Solana Passes Controversial Proposal to Allocate 100% of Priority Fees to Validators

The proposal, SIMD-0096, is set to radically alter Solana's current tokenomics, with the community tentatively prepared to embrace the changes.

Solana has passed one of the most controversial bills in the DeFi blockchain’s history. The proposal, SIMD-0096, is set to radically alter Solana’s current tokenomics, with the community tentatively prepared to embrace the changes.

In the past, such polarising developments to key networks have resulted in community splitting (in what’s known as a fork). Solana is likely to avoid such a drastic reaction, however, the impact of the “upgrades” will have a lasting effect on both the blockchain and its community.

Related: Standard Chartered Says Solana, XRP Could See ETF Launch by 2025

77% of Validators Voted In Favour of New Proposal

So, what’s the deal with SIMD-0099? Why has it split pundits down the middle?

Essentially, the proposal will fundamentally change Solana’s token distribution. Traditionally, transaction fees on the blockchain were handled on a 50-50 basis – network validators received half, while the other half was burned. The result of this was a largely deflationary currency.

The new changes, passed with a vote of 77%, are set to ensure that network validators receive 100% of priority transaction fees, removing the burning mechanism almost entirely. Priority fees are incurred when blockchain users want to speed up the settlement of their transactions (important when milliseconds can impact DeFi earning strategies).

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

The vote receiving over ¾ support suggests that the community should be (mostly) happy about the changes – however, remember, validators control the Solana vote. So in essence, validators voted in favour of giving themselves more money, which is hardly a shock.

The negatives of the new proposal are fairly obvious. Solana will become steadily more inflationary with more tokens in circulation – although some believe it would only increase inflation by an insignificant amount.

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…

On the flipside, there are plenty of positives to mull over too. Incentivising more validators to contribute to the network will provide a greater level of security and decentralisation to Solana, something it has come under fire for. It may also add a level of stability during periods of congestion, which has seen several network dropouts in the past.

The implementation of the new token distribution is still a few months away, but the market has reacted strongly, with SOL trading nearly 10% lower on the week.

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