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ETH 
SOL TLDR: According to 21Shares, the SIMD-550 and SIMD-553 proposals could cut Solana's circulation by $1.4 billion to $1.5 billion over six years.
Under the SIMD-553 fee mechanism, the daily SOL destruction volume is expected to increase from approximately 600-800 to 7,500-9,000.
Under the SIMD-550 framework, Solana pledge yields may fall from close to 5.25% to approximately 2.25% in the third year.
21Shares data shows that Solana's pledge ratio is as high as 67.93%, which is almost twice the 34.14% ratio of Ethereum.
Solana is advancing two governance proposals that could reshape SOL's supply dynamics in the coming years. The two proposals, known as SIMD-550 and SIMD-553 respectively, aim to adjust the agreement's inflation mechanism and transaction-based destruction mechanism.
According to 21Shares, the two proposals are expected to combine to reduce Solana's circulation by $1.4 billion to $1.5 billion over six years. This change will also significantly increase the amount of SOL destroyed per day while compressing the pledge yields of verifiers and holders.
How SIMD-550 and SIMD-553 are reshaping Solana's SOL supply
The SIMD-550 proposal by Solana infrastructure company Helius doubles the network's annual deflation rate from-15% to-30%. The change will advance Solana's final inflation rate of 1.5% from around 2032 to the first half of 2029.
As deflation accelerates, nominal pledge yields are also expected to fall. According to 21Shares, yields could fall to about 4.34% in the first year and approach 2.25% in the third year.
The SIMD-553 proposal submitted by Solana research institute Temporal was approved and merged on July 20. The proposal introduces a destruction fee linked to compute units used in online financial transactions.
Under the new structure, the daily SOL destruction volume may increase from the current approximately 600 to 800 to 7,500 to 9,000. According to estimates by 21Shares, this range corresponds to a daily value of between $712,500 and $855,000 as of August 24.
Taken together, the two proposals are expected to reduce issuance by $1.4 billion to $1.5 billion over six years. The final result still depends on the voting results of SIMD-550 and the design of the verifier fee mechanism under SIMD-553.
Impact of yield compression on Solana holders
Solana's current pledge yield is close to 5.25%, mainly due to agreement inflation, transaction fees and MEV income. According to data from 21Shares, agreed inflation accounted for the largest proportion, at approximately 3.78%.
If the yield drops from approximately 6% to nearly 3% within two years, the pledge revenue per SOL will be roughly halved. The validator's economic model adds another layer of uncertainty because the fee design for validators in SIMD-553 has not yet been finalized.
Based on current forecasts, of the existing 738 validators, 2 validators will turn to losses in the first year. If fees rise as expected, that number could climb to 30 validators by the third year.
Solana's pledge ratio is close to 67.93%, which is almost double the 34.14% ratio of Ethereum. Part of the purpose of lowering yields is to squeeze funds out of pledges and push it to DeFi activity on the network.
Similar upgrades can provide some historical reference. Ethereum's EIP-1559 destruction mechanism rose 37% in the month after its launch in August 2021, while Cosmos's Proposition 848 rose 25% in the month after its adoption in November 2023. The two gains also coincided with a stronger market, so upgrades were not the only factor driving these gains.
