Solana's native token, SOL, increased 5% on May 27, trading from $161 on May 26 to $171. This growth has boosted investors' hopes for continued upside, especially since SOL had reached $189 on May 21, just days before. A key factor in SOL's price increase is a proposal to increase yields for validators instead of burning tokens, although network activity remains unchanged.

SOL/USDT 1-day price chart | Source: TradingView

Solana will no longer burn 50% of priority transaction fees

On May 27, Solana validators approved proposal SIMD-0096, removing the 50% burn rate on priority transactions and setting it at 0%. Therefore, from epoch 621 onwards, all transaction fees will be allocated to block producers. This change is intended to ensure validators are incentivized to prioritize network security and efficiency rather than engaging in arbitrage strategies that involve arranging or discarding transactions.

Maximum Extractable Value (MEV) refers to the profit that block producers earn by determining the order in which transactions are processed on the blockchain. With each block containing a limited number of transactions, validators can select pending transactions for inclusion, often to the detriment of regular users who may experience poorer execution prices in other blocks. decentralized finance (DeFi) application.

However, the SIMD-0096 proposal could negatively impact the Solana network by making the SOL more inflationary, noted Laine, a Solana staking validator. Despite a 4.6% annual increase in issuance, Laine pointed out that priority fees were absent in May 2023, suggesting the effective inflation rate will return to around 9.9% annualized.

Some analysts believe that SOL's recent price correction is a reaction due to the approval of a spot Ether ETF in the United States. SEC approval on May 23 pushed ETH to $3,975 on May 27, just 20% off its 2021 ATH peak of $4,878.

Analyst and investor 'gumshoe' claims that traders have become pessimistic about SOL following the approval of the Eher spot ETF, which was described as a "once-in-a-lifetime bull market catalyst." He argued that the market has been overly focused on the Ether ETF's decision, even though SOL's year-to-date return of 69% is almost identical to Ether's 72% over the same time period.

Solana's network activity stagnated over the past week

Despite differing interpretations of the impact of removing the burn mechanism, growth in Solana network usage remains sluggish, especially when compared to Ethereum and its layer-2 solutions. It.

Recent data from DappRadar indicates that Solana's decentralized application (DApps) volume grew just 5% over the past week, markedly lower than Ethereum's 52% increase. BNB has increased by 22% in the same time period, highlighting Solana's relative underperformance.

Top blockchains ranked by 7-day DApps volume, USD | Source: DappRadar

In terms of active users, Solana saw a 6% drop in unique active addresses weekly, almost identical to Ethereum's 4% drop. However, competitors such as BNB Chain and Polygon have increased the number of active users by more than 25%. Solana's second-largest decentralized exchange, Raydium, lost 16% in users this week, while its NFT marketplace Magic Eden fell 22%.

It remains unclear how much of SOL's recent decline to $161 is due to speculation surrounding Ether ETF approval, nor is it clear how soon the instruments will begin trading in the United States.

With stagnant on-chain activity and significant criticism of the inflationary changes resulting from the removal of the burn mechanism, it seems unlikely that SOL will revisit its previous high of $190 anytime soon.

Source: https://tapchibitcoin.io/gia-solana-sol-gap-khang-cu-gan-muc-190-day-la-ly-do-tai-sao.html