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NODO Weekly: Solana’s Governance, Trading Dominance & Sandwiching
Solana’s latest governance battles, crypto’s trillion-dollar trading economy, and the rise of sandwich attacks
Nodo TEAM
March 24, 2025
This week, we break down Solana’s latest governance battles, examine how trading has emerged as crypto’s primary revenue engine, and explore the state of sandwich attacks on Solana.
1. Solana SIMDs
Nearly a month ago, SIMD-0096 was implemented, redirecting 100% of priority fees to validators instead of burning 50% as before. This change increased Solana’s annualized inflation rate from 3.6% to 4.7%, sparking discussions on how to balance incentives for validators while maintaining a sustainable economic model.
The SIMD-0228 proposal aimed to introduce a market-based emission mechanism by dynamically adjusting Solana’s inflation rate based on staking participation:
If staking falls below 50%, issuance would increase to encourage security.
If staking exceeds 50%, issuance would decrease, potentially dropping as low as 0% to control inflation.
Despite its intended benefits, SIMD-0228 failed to pass, meaning Solana’s current fixed inflation model remains in place. The rejection raises key questions about the network’s long-term tokenomics and whether alternative proposals will emerge to address the growing concerns over inflation and validator incentives.
The SIMD-0228 proposal fell short of approval, with 44% voting YES, 27% voting NO, 4% abstaining, and 25% not voting. While 61.4% of total votes were in favor, it failed to meet the required 66% threshold for passage.
This was one of the largest governance votes in crypto history, with 74% of staked SOL participating across 910 validators—a higher turnout than the recent U.S. election (64%).
Voting patterns revealed a clear divide: smaller validators overwhelmingly voted NO, while larger validators were largely in favor. This outcome was expected, as SIMD-0228 would have directly impacted the profitability of smaller validators, making the debate over Solana’s inflation and validator incentives far from over.
Solana’s inflation remains unchanged at 4.6% annually, with a 15% yearly reduction until it stabilizes at 1.5%. The current staking rate stands at 65%.
While SIMD-0228 failed—the proposal aimed at reducing SOL’s issuance through market-based adjustments—SIMD-0123 successfully passed, changing how priority fees are distributed on Solana. Previously, validators kept 100% of these fees, but SIMD-0123 now allows them to be shared with stakers via smart contracts.
This change follows SIMD-0096, which stopped burning 50% of priority fees and redirected the entire amount to validators. As a result, SOL’s inflation jumped from 3.6% to 4.7%. While SIMD-0228 sought to curb inflation, SIMD-0123 ensures that the increased rewards are distributed more fairly, benefiting both validators and stakers through higher staking yields.
SIMD-0123 ensures that stakers, not just validators, benefit from priority fee revenue, addressing concerns over higher net inflation and the reduced burn rate introduced by SIMD-0096. The goal is to create a more balanced and sustainable economic model for Solana’s participants.
A key feature of this proposal is on-chain fee-sharing, removing reliance on off-chain agreements or trust-based mechanisms. By enforcing transparent revenue distribution, SIMD-0123 discourages private deals between traders and validators—helping maintain decentralization and network efficiency.
The vote breakdown: 42.27% voted YES, 14% voted NO, 42.88% didn’t vote, and 0.68% formally abstained. Among YES+NO votes, 74.91% voted in favor, surpassing the required 66.67% threshold.
The takeaway is that high inflation wasn’t the real issue—people just wanted a fair share of the rewards.
2. Trading-as-a-Service
The long-standing adage that "institutions are coming" is outdated—they’re already here, and they’re thriving. First, they entered through RWAs in the form of stablecoins, and now, they’ve made their mark with ETFs. Despite being considered "boring businesses," both sectors are on track to generate $9.1 billion in revenue this year, according to Crucible Capital’s Meltem Demirors at Blockworks’ Digital Assets Summit.
We’ve always known that stablecoin issuers—especially Tether—are massive profit machines. But what caught many off guard was the sheer revenue generated by ETF issuers. This year, they will rake in ~$440 million by doing nothing more than buying and holding BTC or ETH. The takeaway is less is more—but not entirely.
On the crypto side, Crypto/DeFi’s top 10 revenue-generating protocols are estimated to pull in $9 billion—not far from TradFi’s $9.1 billion. But that’s only half the story. The other half? Seven out of the top ten are trading platforms, while the remaining three enhance the trading experience.
DEXs like PancakeSwap, Meteora, Jupiter, Uniswap, Pump.fun, Hyperliquid, and Raydium dominate the list. Meanwhile, MakerDAO issues the stablecoins that fuel trading activity on these platforms, and Jito and Lido provide liquid staking tokens (LSTs) that unlock liquidity for even more trading. In fact, the core thesis behind LSTs is to facilitate trading.
While stablecoins have broader use cases, the vast majority are still used for trading rather than real-world payments. Specifically, USDC and DAI from Maker serve more as trading instruments than as everyday currencies. Crypto’s biggest revenue engines is still trading.
Back to institutions—stablecoin issuers provide the liquidity that fuels DEX trading, while ETF issuers give TradFi clients exposure to BTC and ETH, essentially enabling buying and selling (trading) in a regulated format.
At its core, the most successful companies in crypto all revolve around trading. They either own the venues where trading happens or enhance the experience through stablecoins and liquid staking tokens.
If there was ever a question about crypto’s primary use case, the answer is clear: it’s trading.
The final takeaway is that Solana dominates when it comes to successful crypto apps. Five of the top ten are Solana-exclusive, three are primarily on Ethereum, and the remaining two operate on Binance Smart Chain and Hyperliquid’s HyperEVM.
3. The State of Sandwiching
With constant trading comes sandwiching—a necessary evil in crypto markets, much like payment for order flow (PFOF) in traditional finance. And since Solana has emerged as the epicenter of trading this cycle, it's worth taking a closer look at the state of sandwich attacks on the network.
The chart above illustrates the value extracted by sandwich attackers—who front-run user transactions to secure worse prices and profit off the difference—relative to a protocol’s swap volume.
The most successful app on Solana—like we just discussed—is noticeably absent from this list. Their tech is either so efficient that they rarely get sandwiched, or the volume affected is too small to make the cut relative to their total swap activity.
Interestingly, 90% of sandwich volume on Solana is tied to memecoin trading. The most popular bots facilitating memecoin trades all show up on the list, which isn’t surprising. What is surprising, however, is seeing Phantom in third place. As the most widely used wallet on Solana—and the default choice for memecoin trading—that could explain its ranking.
Written by Pascal Abams — Research Analyst at NODO. I research on-chain trends, market narratives, and investment opportunities in crypto. If you have thoughts, insights, or just want to connect—reach out
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