- Solana is voting to make the SOL token more scarce.
- Those in favour say staking emissions are higher than they need to be.
- Others argue that lowering emissions will make it less profitable to run Solana validators.
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GM, Tim here.
Solana stakeholders have begun voting on a network change that could slash the amount of newly-created SOL tokens by two-thirds.
Dubbed Solana Improvement Document 228, or SIMD-0228, the proposal reduces the amount of the cryptocurrency awarded to stakers based on the total amount of tokens staked.
It will also reduce the blockchain’s emissions by a flat 15% each year until hitting a base inflation rate of 1.5%.
Set to pass
So far, SIMD-0228 looks set to pass. Over 25% of all staked Solana tokens have voted, with 17% backing the decision to lower emissions.
The vote comes as crypto developers and investors become increasingly concerned with sustainability.
It’s a tricky issue to navigate. Blockchains like Ethereum and Solana have spawned a $113 billion DeFi ecosystem.
Yet they are still struggling to balance the fees users must pay to transact on them with the incentives given out to those who run the blockchains and secure transactions.
Solana’s annual token inflation rate — new tokens given out to validators who secure transactions — sits at 4.5%.
Price pressure
At the current price of $127 per token, that equates to around $3.5 billion worth of new tokens each year.
Those in favour of SIMD-0228 say that amount is higher than it needs to be.
Continuously issuing new tokens causes “long-term, continual downward price pressure,” Solana company Helius said in September.
Yet others argue that lowering emissions will make it less profitable to run Solana validators. If validators can’t turn a profit and have to shut off, it will make the network less decentralised.
It’s not just Solana worrying about excessive token emissions. Ethereum developers are also mulling proposals to limit the amount of rewards distributed to stakers on the network.
For almost a year, Ethereum has given out more Ether tokens to stakers than its users have removed from circulation by paying for transactions, making the network inflationary.
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