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- Solana’s SIMD upgrades aim to improve validator rewards, staking, and fee distribution but have sparked controversy.
- SIMD 096 directs 100% of priority fees to validators, boosting staking rewards while discouraging off-chain trading deals.
- The March 6 vote on SIMD 0228 will shape Solana’s economy by adjusting inflation based on staking participation.
Solana is set to release the first of several updates that seek to optimize the existing layer one protocol and its economy. These are called SIMD proposals meaning Singularly Incentivized Ministries Development. This aimed to improve the validators rewards system, improve staking options, and create a fair distribution of the rewards. These changes assure long term gain; however, these have stirred controversy amongst the validators.
In a recent X post, VanEck research head Matthew Sigel highlighted that the first upgrade, SIMD 096, occurred on the 12th of February with changes to the fee burn policy of the network.Before this update, Solana burned 50% of priority fees and allocated the rest to validators, but now it directs 100% to validators. This change increases staking rewards thus eliminating opportunities for off-chain trade between traders and validators to occur.
Solana Validator-Staker Shift
Another proposal, SIMD 0123 is still active and is present to the voting process which may deepen the changes in the validator-staker relationship. In this proposal, validators are require to share the fees pro-rata more fairly for those stakers who pay 40% of total fees for Solana. Despite the possibility of sharing these fees with validator, many have retained the large part. If the proposal is applys then it will in a way equally distribute, or rather increase staker’s gains and decrease the validator’s rewards.
Source: Multicoin Capital
The most contentious upgrade under consideration is SIMD 0228 here, which brought an inflation adjustment factor linked to staking. Currently, Solana has an inflation rate of 4.7% with 63% of SOL which is staked. The planned system of rewards within staking participation will decrease inflation as it would make token scarcity enhance the SOL token. But if staking rates drop then inflation would increase in order to make up for it in an equilibrium sort of way.
Though it is trying to make a good combination of the token creation process and network security, many validators have concerns. Some estimate that their earnings could decrease by up to 95% which means that small validators cannot make it in the market.
Nonetheless, Solana’s development team regards all these changes as inevitable measures on the way to long-term solvency. Lower inflation might reduce the selling pressure and excessive supply, and contribute to stabilizing SOL’s price. Solana recorded $103.35 billion in volume for the fifth months in a row while surpassing Ethereum by 24%.
Key Levels to Wacth
Despite that, the price of Solana still fluctuates, being $143 dollars at the moment after a 28% retracement. A major support level is located at $136, while the resistance level at $150 can either lead to a rebound to the $166 dollars level. The market is still bearish due to the SOL deposits from FTX to Binance.
Source: TradingView
The decision to vote for or against SIMD 0228 will occur on the March 6, 2025, and it will be a pivot point for Solana’s economy. Investors, validators, and stakers look closely at the further development of the network and versatile and more efficient staking and reward procedure. It could potentially define how powerful solana is within the new innovative blockchain industry.
