Solana Supply Reduction Proposals Could Halve Staking Yields

Solana's supply dynamics are set to change significantly if two governance proposals pass and are implemented. Asset manager 21Shares published an analysis on August 26 that examined these proposals, which could halve SOL staking yields within two years and reduce the network's supply by up to $1.5 billion over six years.

SIMD-550, proposed by Helius, would double the annual disinflation rate from -15% to -30%, accelerating the timeline to reach the terminal inflation rate of 1.5% from 5.7 years to 2.8 years. This would lead to a decline in staking yields from approximately 5.25% to around 3% by year two.

SIMD-553, proposed by Temporal, would introduce burn fees tied to computational resource consumption in financial transactions, increasing daily SOL burns by more than 10x. The combined six-year issuance reduction effect of both proposals is estimated at $1.4 billion to $1.5 billion.

Historical precedents suggest that supply-reduction measures can lead to market rallies. However, Solana Company, a listed treasury firm on Solana, has expressed opposition to the proposals, citing concerns about rule continuity during a period of institutional adoption.