Solana Validators Approve Faster Disinflation Rate

Solana slows new token creation

Solana validators have voted to approve a proposal that accelerates the rate at which new SOL tokens are removed from circulation. The change doubles the network's annual disinflation rate from 15% to 30%.

Disinflation means the rate of new token issuance decreases over time. This proposal does not change the network's long-term inflation target, which remains set at 1.5%. Under the new schedule, Solana is expected to reach that 1.5% terminal inflation rate in about 2.8 years, down from roughly 5.7 years under the previous plan.

The finalized voting results showed 67% support, with 25.16% voting against and 7.84% abstaining. Overall participation reached 60.7% of the eligible stake.

Voting details and major stakeholders

The vote was part of Solana’s first binding governance process, which also approved a proposed Solana Constitution. A separate proposal on resource and inclusion fees was rejected.

Largest participants were divided on the disinflation measure. Figment, the largest voter with 17.1 million SOL staked, voted entirely against it. Helius and Jupiter overwhelmingly backed the proposal.

Kraken changed its position during the vote. The exchange initially voted against the measure at 12:33 UTC, which temporarily pushed support below the required threshold. By the end of voting, more than 90% of its roughly 8.9 million SOL voting stake backed the proposal.

Fewer tokens in circulation

The change will result in an estimated 18.9 million fewer SOL being issued over the next six years. This reduces future dilution for SOL holders but also lowers staking rewards for validators and delegators, as fewer new tokens are created to reward them.

ETF capital continues to grow

The governance vote comes as US-listed Solana investment products continue to attract investor capital. A Solana ETF is a type of exchange-traded fund that allows investors to gain exposure to the price of SOL without directly holding the token. Bitwise’s Solana ETF recently surpassed $1 billion in assets, becoming the first Solana ETF to reach that milestone, according to Bloomberg ETF analyst Eric Balchunas.

US Solana ETFs have attracted roughly $1.7 billion in cumulative net inflows, with little sustained outflow since their launch.

What remains unclear

It is not yet clear how the reduction in staking rewards will affect validator behavior or network security parameters in the coming years.

Source

• Cointelegraph