Solana (SOL) validators are voting on two supply proposals. One would raise the disinflation rate, and the other would burn more SOL.

Together, they would reduce projected emissions by about $1.4 billion to $1.5 billion over six years. But what could that mean for Solana’s price? Other protocols may offer some precedent.

What Solana Is Voting On

Solana’s staking yield sits near 5.25%, drawing mainly from protocol inflation of about 3.78%. Transaction fees and maximal extractable value (MEV) supply the rest.

SGP-0002, which corresponds to the technical proposal SIMD-0550, proposes reducing the inflation schedule. This would be done by increasing the disinflation rate.

“It doubles Solana’s annual disinflation rate from -15% to -30%, compressing the timeline to Solana’s 1.5% terminal inflation rate from approximately 5.7 years to 2.8 years, reaching that level by H1 2029 rather than H1 2032,” 21Shares explained.

Under this, nominal staking yield falls to roughly 4.34% in the first year. It drops to 3% in year two and 2.25% in year three.

SGP-0003, based on SIMD-0553, would divide Solana’s current 5,000-lamport signature fee into two parts: a 2,500-lamport base inclusion fee paid to the block leader and a resource fee determined by requested compute units and the applicable resource fee rate, which would be burned.

“At current network activity, daily SOL burns would rise from approximately 600–800 SOL to approximately 7,500–9,000 SOL, or $712,500 to $855,000, as of August 24. It is a meaningful acceleration in supply destruction, though not sufficient alone to offset current inflation of roughly $4.5 million per day,” the blog added.

Voting is set to continue through epoch 1023. According to 21Shares, the two proposals could roughly halve staking yields within two years and make the asset “structurally scarcer.” 

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Ethereum and Cosmos Offer an Imperfect Comparison

21Shares pointed to two previous upgrades to gauge how markets could react to Solana’s supply-reduction proposals.

Cosmos’ (ATOM) Proposal 848 cut maximum inflation in November 2023. ATOM gained 25% over the following month and 10% over three months. However, the period also coincided with growing optimism around the approval of spot Bitcoin (BTC) ETFs.

Ethereum’s EIP-1559 introduced a burn mechanism in August 2021. ETH climbed 37% in one month and 60% over three months. However, broader market conditions also supported the rally as the crypto market approached its cycle peak.

The two examples suggest that supply-reduction upgrades can strengthen a token’s narrative. However, broader market conditions can have a larger influence on price.

“In both cases, the near-term move (1–3 months) likely came from a mix of the deflationary signal and supportive market conditions, not the upgrade alone. At the same time the subsequent 6–12 month drawdowns had little to do with the upgrades: for ETH, the onset of the 2022 bear market and the Fed beginning its rate hiking cycle; for ATOM, the broader summer 2024 slump,” the team added.

21Shares suggested that for SOL holders, the precedents offer a potentially bullish signal, but they do not guarantee a similar price reaction. 

SOL trades near $101 after gaining close to 20% over the past week. The advance tracks a broader market rally rather than the governance vote itself.

Neither proposal alters the protocol on its own. Approval would hand developers a mandate, with the technical work and activation timing still to be settled.

That leaves two open questions for holders. Whether the changes reach mainnet and whether tighter supply extends the current rally will take months to answer.

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Source: BeInCrypto