21Shares: Solana Advances Inflation Reduction and Burn Proposal, Staking Rewards May Be Halved

On August 26, asset management firm 21Shares announced that Solana is advancing two proposals, SIMD-550 and SIMD-553, aimed at accelerating the decline in inflation and increasing the amount of SOL burned. SIMD-553 was approved and merged on July 20, while SIMD-550 entered the voting phase on August 23. If passed, it is expected to reduce SOL issuance by approximately $1.4 billion to $1.5 billion over the next six years. SIMD-550 aims to increase the annual inflation reduction rate of Solana from 15% to 30%, shortening the time to reach a final inflation rate of 1.5% from about 5.7 years to 2.8 years. The nominal staking yield is expected to drop from the current approximately 5.25% to 4.34% in the first year, 3% in the second year, and 2.25% in the third year. SIMD-553 imposes burn fees on computational units for financial activities, with the daily SOL burn volume expected to increase from about 600 to 800 SOL to 7,500 to 9,000 SOL, valued at approximately $712,500 to $855,000. However, this still falls short of offsetting the daily inflation issuance of about $4.5 million. The decline in staking rewards will directly compress validator income, with about two validators potentially turning to losses in the first year, and this number could rise to 30 by the third year. While reducing issuance and increasing burn amounts may help improve the long-term supply-demand structure of SOL, it does not necessarily lead to a price increase.

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