Solana Proposes a New Token Emission Mechanism Based on Staking Participation

Solana has proposed a new mechanism to adjust the issuance of its SOL token based on staking participation. The proposal seeks to replace the current fixed emission system with a programmatic model that adapts to network activity. By Sasha D.

output: Solana is looking to adjust its token issuance with a new mechanism that takes into account staking participation, aiming to replace the current fixed system with a more programmatic model that adapts to network activity.

The proposal, SIMD-0228, is focused on reducing the rate of SOL issuance without compromising the security of the blockchain, which is maintained by a distributed network of validators who are rewarded for staking their tokens.

Solana’s native token is issued through a predetermined system that does not account for changes in the ecosystem, and as validators have found new revenue sources, such as Maximal Extractable Value (MEV), the need to incentivize security through token emissions has decreased. In the last quarter of 2024 alone, MEV revenue on Solana reached over $400 million, showcasing a huge increase compared to previous periods.

According to the new model, the percentage of SOL tokens that are staked will be used to adjust the issuance rate. When participation is high, the system will decrease issuance to the minimum. If, on the other hand, participation decreases, the system will increase issuance to encourage more users to lock up their tokens and maintain network security.

To avoid any abrupt changes, the transition from the current system to the new mechanism will take place over 50 epochs, gradually adjusting the emission rate until the new formula is applied.

The goal of the new system is also to reduce the selling pressure that can be caused by token inflation. In proof-of-stake networks, stakers often sell a small part of their accrued staking rewards to pay taxes or other costs, which can impact the asset’s price. By limiting SOL issuance to only what is strictly necessary, this effect is expected to decrease, potentially contributing to greater market stability.

The proposal is currently being discussed and voted on by the Solana community, with validators able to suggest improvements to the new formula and casting their votes based on their stake weight. The process will include verifying the staking participation data and a voting period, where validators will send tokens to specific addresses to indicate their decision.

For the proposal to be approved, at least two-thirds of the votes must be in favor, and voter participation must reach 33% of the total voting weight.