Proposal to Slow Down New SOL Supply Passes on Solana: Staking Rewards Could Decline to 2%

With the newly approved decision on Solana, the annual supply reduction rate has been increased from 15% to 30%, while staking rewards are expected to decline to approximately 2.25% in the third year.

A decision that will more rapidly curb the increase in the amount of new SOL entering the market has been approved on Solana. According to data shared in The Block’s Data & Insights weekly newsletter, the proposal named SGP-0002 was approved with 67.001% support. The approval threshold was set at 66.67%.

The decision does not reduce the existing SOL supply. Instead, it projects a faster decline in the amount of new SOL entering the market over the years. With the new regulation, the annual supply reduction rate increases from 15% to 30%. It is calculated that this change could result in approximately 18.9 million fewer SOL being issued within six years.

Staking rewards could drop to 2.25% in the third year

The new system may also change the income structure of participants validating network transactions. Staking rewards are expected to drop from the current level of approximately 5.25% to 2.25% in the third year. This pressure is expected to impact smaller independent validators, who derive a significant portion of their income from new SOL issuance, more heavily.

The decision comes at a time of increasing network usage on Solana. On August 27, seven-day average transaction fees reached approximately 9,200 SOL, rising more than 80% compared to three months ago. The number of non-vote transactions also rose to 191 million. Daily tips paid to Jito validators averaged 2,073 SOL over the last week.

The participation of 1,326 validators in the vote, with the participation rate reaching 60.7%, was recorded as the highest participation in Solana governance to date. Conversely, the decision is not expected to change network speed or transaction fees for the average user in the short term.