Solana startups spin up validators for revenue and ‘soft power’

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Two weeks ago, Solana validators voted down SIMD-0228, a proposal that would have significantly cut network inflation. Still, core Solana stakeholders seem interested in cutting inflation at some point, a prospect that would hurt the bottom line for validators.

Validators run Solana’s software to help add blocks to the blockchain, and they’re paid for the labor partly via inflation. Validators can be pretty much anyone with some pricey hardware and internet access, but in a world of lower SOL inflation, it may become less worthwhile to run a Solana validator for financial reasons. Instead, startups building businesses on Solana can reap unique benefits from running a validator, and some have already taken the leap.

“[We] have seen a big push over the past six months,” InfStones head of global sales Parker Poor said when I asked about Solana-native teams wanting to spin up validators.

The Solana payments business Sphere is one such example, although it runs its validator nodes itself rather than through a staking provider.

“[SOL] issuance getting cut is probably inevitable,” Sphere CEO Arnold Lee said, but he added that running a validator “would probably still be worth it for distribution and alignment,” even if it failed to turn a profit.

Solana’s process for protocol governance involves validators voting on proposals based on their share of delegated staked SOL. Solana startups need to run validators if they want a direct say in the future direction of the network.

“[C]ontested votes like [SIMD-228] underscore the strategic importance of having a seat at the table to make these decisions,” Bernat Fages, co-founder of the node operator firm Firstset, said in a text.

Beyond the rare contested vote, running a validator can confer “soft power” on startup teams as well, Lee said. Users who like the startup’s product might delegate some stake, Lee added. Or it could be even simpler than that: “Toly [Solana’s co-founder] will probably want to retweet you if you’re really active in governance.”