Proponents argued Solana’s old priority fee system was inefficient.<\/p>\n
Solana validators\u00a0are set\u00a0to enjoy a bump in earnings following the passage of a new governance\u00a0proposal.<\/p>\n
On May 27, the Solana community\u00a0approved<\/a>\u00a0proposal SIMD-0096 to allocate 100% of priority fees to network validators and abandon the network’s token burning mechanism. The proposal passed with a\u00a0strong\u00a0majority of 77% votes\u00a0cast\u00a0in favor.<\/p>\n Priority fees on Solana are optional fees that users pay on top of base transaction fees to ensure that their transactions\u00a0are prioritized\u00a0ahead of the standard transaction queue. At present, priority fees are equally divided between rewards for validators and a token-burning mechanism intended to control SOL inflation \u2014 which stands at 1.5% annually.<\/p>\n However, SIMD-0096\u2019s\u00a0implementation\u00a0won\u2019t\u00a0be activated\u00a0for several months.<\/p>\n The proposal to divert all priority fees to validators stemmed from concerns that the previous system may encourage side deals between network users and block producers, undermining network integrity.<\/p>\n \u201cFor example, consider a scenario where a transaction submitter wishes to prioritize their transaction,\u201d\u00a0the proposal said.\u00a0\u201cUnder the existing model, they might opt to directly pay the block producer a 75% priority fee to ensure their transaction is processed promptly, rather than paying a 100% priority fee where the block producer only receives 50%.\u201d<\/p>\n The proposal garnered mixed responses from prominent validators. Everstake, Jito, and Solend believe the proposal better aligns incentives and improves network efficiency, while Step Finance, Triton, and Solana Compass oppose the change.<\/p>\n Hanko Baggins from Bandito Stake warned that eliminating the burn mechanism could lead to excessive SOL inflation.\u00a0\u201cWhile our bags would significantly benefit from the increased fees, I am\u00a0not comfortable with\u00a0removing the burn mechanism,\u201d\u00a0Baggins\u00a0said<\/a>.<\/p>\n \u201cValidators are leaning towards being greedy, which\u00a0isn’t\u00a0great news for retail investors,\u201d\u00a0added<\/a>\u00a0X\u00a0user,\u00a0dmoutouss.<\/p>\n Anatoly Yakovenko, Solana co-founder,\u00a0expressed<\/a>\u00a0support for the proposal, emphasizing the inefficiencies of the current\u00a0system\u2019s\u00a0Jito tips \u2014\u00a0which are\u00a0the share of priority fees paid to validators to prioritize transactions.<\/p>\n Yakovenko said\u00a0that the\u00a0current system requires users to pay double the priority fee when competing to provide Jito tips due to the\u00a0network\u2019s\u00a0burn mechanism.\u00a0He described the priority fee burn as a bug in the system, arguing that it forces users to overpay and benefits validators\u00a0disproportionately.<\/p>\n As such, Yakovenko characterized\u00a0Solana\u2019s\u00a0current Jito tips mechanism as creating inefficiencies for users.<\/p>\n “Users currently have to pay 2x higher priority fees to outbid Jito tips,”\u00a0said Yakovenko.\u00a0\u201cJito tips\u00a0aren\u2019t\u00a0burned\u00a0so\u00a0validators get 100% of the tip. To be included in the block, a user has to pay 2x priority.\u00a0It\u2019s\u00a0just busted.\u201d<\/p>\n Solana’s\u00a0transaction fees\u00a0spiked<\/a>\u00a0to an all-time high of $0.06 on March 18 amid a prolonged period of heavy congestion on the network that\u00a0persists to this day. Although transaction fees have since dropped to\u00a0$0.016<\/a>, costs remain higher than on several leading Ethereum Layer 2s, including Arbitrum, Linea, and Starknet, according to GrowThePie.<\/p>\n According to Dune Analytics, more than\u00a056%<\/a>\u00a0of transactions have failed on Solana throughout May.<\/p>\n Despite\u00a0Solana\u2019s\u00a0meteoric price gains at the tail-end of 2023, the network has persistently struggled with network congestion and outages in recent years.<\/p>\n In September 2021, a\u00a0surge<\/a>\u00a0in bot activity led to a 17-hour network outage. In 2023, another major outage was triggered by heavy network traffic following a software upgrade, requiring that validators manually restart the network. In February, the Solana blockchain network\u00a0suffered<\/a>\u00a0five hours of downtime.<\/p>\n Despite these setbacks, Solana continues to set records for transaction throughput.<\/p>\nEfficiency vs inflation<\/h2>\n
Congestion impacts Solana’s performance<\/h2>\n