Ethereum and Solana are about to receive major updates: What will change?

Cryptocurrency research firm Galaxy Research pointed out that Ethereum (ETH) and Solana (SOL) are evaluating major adjustments in their token supply and inflation policies, and investors should pay attention to possible changes in the supply structure. The agency said the core issue facing the two networks is how to balance the incentive budget needed to secure blockchain with the long-term pressure on token supply.

Ethereum proposal: EIP-8361 gradually reduces circulation

Galaxy Research highlighted EIP-8361, the "Decreasing Issue Destruction" proposal. The proposal, submitted by six researchers including Ethereum Foundation researcher Justin Drake, envisions gradually increasing the destruction rate of verifier rewards as the number of ETH pledged increases. If the pledged ETH reaches 50% of the total supply, 100% of the validator reward will be destroyed, thus eliminating the economic incentive to continue pledging new ETH beyond this level.

Currently, about one-third of the Ethereum supply is pledged. If the proposal passes, the annualized yield at the consensus level would drop from about 2.6 percent to 1.2 percent. MEV revenues and priority expenses will not be affected by this change. If the proposal is approved, a transition period of approximately 18 months is planned. Considering Ethereum's normal upgrade pace, pledgers may still have about two years to adapt to the new model.

However, Galaxy Research emphasized that EIP-8361 is still in the draft stage, the voting process has not yet started, and there is no clear implementation timetable. The proposal is being considered for inclusion in the "Hegotá" upgrade that follows the "GlamAmsterdam" upgrade. Although the relevant screening work is expected to last until November, even if the proposal is passed, the upgrade is unlikely to be implemented before the end of 2027.

The core of the debate surrounding Ethereum is how high the pledge rate should rise in the long run. The framers of EIP-8361 believe that the current incentive model will continue to push the pledge rate up, which may reach about 55% by 2028. Researchers point out that this will lead to increased concentration of liquidity pledge service providers and large verifier operators. The proposal aims to eliminate ETH's permanent revenue base, limit supply dilution, and strengthen ETH's monetary nature.

In contrast, some prominent figures in DeFi, the pledge field and the Ethereum developer community believe that a significant drop in pledge yields may put pressure on individual verifiers, damage Ethereum's DeFi ecosystem, and reduce the needs of institutional investors. The criticism also focuses on the fact that the expected time frame for major changes in Ethereum's monetary policy may be too hasty.

Solana's two proposals: inflation slowdown and cost reform

On Solana's side, two separate proposals are being advanced in the network's new on-chain governance system. Proposal SIMD-0550 (assessed based on SGP-0002) aims to increase Solana's annual decline in inflation from 15% to 30%. If achieved, the date when SOL reaches the final inflation rate of 1.5% will be advanced from 2032 to 2029. According to estimates by Galaxy Research, this change could mean removing approximately 18.9 million SOLs from future supply.

Another proposal, SIMD-0553 (included in SGP-0003), aims to change Solana's transaction fee system. Instead of adopting the current model of charging a fixed fee per signature, it will introduce differentiated fees based on the computing resources required for the transaction, and all fees will be destroyed. It is estimated that this change could increase the number of SOLs destroyed by Solana per day from approximately 650 to between 7500 and 9000.

The above two Solana proposals have entered the discussion stage after receiving 15% support from active pledges. After approximately 16 days of discussion, the pledge view and voting process will be launched, which lasts for 11 eras (approximately 22 days). The proposal requires two-thirds of the decisive pledge to be approved.

Core question: The trade-off between supply security and inflation

Galaxy Research believes that the changes being discussed by Ethereum and Solana, although structurally different, boil down to the same fundamental question: How many tokens do you need to issue to ensure network security? What security compromises can be accepted for lower inflation?

The research institute pointed out that compared with Ethereum's changes, Solana's proposal is more limited and directly aims to increase token scarcity. Although a faster inflation slowdown will benefit investors who hold SOL for a long time, the costs will be borne mainly by validators and pledgers, and their pledge returns will fall faster. Proposal SIMD-0553, which plans to eliminate transaction fees, could strengthen the link between network usage and the transfer of value to SOL.

Galaxy Research added that historically, current inflation policies have played an important role in both blockchains. Token issuance allows the network to pay verifiers during times when economic activity is insufficient and provides funds for blockchain security. However, the agency believes these incentives should not be permanent.

According to Galaxy Research, a healthier long-term model is where verifier activity evolves into low-margin Infrastructure services, while cybersecurity is funded from on-chain economic activity and block space needs, rather than the issuance of new tokens.

However, the agency believes that supply-side changes alone are not decisive for ETH or SOL pricing. Galaxy Research said: "Supply-side regulation can play a supporting role and create a strong narrative, but this is not the main constraint facing both blockchains. Ultimately, it's demand that will re-price these assets."

Galaxy Research pointed out that priorities should remain to improve the technology infrastructure of the Ethereum and Solana ecosystems, increase enterprise adoption, and expand the range of products for individual users. The research institute believes that while security features that are stripped away from centralized systems and decentralized networks are crucial in the long term, this should not obscure current efforts to create demand at existing adoption levels.