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VanEck: Solana's two proposed upgrades will strengthen the network but will significantly cut validator benefits

VanEck: Solana's two proposed upgrades will strengthen the network but will significantly cut validator benefits

Bitget2025/03/05 02:10

PANews reported on March 5 that asset management company VanEck said that Solana's planned protocol upgrade is crucial to the long-term health of the network, but it may deal a blow to validators' income. In March, Solana's validators will vote on two blockchain protocol upgrade proposals (SIMD) that aim to ensure rewards for stakers and adjust the inflation rate of the network's native token SOL.

Matthew Sigel, head of digital asset research at VanEck, said in a March 4 X post that the two proposals have caused "significant controversy" because they could cut validators' income by up to 95%, potentially endangering small operators. "While these changes may reduce staking rewards, we believe that reducing inflation is a worthy goal that can enhance Solana's long-term sustainability," Sigel said.

Sigel introduced that the first proposal, SIMD 0123, will introduce an in-protocol mechanism to distribute Solana's priority fees to validator stakers. Traders can pay extra fees to speed up transaction processing, and priority fees account for 40% of network revenue, but currently validators do not need to share with stakers. The proposal, which was voted on March 6, aims to increase staking rewards and prevent off-chain transaction agreements and strengthen on-chain execution. Sigel called the second proposal, SIMD 0228, the "most influential" proposal, which would adjust the SOL inflation rate to be inversely proportional to the percentage of staked token supply, potentially reducing dilution and reducing selling pressure on stakers. According to Coin Metrics, as of February, Solana's inflation rate was 4%, lower than the initial 8%, but still well above the terminal target of 1.5%, and is currently declining at a rate of 15% per year.

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