As a seasoned crypto investor with a knack for spotting trends and opportunities, 2024 has undeniably been Solana’s year. The network’s meteoric rise has left even Ethereum, the long-standing heavyweight, trailing in its wake.
2024 marks a standout year for Solana, outshining other blockchain networks across significant indicators. Even its transaction fees, lower per unit compared to Ethereum, have recently eclipsed Ethereum during busy periods. Notably, there are no slow days on Solana – demand is high and users are willing to pay premiums to ensure their transactions are processed promptly.
For Solana validators, the year has seen ups and downs (March was profitable but rewards declined significantly during the summer), yet Q4 is turning out to be exceptionally rewarding. Although a few chains like TRON and BNB Chain have enjoyed brief periods of popularity, Solana continues to be the preferred network for retail users.
It’s undeniable, the proof is evident – not just in the daily launches of tokens on Pump.fun, but in the fees collected by Solana validators. Considering the hardships smaller validators faced merely a few months back, they deserve this pay increase. However, with over 1,500 active validators amassing millions of dollars every day, questions have arisen about the part played by Solana users who delegate their stake and whether they should share in the regular profits now being generated.
Solana Makes Millions for Validators – But How Much Goes to Stakers?
On the Solana network, stakers and validators form a mutually beneficial partnership. Validators require support from stakers because a larger total value of staked assets increases their likelihood of being chosen to validate the next block. This setup encourages honest conduct and aligns interests between both parties. However, this system has also been a factor in the difficulties faced by smaller validators earlier this year.
Operating as a validator involves expenses, so the compensation received for performing this task should be enough to cover these costs. This principle is similar to mining Bitcoin: if production costs rise or rewards decrease, miners will stop operating their machinery. However, Solana is currently experiencing significant growth and everyone involved – large validators, small ones, and stakers alike – are profiting. Yet, the debate arises on how this revenue should be allocated, with a focus on whether stakers deserve a larger share during periods of abundance.
By standard, stakeholders of SOL do not automatically receive the extra incentives that validators get in the form of priority fees. Validators are under no compulsion to distribute these fees, hence they don’t. The unique exception is Xandeum, whose multi-validator pool is the first to systematically share block rewards programmatically. As of November 4, its TVL (Total Value Locked), which amounts to almost $5M or 29.8K SOL, is expanding consistently, yet it represents only a small fraction of Solana’s $6B staking ecosystem. The question remains whether other stake pools will imitate Xandeum and allocate more block rewards to SOL stakers – and if they have any duty to do so.
Breaking Down Solana Staking
By taking a look at Solana’s performance indicators, it’s clear that validators are currently earning a substantial amount from transaction fees. Here’s how it works: For every transaction, 50% goes towards rewarding the validator who processes it, while the other 50% is destroyed or “burned.” In early March, the daily transaction fees were typically around $500,000, but they skyrocketed at the end of the month due to the initial memecoin craze, leading to a 10-fold increase in total transaction fees.
Despite a decrease in activity levels during the summer, averaging approximately $1.5 million per day, Solana network activity has significantly surged since October, with daily fees reaching as high as $5 million and currently averaging around $3 million. This surge has led to substantial rewards for validators. In fact, validator revenue has increased more than 12 times over the past six months, yet staking Annual Percentage Rates (APRs) have remained relatively stable during this period.
It seems that the general opinion is leaning towards increasing rewards for those who stake Solana (SOL). This is because their stake has played a crucial role in enabling validators to consistently earn substantial returns. Now, it falls on staking platforms, including liquid staking solutions, to establish a fair compensation system for SOL stakers. The staking market is quite competitive, with users not hesitating to move their stake to places offering better economic prospects if necessary.
As a researcher, I firmly believe that it’s strategically advantageous, beyond any ethical considerations, to offer a slight bonus to Solana (SOL) stakers. By doing so, we can attract and maintain a substantial number of validators, maximizing their SOL stake. This increased stake strengthens our validators’ position, enabling them to consistently secure those lucrative block rewards that are integral to our platform’s success.
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2024-11-04 19:45