Ubik Capital interview: Current state of Solana validators and fee economics

8 min readMar 13, 2024

The following interview is as a result of a request from a team that participated in Solana Scribes content hackathon.

Why did you choose to become a validator?

Ubik Capital is one of the early supporters of the Solana project as validators, participating in the support of the project since its initial phases of the first testnet, but also being investors in the Solana project.

We understood from the beginning that such a project is more than necessary for the blockchain space and the team behind it is capable of realizing such an ambitious project.

By acting as a validator, Ubik Capital contributes to the network’s security and consensus mechanism while earning rewards for our participation.

Ubik Capital chose to become a validator because it loved the idea and the team behind the Solana project, also because of the opportunity to earn transaction fees and rewards through protocol-defined inflation rates. This provides a solid foundation for sustainable income generation. Moreover, the staking mechanism within the ecosystem ensures that validators are rewarded for their crucial role in validating the ledger.

In addition, staking pools are an appealing aspect of operating as a validator. Staking pools enhance decentralization, promote censorship resistance, and facilitate the growth of decentralized finance (DeFi) on the network. By participating in staking pools like Jito, Ubik Capital actively strengthens the network’s resilience against censorship and centralization and supports the broader adoption and evolution of DeFi protocols.

As a validator, how do you attract delegators to stake with you in order to increase your rewards?

As a validator, Ubik Capital’s approach to attracting delegators is centered around offering competitive Annual Percentage Yields (APYs) while maintaining a transparent and reliable operation. We prioritize providing an attractive APY by factoring in both commission rates and performance, ensuring delegators can expect consistent returns on their stakes.

Also, transparency is key in our communication with delegators. We provide comprehensive information about our validator operation, including fee strategies, team experience, hardware specifications, and operational practices. This transparency builds trust and confidence among delegators, empowering them to make informed decisions about staking with us.

Overall, Ubik Capital aims to attract delegators who value reliability, transparency, and competitive rewards for their staked assets. Through consistent performance and transparent communication, we seek to establish trust and foster long-term partnerships with delegators on the network.

How sustainable is Solana’s reward system, including commissions and block rewards, for the long term?

Solana’s reward system, including commissions and block rewards, is sustainable for the long term. The network’s design promotes a healthy, self-sustaining economy with incentives aligned to ensure security and decentralization. Protocol-based rewards, generated from inflationary issuances according to a predefined schedule, provide predictable incentives for participants. Transaction fees further contribute to economic stability and forking protection. Overall, Solana’s reward system is designed to support long-term growth and stability, ensuring continued network security and decentralization.

What factors should individuals or organizations consider before deciding to become a validator?

Individuals or organizations should consider some key factors before deciding to become a validator on the Solana network. First, technical proficiency is essential, as a validator requires a strong background in computer hardware, networking, and Linux system administration. Validators must ensure they meet specific hardware requirements and maintain reliable internet connections to handle transaction validation effectively.

Also, quick response times are crucial in the event of network issues or outages, emphasizing the need for vigilant monitoring and proactive management. Effective marketing and community engagement are also vital for attracting delegators and building a supportive community around the validator. This involves providing customer support, engaging with users, and effectively communicating the benefits of staking with the validator.

Finally, a commitment to continuous learning is essential, as the blockchain space is constantly evolving. Validators must stay informed about updates, changes, and best practices within the Solana ecosystem to ensure long-term success.

What criteria should delegators consider when selecting a validator?

When selecting a validator, delegators should consider these key criteria:

Commission and APY: While the validator’s commission impacts returns, it’s essential to assess the Annual Percentage Yield (APY) instead. APY factors in both the commission and the validator’s performance, providing a clearer picture of expected returns over time.

Total stake (“Halt Line”): A diverse array of validators is vital for network stability, decentralization, and censorship resistance. Delegators should pay attention to the “halt line,” which represents validators collectively controlling 33% of the total stake. Validators above this line hold significant influence and should be considered carefully.

Data center location and concentration: Avoiding excessive concentration of validators in a single data center is crucial. A catastrophic event or hosting company decision affecting a concentrated data center could significantly impact the network. Delegators should prioritize validators with distributed data center locations to mitigate risks.

Slot success rate: This is the percentage of slots successfully included in the blockchain. A high success rate indicates reliability and effective performance, while a low rate may signal potential issues affecting earnings or network security.

Validator information and public profiles: Delegators trust validators with their stake, so reliability and transparency are key. Assessing a validator’s public profile, including fee strategy, team experience, hardware specifications, and communication methods, is essential. Top validators typically provide comprehensive information on their websites and offer multiple communication channels for inquiries.

By evaluating these criteria, delegators can make informed decisions when selecting a validator.

With the introduction of the Priority Fee on Solana, how has it impacted your revenue and the network’s operations?

With the introduction of the Priority Fee on Solana, both our revenue as a validator and the network’s operations have experienced significant impacts. Users now have the option to pay additional fees to prioritize their transactions, ensuring faster processing during high-traffic periods such as crypto-trading opportunities or NFT minting rushes.

As a result, Ubik Capital’s revenue has seen an increase. In fact, the average block rewards are up by 20% compared to last year. Half of the Priority Fee revenue goes to validators as a reward for their contribution to the network, while the other half is burned, contributing to the scarcity of SOL tokens and potentially increasing their value over time.

Overall, Priority Fees have improved transaction processing speed, incentivized validators, and contributed to the long-term growth and stability of the Solana network.

Solana boasts one of the lowest transaction fees among blockchain networks, with the base fee potentially as low as 0.000005 SOL. How viable is this fee structure in the long term for validators’ rewards?

Solana’s low transaction fees give it a big advantage over other blockchain networks. But whether this low-cost setup can keep validators making good money in the long run depends on a few things.

On one hand, because the fees are so low, validators might not make much money from each transaction. But Solana can handle a lot of transactions very quickly, so even with low fees, validators can still make decent money by processing a large number of transactions.

Also, with Priority Fees, users can pay extra to make sure their transactions get processed faster. This extra money goes partly to the validators, giving them another way to earn income alongside the regular fees. The remaining fee gets taken out of circulation and the tokens are “burned,” making SOL more valuable over time. When SOL tokens become more valuable, validators who hold them as part of their earnings can benefit.

So, even though Solana’s transaction fees are low, this fee setup should keep validators earning well into the future.

What challenges do validators face within the Solana ecosystem, and what potential solutions do you propose?

Validators on Solana face several challenges that impact their operations. First, network congestion and productivity issues can arise during peak usage, affecting block propagation and efficiency. To address this, validators can increase the number of RPC nodes, collaborate with other validators, and monitor network traffic closely.

Secondly, software updates pose challenges, as they are essential for network health but can sometimes cause unexpected issues. Validators can mitigate these challenges by testing updates on the testnet, maintaining a proper communication plan, and implementing backup mechanisms.

Finally, security concerns are critical for validators, who must protect against external threats and unauthorized access. Validators can enhance security by using firewalls, keeping nodes updated, and implementing strong authentication processes.

By proactively addressing these challenges, validators can contribute to the sustainability and stability of the Solana network.

Give your ending note or anything you wish to add

Ubik Capital’s role as a validator is crucial in maintaining the integrity and efficiency of the Solana network. By embracing innovation, communication, and proactive measures, we can continue to drive the growth and sustainability of Solana’s blockchain ecosystem.

How Ubik Capital Facilitates Staking and Delegation

Ubik Capital is a PoS validator across several networks, including Solana, Cosmos Network, Polkadot, Oasis Protocol, Crypto.com, Band Protocol, Aleph Zero, ICON Network, xx Network, Coreum to mention a few.

Ubik Capital makes it easy for users to stake and delegate their coins by providing them with a simple interface and 24/7 support. Furthermore, with 100% uptime across all networks, users can be assured that their coins are always being staked and earning rewards.

If you’re interested in staking your coins with Ubik Capital, you can check out some of their top guides on how to do so:

Proof of Stake is an increasingly popular consensus algorithm, especially with Ethereum’s transition into PoS. There are many variations of a PoS consensus algorithm; however, with this guide, you should understand how it generally works.

Ubik Capital is an excellent option if you’re interested in earning rewards by staking your coins.

About Ubik Capital

Capital is a Proof-of-Stake service provider, validator, and investor. Ubik Capital provides staking-as-a-service as well as investments to various blockchain projects. Ubik Capital secures major networks and is a trusted staking provider with years of industry experience.

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Website: https://ubik.capital/

Twitter: https://twitter.com/ubikcapital

Telegram: https://t.me/ubikcapital

Discord: https://discord.gg/9Jzbk4MZPF

E-mail: contact@ubik.capital

Disclaimer: Not financial advice. Cryptocurrency and blockchain investments are high risk, can incur substantial losses, and are not suitable for everyone. Please consult a professional before considering investment in any cryptocurrency. This article does not encourage or support any specific investments, use of applications or technology, or financial direction. This article is for informational purposes only and should be verified and validated externally for 100% accuracy.

Ubik Capital interview: Current state of Solana validators and fee economics

How Ubik Capital Facilitates Staking and Delegation

About Ubik Capital

Written by Ubik Capital