Solana validator revenue is about to jump, but stakers might miss out

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Solana’s validators are about to see a major income bump, but the protocol lacks a way for them to share the wealth with their stakers. 

In May, Solana validators passed a proposal to send 100% of priority fees — which are extra funds users can pay for a better chance of landing their transactions — to validators. The proposal’s implementation now seems imminent, but some are calling for Solana to pump the brakes until validators are able to share the extra fees with stakers. 

Validators, who run Solana’s software and create blocks in the Solana blockchain, currently receive half of SOL-denominated priority fees, and the other half is burned, or effectively removed from circulation. This leads some validators to strike side deals with users, since a user paying 75% of the priority fee directly to the validator outside of the Solana protocol would benefit both parties, for instance.

Named SIMD-0096, the May proposal aims to end these side deals. But Solana lacks an in-protocol way for validators to share priority fees with stakers — who delegate their SOL to validators for a share of the validator rewards — so the increased SOL inflation would essentially benefit validators at the expense of everyone else. 

Some Solana developers have argued that SIMD-0096 could incentivize priority fee spoofing, or validators artificially raising priority fees to take home more rewards. Still, the change is being implemented.

Solana priority fees totaled some $240 million in January, according to Blockworks Research. Implementing SIMD-0096 would have increased Solana’s real economic value, a Blockworks Research metric for blockchain value accrual, by roughly 22% last month.

A newer proposal, SIMD-0123, would give validators the ability to directly share priority fees with stakers. As things stand, this proposal has little chance of being implemented by the time SIMD-0096 goes into effect, Solana Foundation validator relations lead Tim Garcia said on X. 

Some are calling for the network to only approve both proposals together so that stakers can share in the windfall. If these calls aren’t heeded, then stakers will have to rely on the goodwill of validators passing along extra rewards until SIMD-0123 is enabled.

“[V]alidators are only overcompensated if they do not share back the rewards ([H]elius will share back for example),” Mert Mumtaz, CEO of the largest Solana validator in Helius, said in a text.

Solana infrastructure shop Jito also offers a way to distribute priority fees via TipRouter, a piece of software built for Jito’s restaking protocol that distributes validator rewards.

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