Solana (SOL) Inflation Spikes 30% After Fee Distribution Change

Solana (SOL) inflation has spiked after the new preferential fee distribution mechanism was implemented on February 12. According to data from Blockworks researcher Carlos Gonzalez Campo, SOL’s annual inflation rate has increased from 3.6% to 4.7%, marking a 30.5% increase in just one week.

What Caused the Inflation Increase
The main reason for this change is the implementation of Solana Improvement Document 96 (SIMD 96). Previously, only half of the preferential fees went to network validators, while the other half was burned. However, with SIMD 96, all preferential fees will now go to validators, resulting in a significant decrease in the amount of SOL burned each day.

Data shows that the amount of SOL burned has dropped sharply from nearly 18,000 SOL to just 1,000 SOL per day, leading to an increase in inflation. The weekly SOL burn rate from February 10 to 16 also dropped to 6.93%, the lowest since October 2024 and almost half of the previous week.

Impact on Real Economic Value (REV)
In addition to the impact on inflation, the implementation of SIMD 96 also affects the real economic value (REV) distributed in the Solana ecosystem.

Specifically, during the week from February 3 to 9, SOL holders received 65.7% of the total REV of the network. However, after SIMD 96 took effect, this number dropped to 58.9% during the week from February 10 to 16. In contrast, the REV ratio for validators has increased.

On-chain data shows that the REV ratio for SOL holders was once close to 72%, but has gradually decreased to 40.9% on February 16. Meanwhile, the validator commission ratio in the same period increased from 25.1% to 56.1%.

Solana REV | Nguồn: Blockworksresearch

SIMD 228 Solution: Adjusting the Inflation Mechanism
To control the rising inflation, the Solana community is looking forward to the approval of SIMD 228, a proposal put forward by Tushar Jain and Vishal Kankani of Multicoin Capital.

SIMD 228 proposes a dynamic inflation mechanism that adjusts based on the proportion of SOL staked. Accordingly:

If the staking ratio falls below 50% of the total supply, inflation will increase to incentivize staking.

If the staking ratio exceeds 50%, inflation will decrease to limit the amount of SOL in circulation.

This mechanism is expected to help control the inflation caused by SIMD 96, although it has not yet completely solved the problem of the decline in the REV distribution rate for SOL holders.

Conclusion
The implementation of SIMD 96 has brought benefits to Solana network validators, but has caused unwanted effects, including increased inflation and a decrease in the REV rate for SOL holders. The solution from SIMD 228 is expected by the community to help balance the Solana ecosystem, ensuring reasonable economic incentives for both SOL holders and network validators.