An interesting feature of the tokenomics of SOL, Solana’s native cryptocurrency, is the role played by inflation. New SOL are minted at the end of every epoch and paid to those that committed stake during the epoch. The amount minted — and therefore the rate of inflation — is controlled by the protocol and set to decrease over time. The question is whether other sources of revenue can fill the gap in time.

The Mechanism

How inflation works in the Solana protocol

New SOL are minted at the end of every epoch and paid to those that committed stake during the epoch. The amount of SOL minted, and therefore the rate of inflation, is controlled by the Solana protocol and set to decrease over time. Starting at an annualised rate of 8% at the genesis of the Solana mainnet, inflation is set to fall to a long-run target rate of 1.5%; it is currently at approximately 3.7%. The date to reach the target rate was originally set in 2032. However, a proposal to bring this date forward to 2029 — now incorporated into a formal governance proposal labelled SGP-0003— is currently being considered by the Solana community.

Staking is central to the operation of the Solana consensus protocol. Operators of validator nodes, which process transactions, act as “Leaders” to produce blocks and establish consensus on the correct state of the network’s data, are required to pledge stake in the form of SOL to the protocol. This carries a high opportunity cost, which acts as a barrier to entry to frivolous or malicious actors. In return, validators receive a number of direct and indirect rewards in proportion to their contribution to total stake pledged. Direct rewards include freshly minted SOL, base and priority transaction fees, and “Jito Tips” — commissions paid to guarantee inclusion of a set of related transactions in a single slot. Indirect rewards include more frequent turns as block leader and relay node for outbound block data and voting rights in governance proposals.

Validators can stake their own capital. However, the protocol also facilitates non-custodial delegated staking, in which someone can lock SOL in their wallet and commit it to a third party validator, where it gets aggregated with the stake delegated by others in order to increase the node’s share of participation rights and rewards. This arrangement allows those who do not want the expense or commitment of running their own node to participate in staking and gives node operators access to a bigger pool of stake. Some rewards, notably inflation, are distributed by the protocol directly to the wallets of those that delegated stake. Others are shared between the validator and the stakers, with the distribution rate set by the validator. 

Why Inflation Was Included

The bootstrapping problem and the architecture decision

The decision to reward stakers with newly minted SOL was driven by the problem of bootstrapping a new network. Network security depends on there being a sufficient value of stake and number of validators to make attacks difficult and costly — the last thing a new network needs is a reputation for being insecure. However, at its launch Solana was unlikely to generate sufficient transaction fees to compensate stakers from that source alone. This was partly a matter of volume: it takes time to build network usage. It was also the result of conscious decisions around system architecture and fee structure to position Solana as a low-cost, high-volume transaction network.

Transaction fees are split into two categories. All transactions pay a base fee, proportionate to the number of cryptographic signatures contained within the transaction. This fee is deliberately set very low at 0.000005 SOL — approximately $0.00037 — per signature [i]. Moreover, half of base fees are burned by the protocol and so not available to validators. Optionally, users can also submit a priority fee to incentivise leaders to include a transaction in their block. Priority fee prices are dynamic, varying according to the complexity of the transaction, measured in “Compute Units”, and the level of congestion on the network at execution time. However, Solana’s technical architecture is designed to facilitate parallel processing of transactions hitting different accounts, meaning that competition for block space is localised to particular high-volume accounts and many transactions incur minimal priority fees.

Why Inflation Was Designed to Fall

The case for disinflation

The reducing rate of inflation was built into the protocol for several interconnected reasons. The bootstrapping logic has a natural endpoint: a subsidy that runs forever is no longer a bootstrap, it becomes a permanent feature of the economic model. The scheduled decay was the protocol designers’ acknowledgment that the subsidy should phase out as the network matures and fee revenue grows to replace it. The terminal floor of 1.5% — rather than zero — reflects an ongoing view that some baseline issuance is useful for ensuring broad validator participation, but the trajectory toward that floor was always intentional.

Predictability and credibility were also central. A fixed, pre-announced disinflation schedule gives all participants — stakers, validators, developers, investors — a known path to plan against. By encoding the schedule in the protocol from the outset, the founders committed to a transition that no single party could easily reverse or manipulate. This is the same logic that underlies central bank inflation targets — commitment to a known path is itself economically valuable.

Finally, there was a question of economic alignment.  As the network matured into the strategic position envisioned by its creators — as Solana’s founders described it, the “Internet Capital Market” — it was believed appropriate that fee revenue, which is based on the real economic value generated by the network, should replace inflation as the principal source of staking rewards. Inflation-based rewards act as a tax on holders of non-staked SOL, who are not the people gaining benefit from using the network, leading to a risk of misaligned incentives. Certain unusual behaviour patterns observable on Solana, including a staking ratio much higher than peer protocols and very low use of native SOL as collateral in DeFi protocols may be attributable to the effects of such incentives.

The Other Side of the Coin

Fee revenue is not keeping pace

So, disinflation has a sound theoretical basis and some empirical support. However, there is another side to the coin. Although transaction volumes on the network have increased significantly, fee revenue has failed to keep pace. Analysis by Deepak Jassal of 01 Capital has found that while DEX volume on Solana rose 80% between 2024 and mid-2026, transaction fees expressed in basis points fell 79% over the same period, from 10.3 to 2.2.  This decline may reflect reduced complexity of the average transaction or it may indicate that activity is more evenly distributed across the network, reducing congestion-driven priority fee pressure. But either way, it means that total transaction volumes must grow very quickly to compensate. And it seems that they are not growing quickly enough. 

After deducting burning and node operating costs, aggregate fees reaching providers of staked capital in the twelve months to June 2026 totalled approximately 1.99 million SOL and were declining sharply over that period, from 1.26 million SOL in Q3 2025 to 0.66 million SOL in Q2 2026, a fall of approximately 48% in the network’s own unit of account [ii].

Fee Revenue vs Inflation Rewards — The Structural Gap

Inflation-based rewards totalled approximately 8.5 million SOL in the twelve months to June 2026 — roughly 81% of total staker income against 1.99 million SOL from fees. Both figures are in the network’s own unit of account, stripping out exchange rate effects. The imbalance is structural, not a dollar-denominated artefact.

Inflation-based rewards are also set to fall, in line with the protocol’s disinflation schedule, toward a terminal floor of approximately 3.9 million SOL per year at the 1.5% rate [iii]. Under the existing schedule this floor is reached by 2032; under the accelerated rate in SGP-0003 [iv], the date comes forward to 2029. The gap between current inflation rewards (8.5 million SOL) and the terminal floor (3.9 million SOL) is approximately 4.6 million SOL per year of income that must be replaced by fee revenue. With fee revenue currently running at under 2 million SOL and declining , that replacement is not in prospect.

What This Means

The revenue gap and what fills it

Based on current trends, the revenue gap to stakers is widening, not shrinking. The obvious question is what that means for capital commitment and, ultimately, network security. The follow-on question is how the gap should be filled.

If the efficiency of Solana’s architecture means volumes alone cannot be counted on to grow revenues, it is perhaps time to rethink the fee structure. The governance system has already taken a first step in this direction — SIMD-553, accepted in July 2026, introduces a protocol-level fee burn tied to compute unit usage, creating for the first time a demand-linked deflationary mechanism alongside the existing supply-side disinflation schedule. This is structurally the right direction: it creates a connection between network usage and token scarcity that does not depend on congestion-driven priority fees. But at current volumes the effect is modest, and the gap between what fee reform can plausibly deliver and what the inflation transition requires remains large.

The implications for validators, stakers, and institutional participants considering the network as infrastructure are explored in the companion piece, “Does SOL’s Price Matter for Network Resilience?”, published separately by the Solana Research Institute.

[i] Based on SOL Price at time of writing of $75.59

[ii] Quarterly fee revenue converted to SOL using average of opening and closing SOL/USD prices for each quarter. Q3 2025: avg $176.88; Q4 2025: avg $173.31; Q1 2026: avg $135.60; Q2 2026: avg $77.36. Trailing twelve-month average: $140.79. Dollar fee revenue figures from Deepak Jassal, 01 Capital, sourced from Messari and DeFiLlama. Figures are indicative.

[iii] Terminal floor calculated at 1.5% inflation on approximately 432 million SOL staked at current levels, converted at trailing twelve-month average price of $140.79. The SOL-denominated figure is more stable than the dollar equivalent as it is independent of exchange rate movements

[iv] SGP-0003 incorporates SIMD-550 (accelerated disinflation) alongside related governance proposals. Active signalling as of August 2026; outcome pending at time of publication.