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Solana upgrades may impact validators as votes approach

Solana upgrades may impact validators as votes approach

GrafaGrafa2025/03/05 09:40
By:Isaac Francis

Solana (CRYPTO:SOL) validators are set to vote on two protocol upgrades that could improve the network’s sustainability but significantly reduce validator revenues, according to asset manager VanEck.

The proposals, known as Solana Improvement Documents (SIMDs), focus on staking rewards and inflation adjustments for the network’s native SOL token.

VanEck’s head of digital asset research, Matthew Sigel, highlighted in a March 4 post that the changes could cut validator revenues by up to 95%, raising concerns for smaller operators.

“While these changes may reduce staking rewards, we believe lowering inflation is a worthy goal that strengthens Solana’s long-term sustainability,” Sigel said.

The first proposal, SIMD 0123, aims to distribute priority transaction fees to validator stakers.

Currently, traders can pay extra to validators to prioritise transactions, but validators are not required to share these fees with stakers.

If passed, the March 6 vote would increase staking rewards while discouraging off-chain agreements between traders and validators.

The second proposal, SIMD 0228, seeks to adjust Solana’s inflation rate based on the percentage of SOL staked.

The goal is to reduce dilution and selling pressure by lowering rewards for stakers who treat them as income.

As of February, Solana’s inflation rate stands at 4%, down from an initial 8% but still above the long-term target of 1.5%, according to a Coin Metrics report.

Inflation currently declines at a fixed rate of 15% per year, but the proposal would make adjustments based on staking activity.

The second proposal was primarily drafted by Vishal Kankani of Multicoin Capital, which holds a major stake in Jito (CRYPTO:JTO), Solana’s largest staking pool.

Developer Jito Labs reports that 93% of Solana validators use Jito’s software for block-building.

These changes come as asset managers push for US regulators to approve Solana-based exchange-traded funds (ETFs).

Bloomberg Intelligence estimates a 70% chance of SOL ETFs being approved in 2025, with issuers also seeking permission for cryptocurrency staking within ETFs to enhance returns.

At the time of reporting, the Solana (SOL) price was $141.89.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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