Ethereum and Solana Supply Cuts Won't Boost Prices Without Stronger Demand Growth
Ethereum and Solana are exploring ways to curb inflation by reducing new token issuance. However, according to Lucas Cheyan, vice president at Galaxy Research, lower supply alone is unlikely to lift prices. The direction of token prices will ultimately be determined by demand.
Ethereum's proposed solution, EIP-8361, would phase in the burning of validator rewards over an 18-month period. This would effectively reduce validator issuance rewards to zero if the staking ratio reaches 50% of the total Ether supply. The proposal was submitted by six researchers, including Ethereum Foundation researcher Justin Drake.
Solana is also advancing proposals that would change its issuance and fee-burning structure. SIMD-0550 would double the annual disinflation rate to 30% from 15%, while SIMD-0553 would impose fees on computing resources and burn all of the proceeds. Both proposals aim to reduce supply.
Cheyan emphasizes that supply-side policy changes are not unimportant, but any meaningful revaluation in Ethereum and Solana will ultimately require stronger demand for the networks and their tokens.