Gray believes Ethereum and Solana will be scarcer than gold

Scarcity may no longer be the exclusive domain of Bitcoin.

According to forecasts released by Gray Investment, the annual supply growth rate of Ethereum and Solana may fall below 1.8% of gold by 2031. In fact, multiple reform options are currently being discussed, including Ethereum's EIP-8361 and Solana's SIMD-0550 and SIMD-0553. If these proposals are passed, Ethereum's annual inflation rate could fall to 0.4%, compared with 1.1% for Solana. This development is likely to reshuffle the pattern between scarcity, pledge gains and valuation of the two cryptocurrencies.

Brief summary

According to a study by Gray Investment, new technology proposals could reduce Ethereum's annual inflation rate to 0.4% and Solana to 1.1%, making it scarcer than physical gold. Proposal EIP-8361 plans to burn more and more verifier rewards as pledges increase, bringing Ethereum's circulation back to Bitcoin levels. By doubling the circulation reduction rate with the SIMD-0550 proposal, Solana has greatly accelerated the process of achieving tight supply caps. Although this tightening reduces returns on direct payments to pledgers and ETFs, increased scarcity could support token prices and transform these alternative currencies into leading stores of value.

EIP-8361 Comprehensive Reform of Ethereum Distribution Model

On August 4, six researchers from the ecosystem, including Justin Drake of the Ethereum Foundation, formally submitted proposal EIP-8361, titled "Decreasing Issue Burning." The text aims to address what the author calls "artificial over-issuance" in current network economic models. Currently, even with almost all ETH tokens locked in the agreement, verifiers can still earn nearly 1.5% of pledge revenue per year. According to the researchers 'diagnosis, this cap maintains excessive money creation and does not correspond to actual operational security needs. Therefore, EIP-8361 introduces a dynamic mechanism designed to burn more and more reward shares as the proportion of ETH pledged increases, and plans to complete the transition within 18 months, once approximately 60.25 million ETH (i.e. half of the total supply) is pledged, all rewards will be burned.

According to the quantitative model included in the proposal and subjected to gray scale analysis, the annual circulation of Ethereum will peak at about 0.5% when the pledge rate reaches 20%, and then as the network approaches 50%. The pledge level begins to decline and approaches zero. In the gray scale forecast for 2031, the asset manager estimates that Ethereum's annual inflation rate will fall to about 0.4%, keeping in line with the expected Bitcoin issuance rate for the same period. This structural change has not been ignored in the institutional finance sector. Gray also recalled that its own ETHE Spot Fund began distributing pledge proceeds to its shareholders earlier this year, making it the first cryptocurrency spot exchange-traded product in the United States to implement such a mechanism.

The following key numerical indicators summarize the technical and financial impact of this update on the Ethereum network:

60.25 million ETH: After the 18-month transition period, when the pledge amount reaches this threshold, 100% of the circulation used for rewards will be burned;0.4%: The theoretical annual inflation rate of ETH supply by 2031 as predicted by gray scale is the same as Bitcoin;0.5%: When the network pledge rate is about 20%, the annual circulation will hardly exceed the peak.

Solana: Accelerate supply reduction with SIMD-0550 and SIMD-0553

Solana, on the other hand, follows a separate deflation trajectory, with the core of improving documents SIMD-0550 and SIMD-0553. Currently, the cryptocurrency's annual inflation rate is approximately 3.695%, following the original plan of reducing it by 15% every year until it reaches the long-term lower limit of 1.5%. Proposal SIMD-0550 proposes to accelerate this process by doubling the annual rate of reduction, compressing years of progressive monetary adjustment into a shorter time frame. At the same time, Proposal SIMD-0553 modifies transaction fee management to increase the proportion of SOLs permanently destroyed, preventing these cryptocurrencies from being re-injected into verifiers. However, gray scale analysis shows that under current network conditions, the amount of additional SOL burned through SIMD-0553 is still small compared to daily circulation, confirming that SIMD-0550 is the real driving force to reduce inflation to 1.1% by 2031.

There is no complete consensus on the feasibility of this dual technical initiative in terms of time. As Gray's research report makes clear, these release trajectories rely on the strict assumption of immediate implementation and no changes to other operating parameters, a condition that is considered unlikely to be fully achieved in reality. The political and community levels play a key role here. In a recent speech, Gray Research Director Zach Pander compared the progress of the two networks. "Solana's plan has broader community support and is more likely to be implemented than Ethereum's equivalent," he said. Differences in participant support are decisive for investors seeking to incorporate this future scarcity into valuation models.

Economic trade-offs that enhance scarcity

The evolution of these issuance models has placed community governance at the heart of every cryptocurrency ecosystem strategic choice. Although mathematical models predict significant compression in token creation, support from the majority of verification participants is required from proposal to effective implementation. The support differences between Ethereum and Solana pointed out by Gray illustrate how political and economic factors affect the adoption of technology updates. On the market side, establishing a higher scarcity than gold marks a stage in the structuring of major alternative currencies as mature financial assets, allowing them to compete with traditional safe-haven assets under global inflationary pressure.

Economically, the shift to algorithmically enhanced scarcity introduces complex trade-offs between the unit value of assets and the total benefit received by network participants. By reducing the speed at which new tokens are issued, these reforms actually reduce the nominal income paid to verifiers and share holders of pledged cryptocurrency ETFs. However, Zach Pander pointed out that a smaller circulation supply could support token prices in the market, offsetting the mechanical decline in pledge earnings. The final equation will depend on the ecosystem's ability to maintain its consensus security while persuading pledge participants to accept lower direct returns in exchange for an underlying asset that is theoretically scarcer and more robust and able to withstand the pressure of traditional currencies.