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Solana price prediction as new update changes network fees dynamics

Solana price prediction as new update changes network fees dynamics

Solana (SOL) validators voted in favor of Solana Improvement Document (SIMD)-0096, a proposal to allocate all transaction priority fees to validators for the blocks they produce instead of the previous 50/50 split between burning fees and rewarding validators.

This proposal aims to improve incentives around how validators receive priority fees, enhancing network security and efficiency. 

Priority fees are a way to ensure a user’s transaction is placed at the front of the execution ordering queue. Essentially, these are optional fees that a user can add to their transaction to increase inclusion guarantee.

The approval of SIMD-0096, which received 77% approval from major validators such as Everstake, Jito, Helius, and Stakehaus, aims to optimize incentives within the validator system and eliminate potential side deals between block producers and transaction submitters.

However, it faced opposition from others, including Step Finance, Triton, and Solana Compass. Proponents argue that the change will reduce the potential for detrimental side deals and better align incentives for validators. 

Critics, such as Hanko Baggins from Bandito Stake, raised concerns about removing the burn mechanism, which helps manage Solana’s annual inflation rate.

Market reaction and price prediction

Although the activation of SIMD-0096 may take several months due to the current Solana Mainnet or upcoming upgrade not supporting it yet, the decision has already sparked interest in Solana.

At press time, Solana is trading at $171.52. Following the proposal’s approval, Solana’s price saw a modest increase, with a 3% gain in 24 hours. According to DeFi Llama, users spent $1.87 million on Solana fees in the past 24 hours.

SOL 6-months price prediction. Source: CoinCodex

According to Coincodex, Solana’s price is predicted to rise by 42.34% to reach $237.43 by November 24, 2024. As per the technical indicators, the current sentiment is bullish, while the Fear & Greed Index is showing greed. Solana recorded a 9.81% price volatility over the last 30 days.

Prominent analysts are also optimistic about Solana’s future. Trader Tardigrade identified bullish trends in Solana’s technical patterns, suggesting the price could soar to $1,000, fueled by the growth of SocialFi applications like SolChat. 

Daniel Yan from Matrixport draws parallels between Solana and Ethereum (ETH), suggesting that Solana could experience gains similar to Ethereum’s following the approval of Bitcoin ETFs.

Yan emphasizes Solana’s unique market position, higher profit potential, and the anticipated introduction of Solana and XRP ETFs by 2025, which could further drive institutional interest and adoption.

The approval of SIMD-0096 marks a pivotal moment for Solana, aiming to enhance network efficiency and security.

While concerns about the removal of the burn mechanism persist, the overall sentiment remains bullish, with analysts predicting significant price appreciation.

As Solana continues to evolve, its innovative approach and strategic maneuvers position it for substantial growth in the cryptocurrency market.

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.

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