Solana [SOL] is currently facing one of its most bearish cycles, with its price sliding from an all-time high of $270 to $213 at press time. In response, Solana developers have introduced SIMD-228, a proposal aimed at slashing SOL inflation by up to 80%. With 71.85% of votes in favor, the proposal has already reached quorum, raising hopes for a potential price rebound.
🚨JUST IN: Solana proposal SIMD-228, which could cut SOL inflation by up to 80%, has reached quorum with 71.85% voting yes. The vote continues until the end of epoch 755. pic.twitter.com/7WW8pykYbW
— SolanaFloor (@SolanaFloor) March 11, 2025
Solana’s Deflationary Model Under Focus
Solana’s tokenomics employ a semi-deflationary mechanism where a portion of transaction fees is permanently burned, gradually reducing the total supply. This model helps offset inflation and stabilize long-term pricing. However, recent data from AMBCrypto indicates that Solana’s transaction fees have plummeted to a six-month low, signaling a drop in on-chain demand.
Since Solana’s deflationary strength is tied to network activity, reduced transaction volumes mean fewer SOL tokens are burned, weakening its ability to counteract inflation. SIMD-228 seeks to address this issue by cutting staking rewards, which are the primary means through which new SOL tokens enter circulation.
Currently, SOL has an annual issuance rate of 6.8%, predominantly allocated to staking rewards for validators. If implemented, SIMD-228 would slash this rate by up to 80%, significantly curbing the number of new tokens entering circulation.
Price Impact and Market Sentiment
At present, Solana’s circulating supply stands at 509.38 million SOL, with its price hovering at $124.78. This corresponds to a market capitalization of $63.56 billion, marking a steep decline from its $123 billion peak during the mid-January rally.
Solana’s declining valuation is largely driven by reduced on-chain activity and a risk-averse investor sentiment. The SOL/BTC pair has dropped to a two-year low, indicating that traders still consider SOL a high-risk, high-volatility asset.
Also Read: Solana (SOL) Eyes Recovery: Key Support Holds as Reversal Signals Emerge
If SIMD-228 successfully reduces inflation while maintaining validator incentives, it could strengthen confidence in SOL’s supply dynamics and pave the way for a potential recovery. However, sustained adoption and increased network activity remain critical in determining its true long-term impact.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of CoinBrief.io. Before making any investment decisions, you should always conduct your own research. Coin Brief is not responsible for any financial losses.
