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.
