VanEck Warns of Solana Upgrade Impact, Validator Revenues Could Plummet?

Updated

March 6, 2025

Gambar VanEck Warns of Solana Upgrade Impact, Validator Revenues Could Plummet?

Jakarta, Pintu News—VanEck research leader Matthew Sigel recently warned that a series of upcoming Solana network updates could significantly impact validators’ revenues while increasing the risk of centralization.

This update involves three main proposals to improve Solana’s economic framework. However, these proposals could potentially reduce validators’ income by up to 95%.

Check out the full news below!

Controversial Proposal

According to Crypto.news, the SIMD 096 proposal, implemented on February 12, shifts 100% of the priority fee to the validator, removing the previous system, which burned half of the fee.

This increases staking payments but hinders off-network trade agreements between validators and merchants. Some consider this proposal a positive step, increasing the incentive to run nodes.

SIMD proposal 0123, currently on the ballot, would further divert revenue from node operators by requiring validators to pay priority fees to stakers.

This is part of an effort to further democratize revenue in the network, but many validators are concerned that this will reduce their ability to financially sustain node operations.

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Impact on Small Validators

vaneck staking solana — Source: Community BitCompare

With high operational costs, including mandatory voting fees of 1.1 SOL daily (approximately $58,000 per year) and hardware expenses of approximately $6,000 yearly, only 458 of Solana’s 1,323 validators have enough stakes to be profitable.

SIMD proposal 0228, which will be voted on March 6, would change Solana’s inflation rate based on staking participation, which could reduce staking revenue and put smaller validators at greater risk.

If the staking participation rate remains at 63%, the network’s annual inflation rate will drop from 4.7% to 0.93%. This will reduce token dilution and staking rewards, which are particularly detrimental to validators. Some community members have proposed lowering the voting fees to alleviate the financial pressure.

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Long-term Outlook and Centralization

Despite the controversy, Sigel argues that reducing inflation will benefit Solana (SOL) in the long run by reducing selling pressure and supporting the token’s value.

Solana’s network activity remains strong, with $109 billion in February, the blockchain has surpassed Ethereum for the fifth consecutive month in terms of decentralized exchange volume, according to data from DeFiLlama.

However, the current plan might make running nodes unfeasible for small validators, which could result in more centralization. This is a serious concern in a community that values decentralization as one of the key principles of blockchain.

Conclusion

With the proposed changes, the future of Solana (SOL) seems to be undergoing many dynamics that could affect both validators and the entire ecosystem. The decisions made now will determine the direction of the network in the face of competition in the ever-evolving blockchain industry.

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