Solana passes first governance vote to accelerate SOL disinflation

Solana Validators Approve Faster Supply Reduction

Solana validators have completed the network's first binding on-chain governance vote. They passed a proposal to double the speed at which new SOL tokens stop being created.

The vote on SGP-0002 passed by a narrow margin. It was approved by 67.0% of votes, just barely clearing the 66.67% threshold. The result marks a major shift for the network's economy.

While many investors see less supply as a positive sign for the token's value, stakers face a trade-off. The new rules will lower the rewards people earn for locking up SOL to secure the network.

Key Numbers from the Vote

• The proposal doubled the disinflation rate from 15% to 30%.
• Solana will reach its 1.5% minimum issuance floor by 2029 instead of 2032.
• Approximately 18.9 million fewer SOL tokens will be created over the next six years.
• Staking yields are expected to fall from about 5.25% to 2.25% within three years.
• SGP-0001, the Solana Constitution, passed with 86% support.
• SGP-0003, a fee proposal that would have burned significantly more SOL, was rejected.

Official Source Details

The passed proposal tracks SIMD-550, a technical standard filed by engineers at the infrastructure firm Helius. It changes the yearly pace at which new token issuance shrinks. Solana already reduces inflation slightly every year, but this change gets it to the 1.5% floor much faster.

The second proposal, SGP-0001, formalizes how voting works on the network going forward. It passed with strong support, receiving 193.65 million SOL in favor against only 4.63 million opposed.

The third proposal, SGP-0003, sought to introduce a "Resource and Inclusion Fee." This would have split transaction fees in two, with part of the fee destroyed to remove it from circulation permanently. If passed, daily SOL burns could have jumped from 650 to 9,000 tokens. However, it failed to reach the required two-thirds majority.

Controversy and Last-Minute Shifts

The vote on SGP-0002 faced significant resistance. Large cryptocurrency exchanges like Kraken initially voted against the measure because it would reduce staking rewards. Kraken held nearly 9 million SOL in voting power and voted against the proposal for most of the count.

At the last minute, Kraken flipped its stance to "for," helping the proposal pass by a razor-thin margin. Other validators, including Galaxy, abstained initially before also changing their votes in the final hour.

Arjun Sethi, co-CEO of Kraken, explained the exchange's position on social media, stating that custodians should act as conduits for their clients' votes rather than using their own voice. Mert Mumtaz, CEO of Helius, had lobbied heavily for the change.

DeFi Development Corp voted against all three proposals and subsequently bought 19,000 SOL. Solana Company, a Nasdaq-listed treasury firm, backed the constitution but voted against both economic changes, citing the need for predictable yield for institutional stakers.

Market Reaction and Next Steps

SOL price activity reflected the uncertainty of the vote leading up to the result. The token had risen roughly 44% over the month prior, priced in as a supply squeeze was anticipated. After the vote concluded, the price dropped. On August 28, SOL fell 3.83% from its opening price on Coinbase, settling at $105.00 after briefly touching $110.14.

With SGP-0002 now passed, Solana will accelerate toward its lower supply cap. The network will issue fewer new tokens each year, potentially creating scarcity if demand remains steady or grows.

What Is Confirmed

The double disinflation proposal has passed and will take effect. The Solana Constitution is now ratified. The resource fee proposal was defeated.

What Is Still Unclear

It is unclear if staking yields will stabilize at the projected 2.25% or if further governance changes will occur to support validator revenue.

Sources

• Decrypt