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COINTURK NEWS > Solana (SOL) > Solana Prepares for Major Updates that Could Impact Token Rewards
Solana (SOL)

Solana Prepares for Major Updates that Could Impact Token Rewards

In Brief

  • Solana plans updates to reward distribution and inflation management.

  • New mechanisms aim to attract investors while impacting small validators.

  • The network will undergo a voting process for implementing these changes.

Fatih Uçar
Fatih Uçar 2 months ago
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Solana $176 is gearing up for two significant updates aimed at enhancing the long-term sustainability of its network. Known as SIMDs 0123 and SIMDs 0228, these proposals focus on regulating reward distribution and managing inflation. The anticipated changes are expected to have a considerable impact on validators and stakeholders within the ecosystem.

Contents
New Mechanism for Reward DistributionLinking Inflation Rate to Staking Ratio

New Mechanism for Reward Distribution

The Solana team plans to distribute priority fees received by validators among stakers. In the current system, validators receive additional payment for transaction priority. The new model will directly transfer these fees to those who stake their tokens.

This change aims to attract more investors to the ecosystem by increasing staking rewards. Moreover, it will prevent validators from making more profits through transaction agreements. However, some experts warn that small validators may face significant declines in their revenues.

According to Matthew Sigel, Head of Digital Asset Research at VanEck, validators could see their earnings decrease by as much as 95%. He notes that small-scale validators may struggle with financial sustainability.

Linking Inflation Rate to Staking Ratio

Solana’s second update proposes aligning the inflation rate of the SOL token with the ratio of staked supply. This adjustment aims to reduce token dilution and decrease the tendency for users to sell rewards immediately.

Currently, Solana’s inflation rate has decreased from an initial 8% to about 4%. The long-term target has been set at 1.5%. The planned mechanism seeks to maintain market balance by inversely correlating the inflation rate with the proportion of staked supply.

These changes could negatively impact validators’ earnings. The redirection of rewards to stakers may make it challenging for smaller validators to compete in the network. Consequently, the update has sparked varied opinions within the community.

The Solana network will enter a voting process to implement these regulations. The decision will be shaped according to stakeholders’ views while preserving the network’s decentralized structure. Ultimately, these developments could redefine the economic framework of the Solana ecosystem.

You can follow our news on Telegram, Facebook, Twitter & Coinmarketcap
Disclaimer: The information contained in this article does not constitute investment advice. Investors should be aware that cryptocurrencies carry high volatility and therefore risk, and should conduct their own research.

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Fatih Uçar 5 March, 2025 - 10:35 am 5 March, 2025 - 10:35 am
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