
Validators on Solana earn income from a variety of sources, including block rewards, front-running arbitrage, and side transactions with network participants. While this structure benefits validators, it is unclear whether alternative fee sources benefit network participants.
Solana validators are well-positioned to earn fees due to the high transaction volume on the network. Solana’s low fees encourage frequent bot trading, which is not common on Ethereum.
On the flip side
- Solana holders have complained about the impact on Solana’s token economics. By redirecting previously exhausted fees to validators, SOL can alleviate deflation.
- The vote highlights governance issues among many cryptocurrency projects, where each token counts as one vote. This system necessarily benefits large holders and insiders at the expense of others.
Why This Matters
Recent decisions by Solana holders highlight several key issues with blockchain networks, including validator power and governance imbalances. If the network decides to favor insiders and large holders, it may lose the support of the community.
Learn more about Solana validator earnings:
Ethereum faces Solana challenge as validator income increases
Learn more about Solana’s potential ETF approval:
Is Solana EFT coming? JPMorgan says it is unlikely the SEC will approve.