Solana validators approve 100% allocation of priority fees, ending 50/50 burn split

Solana validators voted to allocate 100% of priority fees to themselves on May 27, ending the previous 50/50 split between burning fees and rewarding validators.

The proposal, known as SIMD-0096, passed with 77% approval. It aims to address perceived flaws in the current system and align incentives for network security and efficiency.

The change in priority fee allocation seeks to reduce the potential for side deals between transaction submitters and block producers, which proponents argue could undermine network security.

Validators such as Everstake, Jito, Helius, Stakehaus, Leapfrog, Bonk, Solend, and Pico.sol supported the change.

Meanwhile, validators, including Step Finance, Triton, GREED, Solana Compass, Shinobu, Orangefin, AG, Pumpkin Pull, and Edgevana, opposed the proposal.

Bug in the system

Critics, like Hanko Baggins from Bandito Stake, raised concerns about removing the burn mechanism, which helps manage Solana’s annual inflation rate.

Baggins suggested that while increased fees might benefit validators in the short term, the removal of the burn could impact the network’s long-term health and suppress SOL’s price.

Solana co-founder Anatoly Yakovenko addressed these concerns, stating that the current system requires users to pay double the priority fee to outbid tips, which go entirely to validators and are not burned. He described the priority fee burn as a bug in the system.

Laine from Stakewiz estimated that the change could lead to a 4.6% increase in Solana’s issuance, aligning it with levels from a year ago. He emphasized that SIMD-0096 is part of a broader plan to improve block reward distribution, with other proposals like SIMD-0123 also in development.

Delayed implementation

Although the vote has concluded, the activation of SIMD-0096 may take several months, as the current Solana Mainnet or upcoming upgrade does not support it.

The delay allows for further discussion and development of additional proposals, such as SIMD-0123, which aims to streamline block reward distribution, and SIMD-0109, which proposes a native tipping mechanism.

The decision to allocate 100% of the priority fees to validators highlights the varied perspectives within the Solana ecosystem and sets the stage for ongoing discussions about the network’s future.

The move comes amid growing interest in Solana, following its meteoric climb to a local high of $210 earlier in March. The network has also recorded the highest trading volume in recent weeks.