Solana’s current emissions mechanism is fixed, but if the proposal is enacted the network’s emissions rate would be variable, adjusting to market dynamics.
Solana has a market capitalization of $102 billion, making it the fourth-largest cryptocurrency.
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Posted January 16, 2025 at 7:12 pm EST.
Crypto investment firm Multicoin Capital published a Solana governance proposal on Thursday to change the network’s current emission model and reduce the inflation of the network’s native token, SOL.
The proposal, SIMD-0228, aims to make Solana’s emissions of SOL more market-oriented by making the emission rate dynamic and variable. Proof-of-stake blockchains such as Solana and Ethereum issue new tokens as a means to incentivize validators and stakers – contributing to the network’s security.
According to the proposal on the open-source software repository GitHub, if the amount of total staked SOL is higher than a particular target rate, the network would see a reduction in the rate at which SOL is issued, but if the total amount of SOL staked is below the target rate, then the blockchain would increase its SOL issuance The authors of SIMD-0228, Multicoin’s Tushar Jain and Vishal Kankani, recommend a target staking participation rate of 50%.
The price of SOL has increased 3% in the last 24 hours and nearly 13% in the past seven days to trade at $210, giving it a market capitalization of $102 billion at the time of writing, market data from CoinGecko shows.
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Solana currently uses a fixed emissions mechanism, which means the rate at which SOL is issued as rewards for stakers remains static and does not change depending on market conditions.
“The current Solana emissions schedule is suboptimal given the current level of activity and fees on the network because it emits more SOL than is necessary to secure the network,” said Jain and Kankani. “The mechanism is not aware of network activity, nor does it incorporate that to determine the emission rate.”
If the proposal is implemented and functions as designed, the authors argued that it would “systematically reduce selling pressure as long as staking participation remains adequate.”
“By aligning inflation adjustments with the actual deviation, network issuance better reflects the network’s real-time economic and security conditions,” wrote Jain and Kankani.
