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SIMD-123 introduces native block reward sharing for Solana validators, changing how institutions evaluate SOL staking rewards, commissions and reward transparency.
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Solana’s staking model is evolving from inflation-only rewards toward a broader, activity-linked reward structure.
Solana Improvement Document 123 (SIMD-0123), titled, ‘Block reward Distribution’, introduces that mechanism. Approved by stake-weighted community vote in March 2025 and listed by Solana as under development, expected by Agave 4.1, it enables validators to share block reward with delegators automatically through the protocol.
This blog walks through five areas:
By the end of this blog, it will be clear how SIMD-123 creates a native path for native stake, which is meaningful for qualified custody environments, regulated products and institutions seeking to minimize transaction surface.
SIMD-123 introduces a protocol-native path for sharing validator block rewards with delegators.
At the time of writing, delegators receive inflation rewards through the protocol. Validators also earn rewards when they produce blocks, including transaction base fees, priority fees and MEV-related reward. Solana’s network upgrades page describes SIMD-123 as the mechanism that enables validators to share this reward with delegators automatically through the protocol.
Delegators stake SOL to a validator. The validator participates in consensus, earns inflation rewards and takes commission. The remaining inflation reward is distributed to delegators through the protocol.
Block reward has historically sat outside this native reward flow.
This creates an economic gap. Delegated stake increases a validator’s weight in the leader schedule, which can increase block production opportunities. But the core protocol did not previously route resulting block rewards back to the delegators who supplied that stake.
SIMD-123 adds a separate commission rate for block reward.
Validators can set this commission on their vote account, similar to how they set commission for inflation rewards. The protocol calculates the post-commission amount and distributes it to delegated stake accounts at the end of each epoch.
For institutions, this creates two commission variables:
Inflation rewards come from protocol issuance. Block reward comes from network activity. That distinction matters for reward modelling because block reward depends on transaction demand, priority-fee markets, validator performance, and block-building strategy.
SIMD-123 is a market-structure update for staking. It moves block reward sharing from off-protocol arrangements into a native, auditable mechanism.
SIMD-0096 routed 100% of priority fees to validators rather than burning a portion. That made priority fees a more important part of validator reward. SIMD-123 creates the distribution path for delegators.
As inflation declines over time, fee-linked reward may become a more visible part of staking economics.
The official SIMD contains several implementation details for staking teams, custodians and product issuers.
The default block reward commission is effectively 100%. Validators must opt in to share block reward. Delegators should not assume that activation of SIMD-123 automatically increases staking rewards.
Institutions will need to compare whether a validator supports block reward sharing and what commission rate it applies.
Block reward commission is set in basis points on the validator vote account. The calculation caps commission at 10,000 basis points, or 100%.Validators can publish clear terms, and delegators can compare them across operators.
The active commission rate is taken from the vote account state at the beginning of the previous epoch. This prevents retroactive changes from applying to rewards already earned and gives delegators a cleaner basis for epoch-level forecasting.
For each block, reward is split according to the validator’s block reward commission.
The validator’s commission portion is sent to a designated commission collector account. That account must be system-owned and rent-exempt after deposit. If not, the commission amount is burned.
The delegator portion is added to a new vote-account field: pending_delegator_rewards. This creates an observable on-chain accrual balance before rewards are distributed.
Once an epoch ends, the protocol automatically distributes the delegator portion of block rewards to the validator’s active delegated stake accounts.
The split is proportional. The more active stake a delegator has with that validator, the larger their share. Any tiny leftover amount that cannot be divided cleanly is removed from supply.
This process is built to work with Solana’s existing epoch reward flow, helping avoid a single, heavy distribution event at the start of a new epoch.
Block reward rewards arrive as inactive SOL inside the stake account. They are not automatically restaked.
For institutions, this has direct PRR implications. Received rewards and compounded rewards are not the same. Any compounding process must be handled separately.
SIMD-123 also adds a safeguard around validator vote accounts.
If a validator has rewards waiting to be paid out to delegators, those funds cannot be withdrawn first. The protocol keeps that pending delegator portion locked until it is distributed at the epoch boundary.
This helps ensure delegators receive the rewards they have already earned, while still preserving the minimum balance needed to keep the vote account active.
SIMD-123 also introduces DepositDelegatorRewards, a new vote-program instruction that allows lamports to be deposited into a validator’s pending delegator-reward balance. Once deposited, those lamports follow the same epoch-based distribution process as other pending delegator rewards.
This matters because the deposit does not have to originate from block production itself. In principle, that could allow validators or third parties to fund additional SOL rewards for active delegators through the native staking reward flow.
Possible future uses could include stake-weighted delegator campaigns, validator-funded rebates, or other SOL-denominated reward programs. These use cases are not prescribed by the SIMD, but the instruction creates a protocol-level mechanism that could support them.
SIMD-123 gives institutions a clearer way to evaluate SOL staking rewards.
Today, staking diligence often starts with a headline projected reward rate. After SIMD-123, that headline number may be less useful on its own. Institutions will need to understand where rewards come from, how they are shared, and how they are handled operationally.
Post-activation, Solana staking rewards can be assessed across several components:
This means a validator with a low inflation commission may not necessarily produce the highest net result. Similarly, a validator offering a high block reward share may still need further diligence around performance, uptime, commission policy, and any off-protocol reward practices.
For institutional staking programs, SIMD-123 shifts the question from:
“What is the headline staking rate?” to, “What are the sources of rewards, how are they distributed, and can they be verified?”
SIMD-123 does not just add another reward component, rather it gives institutions a more transparent framework for comparing validators, modelling net rewards, and explaining staking outcomes to clients, auditors, and internal risk teams.
SIMD-123 gives Solana a native mechanism for sharing block rewards with delegators. That impacts institutions because it brings a part of validator economics that previously sat outside the standard staking reward flow into the protocol itself.
The impact is not just the possibility of higher rewards. It is that delegators, custodians and staking providers can evaluate rewards with more clarity. Specifically, what rewards came from inflation, what came from block production, what commission was applied, and how rewards were distributed.
For institutional SOL staking, this changes the diligence process. Validator selection becomes less about a single headline reward rate and more about reward composition, commission policy, operational handling and transparency.
It also introduces practical questions that institutions will need to account for, including inactive reward treatment, compounding assumptions, and how any additional SOL-denominated rewards are presented or reported.
As Solana’s staking market matures, SIMD-123 should make it easier for institutions to understand where staking rewards come from, how they are shared and how they should be accounted for.
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