This seemingly “smart issuance” blueprint has triggered intense community debates over the risks of an “inflationary spiral” and conflicting interests—if the staking rate drops below a critical threshold, higher inflation could erode market confidence. Meanwhile, the income structure of validators and the distribution of benefits among ecosystem participants have become hidden landmines in this tokenomics experiment.

The new proposal may reduce inflation by 80% and reduce SOL issuance by 22 million that year

Solana’s SOL issuance mechanism follows a fixed schedule, where the inflation rate starts at 8% and decreases by 15% annually until reaching a target of 1.5%. The current inflation rate stands at 4.694%, meaning approximately 27.93 million SOL are expected to be issued this year, with a staking rate of around 64%.

In contrast, Ethereum’s inflation rate is currently close to 0%, with a staking rate of approximately 30%. SOL’s inflation model is evidently less favorable for maintaining token value, and the high inflation rate has driven a large portion of tokens into staking to secure higher yields, limiting the growth of the DeFi ecosystem.

The proposal argues that in the current Solana network, MEV revenue has already become the primary source of income for validators, meaning that lowering staking yields would not significantly impact their earnings. “Simply put, the current model is ‘dumb issuance.’ Given Solana’s thriving economic activity, it makes sense to develop a monetary policy that enables ‘smart issuance.’”

The proposal initially set a threshold at 50%, meaning that when the staking rate exceeds 50%, the inflation rate would decrease, reducing staking rewards. Conversely, if the staking rate falls below 50%, the inflation rate would increase to incentivize more staking.

However, forum users questioned the lack of rigorous calculations behind the 50% threshold, calling it an arbitrary decision. In response, the proposer introduced a revised algorithmic curve, setting 33% as the new threshold—when the staking rate exceeds 33%, the annual inflation rate would be lower than the current rate.

According to PANews calculations, under the current 64% staking rate, the new issuance curve would reduce the annualized inflation rate from 4.694% to 0.939%, an approximate 80% decrease.

If the proposal is ultimately approved and the staking rate remains unchanged, the annual SOL issuance would drop from 27.93 million to 5.59 million.

The proposal suggests modifying the staking rate and inflation rate.

However, this viewpoint does not seem to have reached a consensus in the forum. Many comments argue that even if the proposal is passed, reality may not unfold as ideally expected. For example, when the staking rate declines, an increase in inflation may further weaken market expectations for the token, potentially leading to further sell-offs of unstaked tokens and creating greater uncertainty.

According to PANews calculations, if the staking rate drops to 25%, it would result in an inflation of 44.13 million tokens, which is significantly higher than the current inflation rate.

If this inflation spiral takes hold, the outcome could be counterproductive. As stated in the proposal, the primary source of income for validators is currently MEV revenue. This is largely due to the high transaction activity on the Solana network, where many MEME players prioritize transaction speed and protection against sandwich attacks, leading to a high share of MEV revenue. However, if overall network transaction volume declines in the future, MEV revenue may no longer sustain validators as their main income source. At that point, coupled with the dual pressure of inflation and price drops, staking enthusiasm could take a further hit, reinforcing a downward spiral of rising inflation and declining staking rates.

Validator Giants Remain Silent Amid Token Holder Power Struggles

The proposal was initiated by Vishal Kankani, an investor at Multicoin Capital, one of Solana’s early backers. In 2019, Multicoin Capital led a $20 million Series A funding round and opted to receive SOL tokens instead of equity. Given this background, Vishal Kankani represents major SOL token holders who are particularly sensitive to how inflation impacts token market prices.

Interestingly, as of February 26, major validators on the Solana network—including Helius, Binance Staking, and Galaxy—have remained silent on this proposal. Helius’ founder, who frequently comments on the development of the Solana ecosystem, only shared a related post and remarked that selling SOL tokens now would be foolish.

In reality, if the proposal passes, it may not be favorable for validators like Helius, which returns 100% of its MEV revenue to stakers. Since Helius does not profit from MEV, it likely relies more on staking rewards for revenue.

Overall, this proposal represents the interests of large SOL token holders who prefer lower inflation to maintain price stability. From a network perspective, Solana’s current staking yield is around 7.03%, but under the new plan, it would drop to 1.41%—a nearly 80% reduction. For large validator nodes looking to earn risk-free returns through staking, this is far from ideal.

The proposal argues that the decline in staking yields will incentivize validators to allocate more of their tokens into the DeFi ecosystem, potentially fostering greater growth within Solana’s DeFi sector.

At its core, Solana’s ongoing tokenomics reform represents a power redistribution among major token holders, validators, and ecosystem builders. If passed, the proposal would slash staking yields from 7.03% to 1.41%, forcing validators to shift from relying on inflationary rewards to exploring MEV extraction and transaction fees. This presents both an opportunity and a high-stakes gamble.

If DeFi successfully absorbs billions of dollars in idle liquidity, Solana could experience an innovation boom similar to Uniswap or Aave. However, if the market reacts by selling off due to falling yields, the massive 44.13 million token issuance at a 25% staking rate could trigger a vicious cycle of “inflation → selling pressure → more inflation,” dragging the network into a death spiral.

For now, the silence of leading validators like Helius hints at underlying tensions in the incentive structure. If MEV revenue-sharing models are disrupted by a collapse in base staking rewards, Solana’s “decentralization” narrative could face a harsh reality check. Meanwhile, Multicoin Capital’s stance as an early whale reveals a deeper strategic shift—institutions now prioritize SOL’s store-of-value potential over its role in securing the network. With the vote approaching on March 7, Solana’s fate will no longer be dictated purely by code but by whether the community can strike a fragile balance between idealism and capital-driven pragmatism.

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