For Solana Users, ‘Priority Fees’ Mean Paying Up to Skip the Line

Doing business on the Solana blockchain is more expensive than ever. For the network and its users, that might be a good thing.

Priority fees, a key feature among major tech upgrades Solana developers pushed last year to fight crippling congestion issues, are going mainstream among the ecosystem’s wallets and trading protocols, with heavyweights including exchange aggregator Jupiter and trading pool operator Orca joining in.

Users can pay the additional fees to validators on the Solana network to have their transactions prioritized – so they go through faster. The extra boost can make all the difference in high-traffic situations, like a fleeting crypto-trading arbitrage opportunity or in the scramble for a hot NFT mint.

In one recent epoch (the blockchain’s time period for validators) nearly three-quarters of all non-vote transactions had priority fees attached, per data from validator statistics service Solana Compass. That rate set a new high water mark for priority fee adoption, which has been growing all year.

The average transaction fee Solana users paid in that epoch (epoch 402) was 0.000014641 SOL, a 67% increase over rates in early July but still only fractions of a penny based on the current market price. That added up to 963 SOL spent on priority fees last epoch, or nearly $24,000 – a rounding error based on the overall value moving across the network.

“Most users can pay 100x current costs and not care since it’s still sub-cent,” the pseudonymous 7Layer, who runs Overclock validator service, said in a Twitter DM.

The priority fees are helping bring order to a network that’s had its share of chaos, most memorably and infamously at the hands of trading bots who in 2021 spammed the network into oblivion. Developers say such things shouldn’t happen under the new tech regime.

Trade-Offs

Solana’s trade-off between price and speed isn’t nearly as poignant as on Ethereum, where congestion in one corner of the network makes doing business expensive for everyone. That’s because Solana’s architecture is built to handle many transactions at once, said Austin Federa, head of strategy for the Solana Foundation.

For example: If lots of traders are trying to swap BONK tokens for the stablecoin USDC on the same exchange at once, they might start paying priority fees to ensure their trades go through at the prices they want. But even during that high traffic time, the local fee market for minting an NFT elsewhere on Solana won’t get more expensive. On Ethereum it would.

Jonny Platt, CEO of Solana Compass, told CoinDesk priority fees are changing the economics of running his validators on Solana. He said average block rewards are 20% higher year-over-year.

Half of the value of priority fees go to validators such as Platt as reward for lending their compute power to the network; the other half of the priority fee gets burned. Platt said this burn mechanism should drive more value into SOL tokens over time by making the tokens more scarce.

“So many normal everyday users of Solana are excited to see this because there’s recognition that we’ve improved over last year,” Platt said of priority fees.

Outrageous outages

Solana suffered multiple well-documented (and excoriated) network outages in 2022 and 2021, some of which were driven by bots pummeling one corner of the blockchain simultaneously. In one such outage, in September 2021, bots crowded a token sale on exchange Raydium with more transactions than Solana could handle. Solana basically broke, going offline for 17 hours – an eon in 24/7 cryptocurrency markets.

To address the spam issue, core developers began a year-long effort to change how Solana handles transactions. It would ditch the “first-come-first-served” transaction execution model for “fee markets” that gave favor to those who paid for priority.

Solana transaction fees are the sum of a static base fee plus a dynamic computational fee. With priority fees, users who want faster execution can opt to pay some extra SOL. Bots who previously spammed the network for dominance won’t win on transaction volume alone, validators said.

“It reduces the incentive because priority based on fee matters more instead of just spamming hard to get in front of the queue,” 7Layer said. “There haven’t been any spam issues close to what they used to be.”

Priority fees haven’t completely solved Solana’s spam issue, said St. Gnu, another pseudonymous validator. The network is extremely cheap to do business on, extra fees or not. He said Solana’s core developers will need to build out more fee features that make spamming less economical.

“The issue is that if you want to just ‘spray and pray’ a bunch of transactions there’s not really a big cost to do that,” he said in a Telegram message.

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