SOL Validators Raking in Unbelievable Subsidies from Alameda Research and Solana Foundation

A user on X, arixon.eth, alleges that over 90% of Solana validators are subsidized heavily by the Solana Foundation and Alameda Research, the defunct trading wing associated with the bankrupt cryptocurrency exchange FTX.

In a post on October 4, the analyst said the level of subsidy is “shocking” but will come to “harm SOL prices in the long term. “

Are Solana Validators Heavily Subsidized?

Solana is a high-throughput blockchain that aims to compete with Ethereum. It combines proof-of-stake (PoS) with proof-of-history (PoH) as a consensus method.

Validators play a crucial role in this architecture since they verify the validity of transactions and add them to the blockchain while ensuring the network remains secure and decentralized. A node must stake SOL to become a validator, with the amount of SOL staked determining voting power or “voting keys.” Like miners, validators are rewarded with SOL whenever they validate a block within each epoch.

There are 1,997 Solana validators at press time. However, the analyst notes that out of 1,997 validators, 1,818 received delegations from the Solana Foundation and Alameda Research.

Solana validators have delegated 106 million SOL, of which 73 million are distributed from the Solana Foundation and 33 million from Alameda Research.  

The analyst concludes that if it were not for the “heavy” incentivization, the Solana node count, validators, would be much lower. Arizon.eth adds that Solana has many nodes only because “two centralized entities are giving node operators free money.” 

Because of this arrangement, the analyst continues, the Solana Foundation “can manipulate node operators to do what they want if they don’t want their stake pulled.” Arixon.eth further notes that many node operators have zero delegations from ordinary SOL holders.

Solana Co-Founder Responds, Claims Stake Not Validator Count Is Important

Solana co-founder Anatoly Yakovenko has since responded to these allegations, saying that while roughly 2,000 validators, their nodes, and vote keys secure the network, not their respective stake. 

In this statement, Yokovenko is emphasizing the importance of online votes and the significance of their votes. Since all validators approve valid blocks simultaneously, their votes, not the stake each holds, are important for network security and stability. 

Anytime a node unstakes SOL, claiming staking rewards and possibly rewards from block validation, their voting power reduces. In this way, the network will rely on other validators for decentralization and security, regardless of the stake held by each. A Solana node operator explained that the distribution of online validators will play a critical role whenever this happens.

Feature image from Canva, chart from TradingView