Solana's inflation-cutting proposal passed with 67% vote and will slow future issuance

Solana's inflation-cutting proposal passed with 67%, just 0.33 percentage points above the required two-thirds absolute majority. SGP-0002 doubled the annual deflation rate from 15% to 30%, and SOL circulation is expected to fall by 18.9 million units over the next six years. The adopted plan retains the terminal inflation floor of 1.5%, while shortening the expected time to reach the floor from 5.7 years to 2.8 years. SGP-0003 was not approved with a support rating of 53.9%, so the current transaction fee structure and daily destruction of approximately 648 SOLs remain unchanged.

Solana (SOL) prices

Solana inflation cuts accelerate progress towards the 1.5% terminal inflation floor

Solana validators approved the inflation reduction proposal with a support rating of 67%, slightly exceeding the network's 66.67% majority requirement. The vote boosted progress on SGP-0002, a proposal that doubled the annual deflation rate from 15% to 30%. The authors of the proposal estimate that SOL's projected circulation will decrease by 18.9 million units over the next six years.

The voting participation rate reached 60.7% of the eligible pledge amount, exceeding the required one-third of the quorum. After the voting results were announced, SOL traded at about $104, down about 3.3% in 24 hours, according to Coingecko data. The reward mechanism will not be changed immediately after the plan is adopted. Developers must first complete consensus code and schedule feature activation times before embarking on a faster deflation path.

Voting records show that 176.29 million SOLs supported SGP-0002 and 66.19 million against it. The total number of abstentions was 20.63 million SOLs, so the total number of votes was 263.11 million SOLs. Abstentions were included in the denominator, allowing the proposal to pass with a margin of only 0.33 percentage points.

Kraken played a key role in determining the outcome. Its validators initially shifted their vote pledge to oppose the plan, bringing support to close to 65%. Later, before the vote closed, it converted more than 90% of its 8.9 million SOLs to a yes vote.

This Solana inflation cut does not halve the current inflation rate, but doubles the deflation rate that controls inflation decline every year. Under the approved plan, Solana still maintains a terminal inflation floor of 1.5%. According to SIMD-0550, the network will reach this lower limit in approximately 2.8 years, compared with 5.7 years for current plans. SOL issuance is expected to decrease by approximately 2.6% over the next six years, equivalent to approximately 18.9 million tokens.

Reduced supply may reduce the dilution effect of holders. However, verifiers and committers will see pledge rewards decline more quickly.

Solana's validator governance panel, this inflation cut still needs to be implemented code work. The technical document is still under review after the vote and does not list an activation schedule. The verifier client must add double deflation rate function gating before the main network is activated.

The developers designed a transition plan to maintain continuity. When activated, the software will anchor the existing inflation rate and then apply a steeper curve. Rewards for completed cycles will not be adjusted retroactively.

This change will affect consensus because inflation incentives will go into bank capitalization and bank hashes. Each verifier client must calculate the same reward value to avoid network state conflicts.

Verifier economic divisions, Solana fee reform failed

Stakeholders disagree on revenue trade-offs. Figment voted against its 17.1 million SOL units, while Helius and Jupiter voted in favor. Everstake and the P2P Validator also opposed the Solana inflation cut. Faster deflation may reduce pledge fee income for custody operators. Helius CEO Mert Mumtaz refuted the argument that earnings retention should take precedence over reducing SOL issuance. Solana Company also voted against it, citing the need to maintain stable assumptions for institutional forecasts.

At the same time, SGP-0003 was not approved with a support rate of 53.9%, although the participation rate reached 61.14%. The plan originally intended to replace the base fee of the 5000-lamport with the inclusion fee and resource fee of the 2500-lamport. The validator will charge an inclusive fee and a priority fee, while the agreement will destroy the resource fee portion. Models predict daily destruction of between 7500 and 9000 SOLs. Current fee rules only destroy approximately 648 SOLs per day. The final phase of the proposal was supposed to destroy 0.5% of supply annually, but that level still lags SOL's inflation rate of about 3.8%.

Transaction costs will vary based on the resources requested. Simulations show that the cost of a validator vote is reduced by 12.3%, while the cost of a zero-priority Pump.fun exchange is increased by 3150%. Applications that request to reserve excess computing resources will pay for their complete request, not for actual usage.

The fee vote was not passed, leaving the fee structure and destruction rate unchanged. Unlike SGP-0002, supporters do not have to wait for a cooling-off period to resubmit SGP-0003.

Trading volume reached 4.2 billion in July, while 1.32 billion non-voting transactions occurred between August 17 and August 23. As a result, Solana's inflation cut may have come amid record network usage and a debate over the security budget.