Multichain Capital partners Tushar Jain and Vishal Kankani introduced a proposal to address the inflation of Solana’s native crypto, SOL.
The goal is to use a market-driven mechanism to adjust Solana’s emissions dynamically, moving away from the network’s current fixed-rate issuance model.
Solana’s existing emissions mechanism, established in 2021, follows a rigid, time-based schedule that doesn’t consider the network’s activity or economic conditions. It has been dubbed “The Solana Protocol” by critics “dumb emissions”For its inability adapt to market reality.
Changes in emission
This solution is intended to be introduced into the existing system. “Smart Emissions,”A programmatic and market-based system that dynamically adapts SOL issuance in response to stake participation.
A key feature of the mechanism is that it reduces emissions when the stakeholder participation rate exceeds the recommended 50% target and sets a limit on the upper end of the emission curve in order to keep emissions at a level where they are stable.
The formula for these adjustments is tied to stake participation, MEV revenue, and validator’s commissions. This ensures that the changes made are proportionate to current network conditions.
According to the proposal, a reduction in inflation would encourage more DeFis to adopt SOL. “risk-free”Inflation rates can stimulate economic growth and the creation of new protocols.
In the proposal, it was stated that SOL shareholders earned 2,1 Million SOL in maximum extractable value (MEV), which is worth approximately $430,000,000, during the fourth quarter. This highlights the robust economic activities on Solana.
As MEV revenues continue to grow, the dependence on tokens emissions for attracting stakers has decreased. The proposal argues that Solana’s fixed emissions now result in unnecessary inflation, creating sell pressure and diluting token value.
Risks and perceptions of the market
Token holders are affected by high inflation, which creates an impression of instability within the network. The authors liken Solana’s current inflation model to a public company issuing new shares every two days, leading to continual downward price pressure.
By transitioning from the current dynamic system to this one, it is hoped that investors and other stakeholders will gain confidence.
The proposed design also addresses the theoretical risk of long-range attack by maintaining stake participation above critical thresholds (33 percent for safety with an aim of 50%).
Multichain Capital’s proposal emphasizes the role of market mechanisms in achieving optimal outcomes. The network will become more reactive to the economic activity by tying emission to current conditions. This also enhances security and decentralization.
The following is the document:
“Markets are the best mechanism in the world to determine prices, and therefore, they should be used to determine Solana’s emissions.”
A proposal was rejected because it did not allow for simple solutions, such as a fixed rate of emissions to be adjusted to changes in conditions. Another option that directly tied emissions to MEV revenue was also rejected due to its potential for abuse.
Postings in: Solana Crypto, Featured Articles, Governance Technology The Author 
Gino Matos
Gino is a journalist and law graduate with 6 years’ experience. Ses expertise is mainly focused on developments within the Brazilian Blockchain ecosystem, and in Decentralized Finance (DeFi).
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Assad Jafri
AJ has been a journalist for more than a decade, and he’s been honed in his craft around the world. He specializes in financial reporting and now concentrates on cryptocurrency.
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