Solana's New Proposal Could Slash Validator Revenues by 95%!

On March 6, 2025, Solana validators will vote on two major proposals aimed at modifying the network’s economy and the reward system for stakers. These proposals, known as Solana Improvement Documents (SIMDs), have sparked intense debate within the crypto community, particularly due to their impact on validator revenues, which are set to decrease drastically.

Solana: Major Economic Changes

In May 2024, Solana had already implemented SIMD 096, modifying the burning policy of priority fees. From now on, 100% of these fees go to validators, whereas previously half was burned. This decision increases staking rewards and limits off-chain agreements between crypto traders and validators.

Two other major proposals are under review. SIMD 0123 aims to automatically redistribute priority fees to stakers, based on a commission rate that can be verified on the blockchain. Currently, validators can choose to share these fees, but many retain a large portion. This modification could significantly reduce their direct revenues.

The SIMD 0228 proposal, for its part, provides for an adjustment of SOL inflation based on the percentage of staked tokens. Currently, Solana applies an inflation rate of 4.7%, decreasing annually to a threshold of 1.5%. With SIMD 0228, inflation would decrease if staking increases and would rise in case of reduced participation, ensuring a balance between economic incentive and crypto network security.

Increased Risk for Crypto Validators

These updates could reduce validator revenues by nearly 95%, endangering small crypto operators. A Solana validator must bear high fixed costs: about 1.1 SOL per day for voting fees (approximately $58,000 per year) and $6,000 per year for hardware. Currently, only 458 out of 1,323 validators hold more than 100,000 SOL in stake, the minimum threshold for profitability.

If these changes lead to the closure of many small validators, the crypto network could become centralized around major players like Coinbase and Binance. A proposed solution would be to lower the voting cost to alleviate financial pressure.

Despite these challenges, these adjustments could strengthen the economic stability of Solana by reducing inflation and selling pressure on SOL, thus supporting the cryptocurrency’s value in the long term.