VanEck's Solana Report! What's the Danger Awaiting SOL?

One of the altcoins that suffered the most from the declines caused by the customs duties imposed by President Donald Trump on Canada and Mexico was Solana (SOL).

As the Solana price fell to the $120 levels, Asset manager VanEck warned investors that Solana upgrades could reduce validator rewards.

VanEck Solana Improvement Proposals, designed to reward stakeholders in March and adjust the inflation rate for the network's native token SOL, stated that there will be a vote on two proposed upgrades known as Solana Improvement Proposals.

VanEck's digital asset research head Matthew Sigel said that the planned changes in Solana could reduce validator revenues by up to 95% and affect smaller operators.

There are several upcoming protocol upgrades known as SIMD aimed at improving Solana's technical capabilities and economic framework. These changes may help Solana gain stability and strengthen its position in the cryptocurrency ecosystem in the future.

While these changes may reduce SOL staking rewards, we believe that reducing inflation is a valuable goal that strengthens Solana's long-term sustainability.

According to Sigel, these recommendations are creating a significant debate due to the expected impacts on validator revenues. Some estimates suggest that validator earnings could decrease by up to 95%, making operations unsustainable for smaller validators. Running a Solana validator requires covering fixed costs, including approximately 1.1 SOL per day, $58,000 in voting fees per year, and around $6,000 in hardware expenses per year. Currently, Solana has 1,323 validators, but only 458 have more than 100,000 SOL to exceed the basic profitability threshold. At this point, Sigel warned that if smaller validators shut down, the Solana network could become more centralized.

VanEck, stating that the recommendations came after asset managers' spot Solana ETF applications, also added that the probability of SOL ETFs being approved in 2025 is approximately 70%, according to Bloomberg.