Grayscale Research Head Zach Pandl stated that if the token economics changes being discussed within the Ethereum ($ETH) and Solana ($SOL) communities are implemented, the rate of supply increase for both crypto assets could significantly slow, potentially having a supportive effect on prices.
According to Pandl, the code changes currently underway in the Ethereum and Solana ecosystems aim to reduce the annual token inflation rates of $ETH and $SOL. Assuming other conditions remain constant, slower supply growth could reduce the amount of new tokens entering the market, increasing the scarcity of existing assets.
According to Grayscale’s estimates, if these regulations are implemented, Ethereum’s annual supply inflation could fall to approximately 0.4% by the end of 2031. This rate is close to Bitcoin’s supply growth rate. Solana’s annual supply inflation is projected to fall to around 1.1%.
For comparison, Grayscale noted that the annual increase in gold supply is approximately 1.8 percent, while US consumer price index inflation is approximately 3.3 percent.
The proposed changes to Ethereum and Solana are still being debated by the communities and are not yet finalized. Pandl stated that the proposals for Solana appear to have broader consensus and are therefore relatively more likely to be implemented.
However, reducing token inflation could also lead to a decrease in the rewards received by staking investors. This is because a significant portion of $ETH and $SOL staking returns comes from new token issuances.
Pandl noted that lower supply growth could increase rarity, putting upward pressure on $ETH and $SOL prices, and that investors holding tokens without staking could particularly benefit from this.
*This is not investment advice.
