Kraken's late switch pushed Solana's disinflation vote over the two-thirds line

Solana validators narrowly approved a proposal to double the network’s annual disinflation rate.

It cleared the two-thirds supermajority by just 0.33 percentage points after Kraken flipped most of its stake from no to yes in the last hours.

Issuance reaches its 1.5% floor in 2.8 years

SGP-0002, Double Disinflation, passed with 67% support against 25.16% opposition and 7.84% abstentions, on a turnout of 60.7% of eligible stake. Support was just above the 66.67% bar that the measure needed to pass.

Both supply proposals were turned down by Kraken at 12:33 UTC on August 28. This put SGP-0002 below the supermajority with just less than three hours to go until the count stopped at 15:00 UTC for epoch 1024.

Earlier that morning, support stood at 68.77%, with about 47.72% of eligible stake having voted. Kraken’s no vote knocked support down to about 65%.

Then Kraken moved again. By the close, the proposal had the support of over 90% of the US exchange’s ~8.9 million SOL of voting stake.

The plan, tied to SIMD-0550, would double the yearly disinflation rate on Solana from 15% to 30% but keep the network’s long-term inflation target at 1.5%.

Under the old path, Solana would hit its 1.5% terminal rate in about 5.7 years, but now it will hit it in about 2.8 years. This is an estimated 18.9 million fewer SOL entering circulation over the next six years.

The positive side is less dilution for SOL holders, but the downside is lower staking rewards for validators and delegators.

Figment staked 17.1 million SOL entirely against SGP-0002

Figment, which had 17.1 million SOL in the finalized governance data, voted against the proposal, while Helius and Jupiter voted for it. Other prominent custodial stakers opposed at least SGP-0002, including Everstake and P2P Validator.

Since custodial exchanges get paid when new SOL is issued, disinflation that happens faster means that the APY goes down faster and less money comes in.

That logic is “mathematically nonsense,” said Mert Mumtaz, CEO of Helius and a co-author of the proposals, in an X post. He said any advance in price from slower supply growth would be bigger than the saved yield.

Solana Company, a Nasdaq-listed treasury company that trades under the symbol HSDT, said on August 21 that it supports the Solana Constitution but opposes both supply proposals. Reopening the inflation schedule introduces doubt into the multi-year models that institutions use, the firm said.

SGP-0002 was one piece of Solana’s first binding governance process. The Solana Constitution, SGP-0001, passed with 85.97% support.

SGP-0003 failed with 53.90% support. The fee change under SIMD-0553 would have made transactions pay for the computing power they book, and burned part of what they paid.

The rejection means SOL burns will remain around 650 SOL per day. This is in contrast to the 7,500 to 9,000 SOL, ~$800,000 a day at current prices, that the fee change would have generated.

SOL was trading at about $104, down about 5.2% on the day, according to data from CoinGecko.

Both rejected supply proposals may be resubmitted without any cooling-off period. But supporters would have to win over custodians who have now gone on the record with their objections.

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