Galaxy: Ethereum and Solana may revisit the token inflation model

Galaxy Research Vice President: Ethereum and Solana face the same security budget issue

Galaxy Research Vice President Lucas Tcheyan said on August 7 that Ethereum and Solana are facing a similar policy issue: How much token issuance will it take to pay for network security, and when will security budgets become more costly than benefits? Both networks are discussing through the proposal process, but neither has approved any inflation changes.

Overview

Ethereum's cone release proposal is now numbered EIP-8363, after the editor reassigned the proposal number originally reported. EIP-8363 will destroy the growing validator rewards and cancel issuance incentives when the pledge ratio approaches 50%. Solana's SIMD-0550 plan doubles annual inflation from 15% to 30%, reducing projected issuance by 18.9 million SOL. Solana's governance requirements proposal received two-thirds of the decisive pledge support after completing the 11-era voting process. Galaxy said both networks are reassessing security budgets and have not yet approved any final inflation adjustments.

Ethereum proposal: As pledged ETH increases, rewards will gradually decrease

EIP-8363 will destroy the growing portion of consensus layer verifier rewards as the proportion of Ethereum pledges increases. When the pledge ratio approaches 50%, the destruction ratio will reach 100%, thereby eliminating the incentive for new issues to serve as additional pledge. The authors propose an 18-month transition period because immediate implementation of the full mechanism would significantly reduce verifier benefits. Galaxy estimates that with about one-third of ETH pledged, the consensus layer yield under the full design will drop from about 2.6% to 1.2%. MEV and priority costs will not be included in the proposed destruction. These numbers describe simulation results rather than approved changes to Ethereum's monetary policy.

The agenda of the All-Core Developer Consensus Meeting on August 6 listed "cone release destruction" as one of the candidate proposals for the Hegotá upgrade. The agenda clearly states that this meeting is not to decide whether to include or schedule these proposals. No online voting or activation date has been set yet. At the same time, SharpLink CEO Joseph Chalom opposed the offering change, arguing that lower pledge yields could make ETH less attractive to institutions and increase DeFi's financing costs. These results are still predictions.

Proponents believe that with the increase in pledged ETH, the amount of issuance currently paid by Ethereum may have exceeded the necessary level.

Solana Proposal: For circulation and transaction destruction

Solana is considering two separate changes. SIMD-0550 plans to double annual inflation from 15% to 30%, while maintaining a terminal inflation floor of 1.5%. The technical proposal was merged into the Solana Improvement Document Library in a "review" status on July 23, but the change was not activated. SGP-0002 asks verifiers and delegators whether they should pursue a faster release plan. Its authors estimate that the change will advance the terminal inflation rate from approximately 5.7 years to 2.8 years and reduce SOL circulation by approximately 18.9 million over six years. The "18.9 million SOL" decrease is a forecast, not a definite change in supply.

SGP-0003 involves cost issues. It supports SIMD-0553, which would add a resource fee that includes fees and a resource fee based on transaction resource use, of which the resource portion would be fully destroyed. Galaxy cited estimates that under recent network conditions, the daily destruction volume may increase from approximately 650SOL to between 7500 and 9000SOL. However, the destruction estimate is still being adjusted. On August 9, Cavemanloverboy, author of SIMD-0553, said he was told that earlier estimates were "misleading" and used last month's traffic to release an optimistic and pessimistic range. He also pointed out that contract optimizations and other behavioral changes could reduce future destruction, meaning the final level cannot be considered a fixed value.

Solana governance still between proposal and activation

Galaxy said SGP-0002 and SGP-0003 each received at least 15% active pledge support, enough to advance in Solana's new on-chain governance process. According to official governance rules, a sequence of 11 eras will be launched when this threshold is reached: 7 eras for discussions, 1 era for pledge snapshots, and 3 eras for voting. A proposal can only be passed if the yes vote accounts for at least 66.67% of the decisive pledge (i.e., yes vote plus no vote). Abstentions are excluded and there is no separate quorum requirement. Even if SGP is passed, it will only be directional authorization, not automatic code activation; related SIMD still needs to be developed and functionally gated deployed.

Solana has previously encountered difficulties with changes in inflation. SIMD-0228 failed to pass in March 2025 and, despite receiving 61.39% support, fell short of the required two-thirds approval level. Recently, Solana introduced the SGP framework to separate pledge weighting policy signals from SIMD technical review.

Next steps for Ethereum and Solana inflation

Ethereum developers will continue to review EIP-8363 and decide whether it should be advanced to a Hegotá upgrade. The proposal is still open for request, and the August 6 developer meeting will only see it as a candidate for further consideration. Any adoption requires more review, consensus on upgrade inclusion, and client-side implementation. Solana's path is tied to its governance timetable. SGP-0002 and SGP-0003 must complete the discussion, pledge snapshot and voting phases before they can accept either direction. Technology activation will occur separately later. Currently, these proposals change the market's expectations for future ETH and SOL supply, rather than the network's current distribution rules.

Galaxy's overall view is that as the network matures, both communities are reassessing the price they pay for security. The company believes that lower issuance may marginally improve scarcity, but block space and application demand remain long-term drivers of stronger token values. As a final decision has not yet been made, any repricing of future supplies remains contingent on proposals still under discussion.