Solana started the year as one of the most promising blockchains, but reports of inflated transaction volumes, high bot activity, and hundreds of millions of dollars paid out each month to network validators have become some of the industry’s most debated topics.
Magazine decided to sort out the myths from the facts. Some of the claims are partly true, while others are misleading.
Claim: Solana’s inflation rate is too high
Some industry watchers criticize the network for its high inflation rate, often quoting Messari’s statistic that the circulating supply of SOL has risen 13.4% over the past year.
Growth of SOL’s circulating supply. (Messari)
Solana’s actual inflation rate for SOL’s total supply started at 8% in 2021 and has since dropped to around 5% as of Sept. 6. The network plans to reduce inflation by 15% annually until it reaches its target rate of 1.5%.
There is a long history of bootstrapping networks as they get up to speed, but supporting metrics raise concerns about the current sustainability of Solana’s economic model.
Solana earned $31 million in fees in August, of which $15.5 million was erased through its 50% fee-burning mechanism. The network paid out $335 million in block rewards, meaning it “spent” $319.7 million more than it took in fees, according to Token Terminal.
Couple that with the month’s average token price of $147.76, and an estimated 73,327 SOL entered the Solana economy daily throughout August.
“They’re printing roughly $10 million worth of Solana every single day (depending on the price of SOL). That’s a lot of money that goes to validators who can easily go ahead and put a portion of that back into transaction fees to make their DEX volumes much higher,” crypto educator David Bostik, also known as DB Crypto — who has been a vocal critic of the blockchain — tells Magazine.
But Solana is not the only inflationary chain in the…
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