$SOL beat the broader market. Today, both BTC and ETH are just grinding sideways, while the one that really moved was the one that “walked out on its own.” In the Chinese community, people credit the US spot ETF with the win. That explanation isn’t wrong, but it leaves out another thing happening on-chain on the very same day. Solana validators are voting, and the item being cut is exactly the kind of thing ETF buyers have been coming for.
In the past 24 hours, SOLUSDT is up 7.22%, while BTC and ETH over the same period are only up by a little more than that. On-chain, Solana is, for the first time, moving a complete governance process on-chain: three proposals are being voted on at the same time, with all firepower focused on SGP-0002. It aims to raise Solana’s annual discount rate from 15% to 30%, doubling the speed at which inflation comes down. The endpoint stays the same, but the time to reach it is brought forward by three years. The accompanying SGP-0003 remakes transaction fees: it splits them into one payment as a bundling fee to block proposers, and another resource fee charged based on computational consumption and fully burned.
These two things collide in the same week, but they point in opposite directions. As of August 26, the US spot SOL ETF’s cumulative net inflows are $1.26 billion, a record high. Of the nine products, Bitwise’s BSOL alone captures 77% of the cumulative net inflows. Morgan Stanley’s MSOL has a lower fee rate than BSOL, yet the money still went first to BSOL. It won by being the first to pass through on-chain staking rewards to holders. The money follows staking rewards, not much to do with the issuer’s branding. The ETF buys yield; what SGP-0002 is meant to do is to push that yield lower.
The number most often cited in the promotional talking points is that 18.9 million fewer SOL will be issued over six years—sounds like a supply shock. Based on current protocol inflation, Solana issues about 64,000 new SOL per day. Over six years, the “missing” 18.9 million SOL is actually less than even the amount of additional issuance in just the past ten months. The proposal documents are more honest than the people reposting them: their stated scope is 2.6% below the current issuance schedule. Don’t overestimate the “burn” line either. Right now, the entire network burns only a little over 600 SOL per day. Based on the proposal’s own calculations, once the new rules run, that could reach 7,500 to 9,000 SOL. Sounds like a huge multiple, but set against more than 60,000 SOL of daily additional issuance, it’s still a small fraction.
Both sides argue without ambiguity. On August 14, Helius’s mert publicly said that some so-called stakeholders have motives to profit for themselves by diluting coin holders through increased issuance; he believes this whole argument doesn’t hold water. Standing on the other side is Solana Company, listed on Nasdaq. In the second quarter, 99.4% of this company’s revenue came from staking rewards, and on August 21 it announced opposition to SGP-0002. Of course that stance has self-interest, but the issue it points to is real. If this cut goes through, the first pain will be felt by validators and institutions that survive on staking income. The proposal document itself also admits that under the new table, there will be a group of validators dropping earlier into a non-profitable position. Another listed Solana treasury company, SOL Strategies, took the opposite route: its four validators all voted in favor, with three votes each. Same kind of company that makes its living off SOL, one opposes and the other supports— the difference is that the former sells staking rewards, while the latter sells validator services. Grayscale’s estimate lands somewhere in the middle. They think that if both Ethereum and Solana’s token-economics changes in this cycle are implemented, Solana’s annual inflation would be pushed to just over 1% around 2031, scarcity would increase, and staking returns would move down in tandem.
I support this proposal, but I don’t buy the promotional spin. Using increased issuance to pay staking participants’ modest nominal gains is essentially an internal transfer payment among token holders. Non-stakers get diluted; stakers get it back. The network doesn’t actually gain any new value as a result. Pushing this curve down is the right move. Changes on the supply schedule are limited; the pressure will transmit to the demand side. Once yields move lower, the 77% BSOL share will face a test: when that money originally came in, it bought SOL or it bought yield? I’m inclined to believe buying SOL has a larger share, because on August 26, the cheaper MSOL’s single-day net inflows already surpassed BSOL. Fees and channels themselves are also at work. After the accelerated discount rate takes effect: if the BSOL share keeps falling while total inflows don’t, then my view holds. If total inflows collapse along with the yield, then I was wrong.
There’s also another risk: the voting rules for this round are fighting each other. The Governance FAQ requires that one-third of the network’s staked participation is present, and that two-thirds of the votes cast in favor must be “yes” for it to pass. In the proposal repository, it says there is no participation threshold: as long as the proportion of yes votes out of yes plus no votes is two-thirds, it passes; abstentions don’t count. In the August 26 snapshot, the yes votes are close to seven times the no votes. Under the repository’s rule, it passes easily; under the FAQ’s rule, the staked amount participating would be less than 24% of total active stake, far from one-third. Same vote, two rulebooks. #Solana ’s first time using on-chain governance hits this mismatch—its level of trouble isn’t lower than the proposal itself.
The voting ends with the close of epoch 1023. The earliest estimate from the official side was Thursday. I ran the timing based on the current block production speed; the landing point should be sometime tomorrow night Beijing time. Epoch length already drifts with block production speed. Given the dispute over the accompanying interpretations of the situation, it most likely will come out within these next couple of days.
$SOL Next, you can see whether the spot ETF money keeps going into BSOL. After the yield is cut, whether that 77% share stays put or disperses will explain who’s behind this inflow better than any talk about how many fewer coins are issued on the inflation chart.
In the past 24 hours, SOLUSDT is up 7.22%, while BTC and ETH over the same period are only up by a little more than that. On-chain, Solana is, for the first time, moving a complete governance process on-chain: three proposals are being voted on at the same time, with all firepower focused on SGP-0002. It aims to raise Solana’s annual discount rate from 15% to 30%, doubling the speed at which inflation comes down. The endpoint stays the same, but the time to reach it is brought forward by three years. The accompanying SGP-0003 remakes transaction fees: it splits them into one payment as a bundling fee to block proposers, and another resource fee charged based on computational consumption and fully burned.
These two things collide in the same week, but they point in opposite directions. As of August 26, the US spot SOL ETF’s cumulative net inflows are $1.26 billion, a record high. Of the nine products, Bitwise’s BSOL alone captures 77% of the cumulative net inflows. Morgan Stanley’s MSOL has a lower fee rate than BSOL, yet the money still went first to BSOL. It won by being the first to pass through on-chain staking rewards to holders. The money follows staking rewards, not much to do with the issuer’s branding. The ETF buys yield; what SGP-0002 is meant to do is to push that yield lower.
The number most often cited in the promotional talking points is that 18.9 million fewer SOL will be issued over six years—sounds like a supply shock. Based on current protocol inflation, Solana issues about 64,000 new SOL per day. Over six years, the “missing” 18.9 million SOL is actually less than even the amount of additional issuance in just the past ten months. The proposal documents are more honest than the people reposting them: their stated scope is 2.6% below the current issuance schedule. Don’t overestimate the “burn” line either. Right now, the entire network burns only a little over 600 SOL per day. Based on the proposal’s own calculations, once the new rules run, that could reach 7,500 to 9,000 SOL. Sounds like a huge multiple, but set against more than 60,000 SOL of daily additional issuance, it’s still a small fraction.
Both sides argue without ambiguity. On August 14, Helius’s mert publicly said that some so-called stakeholders have motives to profit for themselves by diluting coin holders through increased issuance; he believes this whole argument doesn’t hold water. Standing on the other side is Solana Company, listed on Nasdaq. In the second quarter, 99.4% of this company’s revenue came from staking rewards, and on August 21 it announced opposition to SGP-0002. Of course that stance has self-interest, but the issue it points to is real. If this cut goes through, the first pain will be felt by validators and institutions that survive on staking income. The proposal document itself also admits that under the new table, there will be a group of validators dropping earlier into a non-profitable position. Another listed Solana treasury company, SOL Strategies, took the opposite route: its four validators all voted in favor, with three votes each. Same kind of company that makes its living off SOL, one opposes and the other supports— the difference is that the former sells staking rewards, while the latter sells validator services. Grayscale’s estimate lands somewhere in the middle. They think that if both Ethereum and Solana’s token-economics changes in this cycle are implemented, Solana’s annual inflation would be pushed to just over 1% around 2031, scarcity would increase, and staking returns would move down in tandem.
I support this proposal, but I don’t buy the promotional spin. Using increased issuance to pay staking participants’ modest nominal gains is essentially an internal transfer payment among token holders. Non-stakers get diluted; stakers get it back. The network doesn’t actually gain any new value as a result. Pushing this curve down is the right move. Changes on the supply schedule are limited; the pressure will transmit to the demand side. Once yields move lower, the 77% BSOL share will face a test: when that money originally came in, it bought SOL or it bought yield? I’m inclined to believe buying SOL has a larger share, because on August 26, the cheaper MSOL’s single-day net inflows already surpassed BSOL. Fees and channels themselves are also at work. After the accelerated discount rate takes effect: if the BSOL share keeps falling while total inflows don’t, then my view holds. If total inflows collapse along with the yield, then I was wrong.
There’s also another risk: the voting rules for this round are fighting each other. The Governance FAQ requires that one-third of the network’s staked participation is present, and that two-thirds of the votes cast in favor must be “yes” for it to pass. In the proposal repository, it says there is no participation threshold: as long as the proportion of yes votes out of yes plus no votes is two-thirds, it passes; abstentions don’t count. In the August 26 snapshot, the yes votes are close to seven times the no votes. Under the repository’s rule, it passes easily; under the FAQ’s rule, the staked amount participating would be less than 24% of total active stake, far from one-third. Same vote, two rulebooks. #Solana ’s first time using on-chain governance hits this mismatch—its level of trouble isn’t lower than the proposal itself.
The voting ends with the close of epoch 1023. The earliest estimate from the official side was Thursday. I ran the timing based on the current block production speed; the landing point should be sometime tomorrow night Beijing time. Epoch length already drifts with block production speed. Given the dispute over the accompanying interpretations of the situation, it most likely will come out within these next couple of days.
$SOL Next, you can see whether the spot ETF money keeps going into BSOL. After the yield is cut, whether that 77% share stays put or disperses will explain who’s behind this inflow better than any talk about how many fewer coins are issued on the inflation chart.