Solana could adopt market-based emission model under new proposal
Multicoin Capital proposed a variable-rate token emission model for the Solana network, known as SIMD-0228, aimed at reducing inflation. This model adjusts based on the staking participation rate, calculated by the ratio of staked SOL to total tokens in circulation. If the participation rate falls below 50%, new token issuance increases to incentivize staking. If it exceeds 50%, issuance is capped to control inflation. In May 2024, validators passed SIMD-0096, removing the 50% burn mechanism for validator fees, allowing full allocation to block producers. Critics argue this could increase SOL's inflation, negatively impacting non-staking holders. Approximately 65% of SOL's circulating supply is staked. Jito, a Solana MEV solution, generated over $100 million in tips, providing additional income for validators. Proponents of the emission change believe MEV incentives reduce the need for high priority fees and mitigate inflation risks.
