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Two governance proposals emerging within the Solana ($SOL) ecosystem could significantly alter the network’s token supply dynamics in the coming years. According to 21Shares’ assessment, if the proposals, dubbed SIMD-550 and SIMD-553, are implemented together, Solana’s total $SOL issuance over the six-year period could decrease by approximately $1.4 billion to $1.5 billion.
The SIMD-550 proposal aims to increase Solana’s annual rate of inflation reduction from the current 15% to 30%. If the proposal is accepted, the network’s long-term target of achieving a final inflation rate of 1.5% will be brought forward from approximately 2032 to the first half of 2029.
However, the faster decline in $SOL issuance will also lead to a decrease in staking yields. According to 21Shares’ estimate, the nominal staking yield could fall to around 2.25% in the third year of the new model’s implementation.
The second significant change on the supply side of Solana comes with SIMD-553. Approved and incorporated into the codebase on July 20th, the proposal introduces a new burning fee mechanism for computing units requested during financial operations.
Based on current network activity, approximately 600 to 800 $SOL are burned daily on the Solana network, but with the SIMD-553, this amount is estimated to increase to 7,500 to 9,000 $SOL. This represents an approximately tenfold increase in $SOL burning compared to current levels.
According to 21Shares, when the inflation reduction accelerated by SIMD-550 and the planned token burns with SIMD-553 are considered together, Solana’s net token issuance may decrease by approximately $1.4 billion to $1.5 billion over the next six years.
However, some uncertainties need to be resolved before these predictions can be finalized. While SIMD-550 is still subject to the final voting process, the actual impact of SIMD-553 will vary depending on how the validators’ fee mechanism is structured.
*This is not investment advice.
Source: <a href="https://cryptonews.net/news/altcoins/33354382/” target=”_blank” rel=”nofollow noopener”>cryptonews.net