The Solana blockchain is one of the layer 1 cryptocurrency ecosystems that is setting the industry standard for scalability and low latency. With its newfound ability to handle heavy transactional load during peak times, Solana could be opening up opportunities for savvy users to exploit fleeting arbitrage opportunities, or purchase desirable NFT’s before they’re gone.
Enter ‘Priority Fees’, a technology aimed at stabilizing the network against crippling congestion and data overload, particularly during peak usage times like the 2021 blockchain overload from trading bots. By offering Priority Fees, users can pay an additional fee to boost the speed of their transactions, effectively easing the transactional pressure at any given time.
Over the past few months, leading wallets, exchanges, and trading pools have adopted the feature, and various projects, developers and institutions have diligently monitored the average fee rate users are paying in to the network. The average transaction fee Solana users paid in a recent epoch was 0.000014641 SOL, though the maximum cost for priority fees was around $24,000.
A key advantage of the Fee Market system implemented by Solana developers is that it eliminates the need for one-size-fits-all spikes in fees, as is the case on Ethereum, where congestion in one part of the network has an adverse effect on the entire ecosystem. Having distinct fees for distinct transactions helps keep the trading fees affordable for users who are trading non-fungible tokens or participating in an arbitrage opportunity.
Projects such as the ‘Solana Compass’ offer an opportunity to gain insight into the current metrics of the Solana network and the incentives it offers to users, allowing them to make more informed investment decisions. Jonny Platt, CEO of Solana Compass notes that priority fees are driving more value into Solana tokens as they become increasingly scarce, and users of the blockchain are excited to see the results of the improvements made.
Priority Fees aren’t the only means of tackling network congestion. Core developers are still attempting to address the ‘spam’ issue with capable anti-spam plumbing, however they warn that until more features that make spamming uneconomical have been built, Solana’s transaction fees won’t be enough to curb the issue.
Despite its historical ties with the now-defunct FTX exchange, Solana has appeared to successfully bounce back from this minor setback. When compared to activity on the Ethereum network, Coinbase suggests that the SOL token is undervalued and should command a much higher market capitalization given that it is processing nearly 17 times the amount of daily transactions than Ethereum.
Navigating Solana’s massively busy network can be daunting, but with the implementation of Priority Fees, users no longer have to worry about time-sensitive transactions being delayed or stuck in queues. The upside to this potentially expensive fee system is that it offers users a significant degree of control during high-demand times, allowing them to quickly and conveniently jump to the front of the transactional queue, allowing them to exploit the arbitrage opportunities presented by the blockchain.
