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Following
SOL Solana rose sharply, governance vote pushed supply-tightening expectations
Solana rose, and much more. In the past 24 hours, SOL has increased by more than 8%, and is gradually approaching its best monthly performance since 2024. SOL has risen about 44% since early August and is back above $105 for the first time since January.
The rally coincides with the same day that network validators completed one of the most important votes in Solana history-deciding whether the network should reduce SOL output and significantly increase destruction. Coincidence? This is not the case. Traders appeared to have priced in on expectations of a tight supply earlier this week, even though the voting results had not yet been officially announced.
Voting will end around 15:30 UTC today, when Era 1023 will end-each era is roughly equivalent to a two-to-three-day network activity cycle for Solana's internal clock. The vote merged three proposals, all of which belong to the Solana Governance Proposal (SGP), a new on-chain system that for the first time allows verifiers and holders of entrusted SOL to conduct binding, pledged weights.
One of the proposals formally approved the Solana Constitution and clarified how future voting would work. Two other proposals are key to driving price discussions: SIMD-550 and SIMD-553.
SIMD-550: Accelerate inflation reduction
SIMD-550, submitted by engineers at Solana infrastructure company Helius, proposes to double Solana's inflation deflation rate (the rate at which new token issuance decreases each year) from 15% to 30%. Solana's inflation rate falls slightly every year, with the ultimate goal of a fixed lower bound of 1.5%. SIMD-550 simply makes this process faster and is expected to reach the lower limit in 2029 rather than 2032, which means approximately 18.9 million SOLs will be reduced over the next six years.
But this is not without cost. Inflation is the source of revenue paid to pledgers, users who lock in SOL to help protect the network. According to 21Shares 'analysis, if issuance is significantly reduced, the pledge yield will drop from the current approximately 5.25% to approximately 2.25% within three years. This is similar to halving Bitcoin, but for pledges. However, some smaller validators may become unprofitable in the process, so that's not good news for everyone.
SIMD-553: Significantly increase the amount of destruction
SIMD-553 was proposed by Solana research and development company Temporal and affects supply in another direction: destruction, where SOL is sent to an address where no one can consume it and is permanently withdrawn from circulation. The proposal divides Solana's transaction fees into two parts: one is the basic "inclusion fee", which is still paid to the verifier; and the other is a new "resource fee", which is linked to the computing resources consumed by the transaction, which will be directly destroyed.
The change will increase Solana's daily destruction volume from approximately 650 SOLs (worth approximately US$48,000) to as much as 9000 SOLs (worth approximately US$668,000)-an increase of 12 to 14 times depending on network activity. The proposal passed a code review by Solana's two client teams, Anza and Firedancer, on July 20. Today's vote will determine whether to use it, not whether it is ready.
As of press time, SOL's 14-day RSI (Relative Strength Index, which is usually considered overbought above 70) is close to 84.5. The results of today's vote are expected to be announced within hours after the end of New Year 1023.
