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<h2>Actionable Insights</h2><ul class="list-bullet"><li value=1><a href="https://github.com/solana-foundation/solana-improvement-documents/pull/550"><span style="text-decoration: underline">SIMD-550: Double disinflation</span></a> proposes updating Solana’s inflation schedule by increasing the disinflation rate from -15% to -30%, doubling the pace of inflation decline. This allows inflation to reach the long-term terminal rate of 1.5% in 2.8 years (H1 2029), rather than 5.7 years (H1 2032).</li><li value=2>Our modeling indicates the proposal would reduce emissions by 18.9M SOL, or ~$1.51B, over six years, while gradually reducing nominal staking yields from ~5.84% to ~4.34%, ~3.00%, and ~2.25% over the first three years.</li><li value=3>Doubling disinflation is expected to have a muted impact on the number of profitable validators, with 2 validators out of 738 transitioning from profitable or breakeven to unprofitable in year one, 13 in year two, and 30 in year three.</li><li value=4>SIMD-550 is an updated version of <a href="https://github.com/solana-foundation/solana-improvement-documents/pull/411"><span style="text-decoration: underline">SIMD-411</span></a> (Nov ‘25), which was closed due to inactivity while the ecosystem waited for new tooling that allows not just validators but also stakers to participate in governance. The original doubling disinflation <a href="https://github.com/solana-foundation/solana-improvement-documents/discussions/261"><span style="text-decoration: underline">discussion thread</span></a> was set up by Austin Federa (Mar ‘25).</li><li value=5>SIMD-550 can be seen as one component of a broader, renewed effort to improve Solana’s tokenomics. Other components include SIMD-553, which proposes adding a new resource fee that is burned, and Alpenglow’s Validator Admission Tickets (VAT).</li></ul><h2>Introduction</h2><p>Solana has moved beyond the need for aggressive bootstrapping. The network has matured into a high-throughput, institutional-grade ecosystem, and the elevated token issuance that helped support its early growth has reached its natural conclusion. We believe Solana’s monetary policy should evolve accordingly: away from bootstrapping and toward a more sustainable inflation schedule suited to a mature network.</p><p></p><p>In this article, we make the case for reducing inflation and, more specifically, for why SIMD-550 is the preferred approach. We then present our modeling of the proposals’ expected effects, including changes to the inflation curve, emissions, total supply, nominal staking yields, and validator profitability.</p><h2>The Case for Inflation Reduction</h2><p>This section outlines the broader rationale for reducing Solana’s inflation rate, independent of the specific mechanics of SIMD-550. Many arguments are built on the economic considerations raised during the <a href="https://www.helius.dev/blog/simd-228"><span style="text-decoration: underline">SIMD-228 discussion</span></a>.</p><p></p><p><strong>Inflation’s Job is Largely Over: </strong>Inflation was necessary to bootstrap the network. That is, it was necessary to distribute stakes, secure a young chain, and seed participation. That job is largely over: Solana is an established network with strong institutional, enterprise, and developer segments. The bulk of the unlocks are behind us. Now, continued high issuance mostly adds unnecessary selling pressure without the buying that bootstrapping it used to provide.</p><p></p><p><strong>Plugging the Leaky Bucket:</strong> High token inflation increases selling pressure, as some stakers, especially in certain jurisdictions, treat staking rewards as ordinary income and must sell a portion to cover taxes. <a href="https://x.com/MaxResnick1/status/1896316441869381914?s=20"><span style="text-decoration: underline">Max Resnick’s analysis</span></a> outlined a 17% “leaky bucket” tax on inflation (i.e., the gap between ordinary income and the 20% long-term capital gains rate). When governments, centralized exchanges, and custody providers take significant cuts of staking rewards, even small reductions in issuance can save the network hundreds of millions of dollars per year.</p><p></p><p><strong>Distortion of Price Signals:</strong> Inflation creates persistent downward price pressure, distorting market signals and hindering fair price comparison. In traditional financial terms, PoS inflation is akin to a publicly traded company executing a small share split every two days. Most charts, dashboards, retail investors, and external observers fail to account for inflation in their analysis, distorting perceptions.</p><p></p><p>A healthy price chart is one of the most effective marketing tools for any ecosystem, influencing not just traders but all participants. In crypto’s psychologically driven markets, price serves as a Schelling point, acting as the key indicator of an ecosystem’s overall health.</p><p></p><p><strong>Penalizing Network Use: </strong>High inflation penalizes the active on-chain use of SOL for activities such as participating in liquidity pools, trading NFTs, or placing order-book bids. Higher staking returns encourage hoarding and reduce financial activity. The effect mirrors traditional finance: higher interest rates raise the risk-free rate and reduce borrowing and spending. In Solana’s case, the “risk-free rate” is the native staking yield.</p><p></p><p>While Solana’s mature and robust Liquid Staking Token (LST) infrastructure may help mitigate some of these adverse effects by enabling active use of SOL without dilution, it also introduces additional costs. These include additional smart contract risk, user experience friction, liquidity fragmentation across tokens, potential slippage when swapping in and out of LSTs, and the burden on users to understand the mechanics of staking liquidity.</p><p></p><p><strong>Renewed Focus on Solana’s Tokenomics: </strong>SIMD-550 can be seen as one component of a broader, renewed effort to improve Solana’s tokenomics. It sits alongside the following proposals:</p><p></p><ul class="list-bullet"><li value=1><a href="https://github.com/solana-foundation/solana-improvement-documents/pull/326"><span style="text-decoration: underline">SIMD-326: Alpenglow</span></a> and <a href="https://github.com/solana-foundation/solana-improvement-documents/pull/357"><span style="text-decoration: underline">SIMD-357: Alpenglow VAT Implementation</span></a>, which seek to remove vote fees—the highest recurring cost for validators—with Validator Admission Tickets (VAT). </li><li value=2><a href="https://github.com/solana-foundation/solana-improvement-documents/pull/556"><span style="text-decoration: underline">SIMD-525’s amendment</span></a>, which proposes to scale down VAT with slot times.</li><li value=3><a href="https://github.com/solana-foundation/solana-improvement-documents/pull/553"><span style="text-decoration: underline">SIMD-553: Resource and Inclusion Fee</span></a> proposes splitting today’s 5,000-lamport signature fee into two components: a base inclusion fee of 2,500 lamports per signature, paid to the leader, and a resource fee (calculated as requested cost units multiplied by the resource fee rate), which is burned.</li></ul><p>This renewed focus is a natural outcome of teams pushing to modernize Solana’s arguably outdated tokenomics.</p><h2>SIMD-550 as the Preferred Mechanism</h2><p>Unlike prior inflation proposals that advanced to a governance vote, SIMD-550 reduces emissions by accelerating Solana’s existing disinflation schedule rather than introducing a new emissions mechanism. This approach offers several key benefits:</p><p></p><p><strong>Simplicity: </strong>Doubling the disinflation rate requires modifying a single parameter, making it the simplest possible protocol change that delivers a meaningful reduction in inflation. This adjustment is straightforward to implement and will not consume core developer resources. It carries a low risk of introduci
