Solana Is Taking Active Steps to Reduce Its Coin Supply. But Is It Enough to Send SOL Soaring Higher?

Solana (CRYPTO: SOL) is asking an essential group of its own operators to approve a pay cut for themselves. A pair of governance proposals before them would slow new issuance and burn much more of Solana's coin supply with each transaction.

That could be good for holders, but much less so for validators, who process transactions and earn newly issued coins. Those operators hold the votes that determine whether the proposals pass, and ballots open Aug. 23. So will these proposals be enough to send the coin higher?

Image source: Getty Images.

Last time this was suggested, nothing changed

In March 2025, Solana Improvement Document 0228 (SIMD-0228) aimed to swap the coin's fixed issuance schedule for a market-driven one. The idea was to preserve and boost the coin's value by lowering the dilution of new issuance overall. It won 61.4% of the ballots cast, a bit short of the two-thirds supermajority required to advance.

The way the vote split was based on size. Validators with under 500,000 SOL to their names voted no in force, while the largest validators voted yes. Bigger validators can absorb a smaller stream of rewards, but smaller ones might go out of business.

So in a nutshell, opposition from smaller validators was enough to keep the proposal from passing.

It might not be different this time

Today's package is actually two Solana Governance Proposals (SGPs).

SGP-0002 would double the annual disinflation rate to 30% from 15%, pulling the 1.5% inflation floor forward to 2029 from 2032. SGP-0003, on the other hand, would burn transaction fees in full, eventually lifting daily coin destruction from 648 SOL to 9,000 SOL, against roughly 60,000 SOL issued daily.

Both would improve the way Solana works, which does not let holders garner much upside from network activity.

The catch is that stakers would effectively be funding the proposals, and they are unlikely to want to do that unless they see no other option that supports the growth of the coin over time. The authors of the proposals model staking yields falling from 5.8% today to 2.2% by year three, so there would be a major reduction in the revenue of staking businesses, and many would probably go extinct. Both proposals cleared the 15% stake threshold for consideration on Aug. 5, and voting runs through Aug. 29. Each is tallied separately, so it's possible for one to be advanced and the other to be rejected.

The main risk here is that lower yields will discourage institutions from holding Solana. But the coin also has a real chance of exploding higher, because reforming its tokenomics would diminish one of the bear thesis's most convincing elements.

So keep a close watch on Aug. 29. If smaller validators turn out against these proposals as in 2025, nothing is going to change, and the bear case for the coin will retain its best argument -- after all, why buy a coin if holders can't benefit from the coin's use?

Alex Carchidi has positions in Solana. The Motley Fool has positions in and recommends Solana. The Motley Fool has a disclosure policy.