Cryptocurrency research firm Galaxy Research stated that Ethereum ($ETH) and Solana ($SOL) are assessing significant changes in their token supply and inflation policies, and that investors should pay attention to potential shifts in supply structure. According to the firm, the fundamental question facing both networks is how to balance the incentive budget needed to ensure blockchain security with the long-term pressure on token supply.
Galaxy Research highlighted EIP-8361, or “Tapered Issuance Burn,” a proposal submitted by six researchers, including Ethereum Foundation researcher Justin Drake, on the Ethereum side. The proposal envisions burning an increasing portion of the rewards given to validators as the amount of $ETH staked increases. If the amount of $ETH staked reaches 50% of the total supply, 100% of validator rewards will be burned, thus eliminating the economic incentive to stake new $ETH above that level.
Currently, about one-third of the $ETH supply is staked, but if the proposal is accepted, the annual yield on the consensus layer could drop from approximately 2.6% to 1.2%. MEV revenues and priority fees will not be affected by the change. If the regulation is accepted, a transition period of approximately 18 months is planned. Taking into account the normal Ethereum update schedule, stakers may have about two years to adapt to the new model.
However, Galaxy Research emphasized that EIP-8361 is still in the draft stage and there is no voting process or definite implementation schedule. The proposal is being considered for inclusion in the Hegotá upgrade, which is planned to follow the Glamsterdam update. While the selection process is expected to continue until November, even if the proposal is accepted, the update is not expected to roll out before later in 2027.
At the heart of the debate surrounding Ethereum is how high the staking rate should rise in the long term. The researchers who developed EIP-8361 believe the current incentive model continuously incentivizes the staking rate upwards, potentially reaching around 55% by 2028. According to the researchers, this could increase concentration in liquid staking providers and large validator operators. The proposed model aims to eliminate the perpetual yield base in $ETH, limit supply dilution, and strengthen $ETH’s monetary properties.
In contrast, some prominent figures in the DeFi, staking, and Ethereum developer communities argue that the sharp drop in staking yields could put pressure on individual validators, harm Ethereum’s DeFi ecosystem, and reduce institutional investor demand. Criticisms also focus on the possibility that the projected timeframe for a significant change in Ethereum’s monetary policy may be too short.
On the Solana side, two separate proposals are progressing through the network’s new on-chain governance system. Proposal SIMD-0550, evaluated under SGP-0002, aims to increase Solana’s annual disinflation rate from 15% to 30%. If this is achieved, the date for $SOL to reach its final inflation rate of 1.5% will be moved from 2032 to 2029. According to Galaxy Research, this change could mean removing approximately 18.9 million SOLs from future supply.
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SIMD-0553, included under SGP-0003, aims to change Solana’s transaction fee system. Instead of the current fixed fee per signature model, a fee system will be introduced that varies according to the computational resources required for the transaction, and all of these fees will be burned. Estimates suggest that this change could increase the daily $SOL burn in Solana from approximately 650 $SOL to between 7,500 and 9,000 $SOL.
Both Solana proposals have advanced to the discussion phase after securing the required 15% support from active stakes. Following approximately 16 days of discussion, a staking view and voting process will begin, lasting 11 epochs, or about 22 days. The proposals require the support of two-thirds of the determining stake amount to be accepted.
According to Galaxy Research, while the changes Ethereum and Solana are discussing have different structures, they boil down to the same fundamental question: How many tokens need to be issued to ensure network security, and what security compromises are acceptable in exchange for lower inflation?
The research firm noted that the proposals on Solana are more limited and directly aimed at increasing token rarity compared to the change on Ethereum. While a faster reduction in inflation would benefit long-term $SOL holders, the cost would largely be borne by validators and stakers, whose staking returns would decrease more rapidly. SIMD-0553, which envisages burning transaction fees, could strengthen the link between network usage and value transfer to $SOL.
Galaxy Research also added that current inflationary policies have historically served a significant function for both blockchains. Token issuance enabled payments to validators and funded blockchain security during periods when sufficient economic activity was not yet present on the networks. However, the company believes these incentives should not be permanent.
According to Galaxy Research, a healthier long-term model would be for validator activities to evolve into a low-margin infrastructure service, and for network security to be financed by on-blockchain economic activity and block space demand rather than new token issuances.
However, the company believes that supply-side changes alone will not be decisive in terms of $ETH or $SOL pricing. Galaxy Research stated, “Supply-side regulations can help and create strong narratives, but that’s not the main constraint for either blockchain. It’s demand that will ultimately reprice these assets.”
Galaxy Research stated that improving the technology infrastructure of the Ethereum and Solana ecosystems, increasing enterprise adoption, and expanding products for individual users should remain a priority. According to the research firm, while security features that decentralize networks from centralized systems are critical in the long term, they should not overshadow efforts to create demand at current adoption levels.
*This is not investment advice.
