Solana Approves Faster Disinflation, but SOL Strategies CEO Warns the Move May Be Premature

Solana has approved a significant change to its token issuance schedule, but the decision is already exposing a deeper debate over how quickly the network should alter its economic model. SGP-0002, known as Double Disinflation, passed with 67% support from participating stake, narrowly clearing the required two-thirds threshold. The proposal would increase the annual rate at which Solana’s inflation declines from 15% to 30%, while keeping the terminal inflation rate unchanged at 1.5%.

The effect would be to shorten the estimated time required to reach that terminal rate from about 5.7 years to roughly 2.8 years. Supporters see the change as a way to reduce future issuance more quickly, but SOL Strategies CEO Michael Hubbard argues that the timing is premature. In his view, Solana’s current inflation rate of roughly 4% to 4.5% is not extreme enough to justify accelerating the decline before the consequences for validators, staking revenue and applications are fully understood.

SGP-0002 Passed by a Very Narrow Margin

The final governance tally showed 176.29 million SOL in favor of the proposal, equal to 67% of participating stake. Another 66.19 million SOL voted against it, while 20.63 million SOL abstained. Overall participation reached 60.7% of eligible stake.

That result placed the proposal only around one-third of a percentage point above the 66.67% approval requirement. The narrow margin matters because the change affects one of the network’s most fundamental economic parameters.

Under the new schedule, projected issuance could fall by an estimated 18.9 million SOL over six years compared with the existing path. That amount would represent about 2.6% of the supply projected under the previous schedule.

The change therefore has meaningful long-term consequences for token issuance, but it does not automatically mean the market price will respond in the same proportion.

Hubbard Rejects the Idea That Inflation Is SOL’s Main Problem

Michael Hubbard argues that treating inflation as the primary reason for SOL’s market performance oversimplifies the issue.

At an annual inflation rate of roughly 4% to 4.5%, he does not consider current issuance unusually high. He also points out that staking rewards remain largely within the Solana economy because tokens distributed to stakers are often restaked rather than immediately sold.

That distinction weakens the assumption that every newly issued SOL represents direct sell pressure.

If a meaningful share of staking rewards is continuously redeployed, then reducing issuance may not create an immediate or easily measurable price effect. Hubbard therefore believes the connection between lower inflation and higher SOL prices is less direct than some supporters suggest.

Validator Economics Are at the Center of the Debate

The strongest concern around faster disinflation is not necessarily the token price, but validator economics.

Galaxy Research raised a similar warning before the vote. Lower staking rewards could make validator operations less attractive if increased fee income or higher SOL prices fail to compensate for the lost issuance revenue.

Validators face ongoing costs such as hardware, bandwidth, voting expenses and operational infrastructure. Smaller operators can be especially sensitive to reductions in rewards because their fixed costs do not decline simply because inflation does.

Frequent changes to major economic parameters can also make long-term financial planning more difficult. Businesses built around staking and validator services need some predictability when estimating revenue, capital requirements and expected returns.

SOL Strategies has direct exposure to these issues because it operates validators, provides staking services and holds a SOL treasury.

The Inflation Vote Is Only the First Step Toward Implementation

Although SGP-0002 passed, the result does not immediately change Solana’s issuance schedule.

The governance vote provides a mandate, but the technical implementation still requires SIMD-0550 to be integrated into validator clients. Inflation calculations must remain consistent across implementations, and the feature would need to be activated on mainnet through a feature gate at an epoch boundary.

Rewards earned before activation would not be changed retroactively. The faster disinflation schedule would begin from the following epoch after activation.

This implementation process matters because governance approval and economic activation are separate stages. Until the software changes are completed and activated, the existing schedule remains in place.

SGP-0003 Created a Separate Governance Dispute

The inflation debate has been complicated by another proposal, SGP-0003, which concerns resource and inclusion fees.

The official tally showed 53.9% support, 18.92% opposition and 27.18% abstention. Under Solana’s current governance documents, abstentions count toward both quorum and the denominator used for approval, which leaves the proposal below the required two-thirds threshold.

Hubbard argues that participants were given a different interpretation before voting began. According to that interpretation, abstentions would count toward quorum but would be excluded when calculating the share of decisive votes cast for or against.

Under that method, SGP-0003 received approximately 74% support among votes that selected either “for” or “against,” enough to pass.

His objection is therefore procedural rather than purely economic. He argues that the rules communicated when voting begins should remain the rules used to determine the result, regardless of whether the policy itself is desirable.

Solana’s Current Constitution Uses a Different Formula

The dispute exists because Solana’s current governance language appears to conflict with the formula described before the ballot.

Article IV of the Solana Constitution states that the approval denominator includes “For + Against + Abstain.” The repository’s voting policy also says abstaining stake counts as participation without contributing to the “for” tally.

However, Solana Compass had stated before the vote that SGP-0003 needed 66.67% of the combined “for” and “against” stake and that abstentions would not affect the final outcome.

An earlier report on the tokenomics debate also described the calculation as excluding abstentions from decisive stake.

That inconsistency has turned SGP-0003 into a test of governance credibility as much as a debate over fees.

Resource Fees Could Change Costs for Solana Applications

SGP-0003 supports a redesign of Solana’s transaction-fee structure through SIMD-0553.

Solana currently charges a base fee of 5,000 lamports per signature, with half burned and half paid to the block-producing validator.

Under the proposed model, transactions would instead pay a 2,500-lamport inclusion fee to the block producer plus a separate resource-based fee tied to the amount of compute requested. The resource component would be burned entirely.

The proposal’s authors estimated that, using May 2026 network activity, daily SOL burns could increase from roughly 648 SOL to between 1,500 and 1,800 SOL during the first stage. Later phases could lift that range to between 3,750 and 4,500 SOL, and eventually 7,500 to 9,000 SOL per day.

That would materially change the balance between issuance and token burning.

More Complex Applications Could Face Higher Costs

Hubbard’s concern is that resource-based pricing could introduce unnecessary complexity and increase costs for certain classes of applications.

Trading routers, order-book systems and other compute-heavy applications could pay more because fees would depend on the resources requested by each transaction.

The impact would not be uniform. A simulation hosted by Sandwiched.me showed that costs could vary according to transaction design, compute limits and whether applications optimize resource usage.

That means some applications could absorb the new structure relatively efficiently, while others could face a more noticeable increase in transaction costs.

The debate is therefore not simply about whether burning more SOL is positive. It is also about how those burns are funded and which applications ultimately pay for them.

Hubbard Also Raised a Potential Conflict-of-Interest Concern

SIMD-0553 was written by Cavey of Temporal, a research and development company that says it built HumidiFi, one of Solana’s major proprietary automated market makers.

Hubbard alleged that the proposed fee design could benefit the associated propAMM while imposing higher costs on direct competitors.

The source does not provide an independent transaction-level study demonstrating the size of any such competitive advantage. The conflict claim should therefore be treated as Hubbard’s assessment rather than an established outcome.

Still, the allegation adds another layer to the governance debate because economic proposals can affect different market participants unevenly.

Solana Has Already Struggled With Inflation Reform Before

SGP-0002 is not the first attempt to rethink Solana’s issuance model.

In March 2025, validators voted on SIMD-0228, which proposed replacing the fixed inflation schedule with a dynamic rate linked to staking participation. Under that system, inflation would fall when a larger share of SOL was staked and increase if participation declined enough to raise security concerns.

The proposal received 61.39% support but failed to reach the required two-thirds threshold.

At the time, Solana’s annual inflation was around 4.6% and was already programmed to decline by 15% each year until reaching 1.5%. Critics warned that a sharper reduction could hurt smaller validators while fixed operational expenses remained unchanged.

The latest vote revisits many of those same concerns, but this time the faster-disinflation proposal passed.

Hubbard’s Position Is More About Timing Than Opposition to Reform

Hubbard is not arguing that Solana should keep its current inflation path forever.

His concern is that neither SGP-0002 nor SGP-0003 is critical enough to justify rushing changes before their consequences are better understood. He sees the timing and governance process as more important than the long-term policy goal itself.

That distinction matters because criticism of faster disinflation does not automatically mean support for permanently higher inflation.

The question is whether the network gains enough from making the change now to justify the risks created for validators, applications and businesses that depend on predictable tokenomics.

Conclusion

Solana’s SGP-0002 proposal passed with 67% support, clearing the two-thirds threshold by only a narrow margin. The measure would double the annual disinflation rate from 15% to 30% and shorten the path to Solana’s 1.5% terminal inflation rate from about 5.7 years to 2.8 years.

SOL Strategies CEO Michael Hubbard argues that the move is premature because current inflation of roughly 4% to 4.5% is not extreme, staking rewards are frequently restaked, and lower issuance may not translate directly into higher SOL prices. He also warns that validator economics and governance consistency deserve more attention before major economic parameters are changed.

Final Takeaway

The key Solana debate is no longer simply whether lower inflation is desirable. It is whether the network is changing its economics faster than validators, applications and governance processes can comfortably absorb. SGP-0002 gives Solana a mandate for faster disinflation, but implementation still lies ahead, and the unresolved SGP-0003 dispute shows that the network’s next challenge may be as much about governance credibility as token supply.