Solana (SOL) pays validators roughly $1.79bn a year in newly issued tokens and destroys about $20mn of user fees against it, according to Token Terminal data. Burns cover a little over 1% of what security costs. Two governance proposals now in front of validators would change both sides of that equation, and on the network's own estimates they would still leave most of the gap open.
Solana's Proposals Would Close a Third of a $1.77bn Deficit
11 August 2026 - 17:00 UTC
SGP 0003 would introduce a resource-based transaction fee that is fully burned, creating a stronger link between network usage and protocol revenue. SGP 0002 would accelerate the decline in SOL inflation, reducing the number of tokens distributed to validators and delegators over time.
Together, they target both sides of Solana's protocol income statement. SGP 0003 aims to increase revenue by burning a larger share of the fees generated by network activity. SGP 0002 aims to reduce expenses by slowing the issuance of new SOL used to compensate network participants.
Expressed as dilution rather than dollars, which removes the dependence on the SOL price, holders are currently diluted at about 3.8% a year and receive back roughly 0.04% through burns. If both proposals take effect as specified, that net figure falls to somewhere near 1.0%.
Governance decides direction, SIMD provides detail
A Solana Governance Proposal, or SGP, establishes whether validators and delegators support a proposed change in network policy. It acts as a stake-weighted mandate indicating that the network should proceed with a particular economic or governance direction. A Solana Improvement Document, or SIMD, provides the detailed technical specification.
SGP 0003 proposes replacing Solana's current fee structure with a system that separates the cost of transaction inclusion from the cost of the resources a transaction requests. Each transaction would continue to pay a fixed inclusion fee of 2,500 lamports, the smallest unit of SOL. That payment would go entirely to the block leader as compensation for including the transaction. A second resource fee would then be calculated based on the network resources requested, including compute units, signatures, account data and other scheduling costs.
The resource fee would be fully burned.
This addresses a weakness in the existing model. A simple SOL transfer and a complex decentralized finance transaction can impose very different computational demands, yet their base fees may not fully reflect that difference. The new structure would make resource-intensive transactions pay more directly for the capacity they consume. It would also strengthen SOL's value-capture mechanism, since greater usage would generate a larger burn rather than allowing almost all incremental fee value to flow to validators through priority fees.
SGP 0002 addresses a different part of the system. It would double Solana's annual disinflation rate from 15% to 30%. That does not mean inflation would immediately fall by 30 percentage points. It means the inflation rate itself would decline 30% each year until it reaches Solana's terminal rate of 1.5%. Under the existing schedule, inflation declines more gradually. Under the proposal, Solana would reach the terminal rate several years earlier, reducing the SOL issued as staking and voting rewards.
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Source: CoinMetrics, Token Terminal
The rationale is straightforward. Solana's security expense remains high relative to the revenue generated through fee burns. Faster disinflation lowers that expense without requiring validators to approve an immediate cut to the terminal rate.
SGP 0003 would turn activity into revenue
Solana's latest weekly fees were approximately $3.6mn, on Token Terminal data. Annualizing the latest four-week average produces roughly $178.6mn in total fees. Fees represent the total amount paid by users to execute transactions and interact with programs, including both base execution fees and priority fees. Those fees are then divided between the protocol and the network's service providers.
Protocol revenue measures the portion permanently removed from circulation through Solana's burn mechanism. Supply-side fees measure the portion distributed to validators for processing transactions and maintaining network security. Validators receive part of the base fee and all priority fees, while the remaining burned portion of the base fee is recognized as protocol revenue. On that basis, Solana generated approximately $20.3mn in annualized revenue over the latest four weeks, equal to around 11% of total fees. The gap does not mean the remaining value disappears. It means most of the economic value paid by users flows to validators rather than being captured through the burn.
SGP 0003 would change that relationship by adding a separate fee that is entirely burned. The proposal includes staged resource fee rates. At an initial rate of 0.1 lamports per cost unit, estimated daily burns could rise to between 1,500 and 1,800 SOL. At 0.25 lamports, daily burns could reach between 3,750 and 4,500 SOL. At the final proposed rate of 0.5 lamports, estimated burns rise to between 7,500 and 9,000 SOL a day.
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Source: Token Terminal, Sandmark Research
Recent burn revenue implies roughly 757 SOL is currently removed from circulation each day. The terminal stage would therefore increase the burn by about 10 to 12 times, assuming similar transaction demand and resource usage. At a SOL price of approximately $73.83, daily burns of 7,500 to 9,000 SOL would translate into annual protocol revenue of around $202mn to $243mn, on Sandmark calculations. That would be a substantial improvement on the current annualized level of approximately $20mn.
The effect on earnings is direct. Earnings measure protocol revenue minus token incentives, so each additional dollar of burned fees improves earnings by roughly one dollar if incentives stay constant. At the current $1.79bn annualized incentive rate, $202mn to $243mn in revenue would reduce the annual deficit to roughly $1.59bn, an improvement of $182mn to $222mn against today.
That also shows the limits of the fee proposal. Even with a tenfold increase in revenue, token incentives would still exceed burn revenue by more than $1.5bn. SGP 0003 improves the top line. It does not touch the dominant expense.
SGP 0002 targets the larger security cost
Token incentives measure the value of SOL distributed to validators and delegators for staking, voting and securing the network. The annualized figure of approximately $1.79bn is almost 88 times current protocol revenue. That is why the disinflation proposal has a larger long-term effect on Solana's bottom line than the fee burn alone.
Under SGP 0002, inflation would fall from approximately 3.8% to 2.9% after one year, 2.0% after two years, and the 1.5% terminal rate after around three years. Under the existing schedule, inflation would remain around 3.2% after one year, 2.8% after two years and 2.3% after three.
Holding SOL's price constant, the faster schedule would reduce token incentive expenses by approximately $63mn in the first year, $295mn in the second and $443mn in the third relative to the existing schedule, on Sandmark calculations. The impact becomes more powerful when combined with SGP 0003.
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Source: Token Terminal, Sandmark Research
In the first year, the combined proposals could improve annual earnings from approximately minus $1.67bn under the unchanged policy path to between minus $1.42bn and minus $1.38bn. By the second year, faster disinflation and higher burns could reduce the deficit to between $975mn and $934mn. By the third year, when inflation reaches the proposed terminal rate, annual earnings could improve to between minus $646mn and minus $605mn. Against the unchanged path, that is an improvement of approximately $625mn to $665mn by year three.
The combination therefore creates a more credible economic transition than either proposal would achieve alone. SGP 0003 makes activity more valuable to SOL holders by increasing burns. SGP 0002 reduces the dilution required to fund security.
A better model, not yet a sustainable one
The proposals materially improve Solana's token economics without eliminating the structural deficit. At the proposed 1.5% terminal inflation rate, Solana would still need to burn approximately 28,000 SOL a day to offset issuance fully. The terminal resource fee model estimates daily burns of only 7,500 to 9,000 SOL. Burns could eventually cover roughly a quarter to a third of annual issuance, assuming the proposal's activity estimates hold. That is a large improvement on the current position, where burn revenue covers little more than 1% of token incentives.
Behavioural uncertainties remain. Applications may become more efficient once requested compute carries a direct cost. Developers may reduce unnecessary resource requests, while some lower-value transactions may no longer be economically worthwhile. Higher fees could therefore produce less revenue than a static model suggests.
SOL's price is another variable. A higher token price increases the dollar value of both burns and token incentives. The effect is not symmetrical because issuance remains much larger than the projected burn. All else equal, a rising SOL price could increase the dollar value of the remaining deficit even as the token-level economics improve.
The strongest conclusion is not that Solana is becoming profitable. It is that the network is redesigning its economics so that usage contributes more directly to value capture, while security becomes less dependent on persistent dilution. SGP 0003 improves the revenue engine. SGP 0002 lowers the cost base. Together, they could reduce Solana's annual protocol deficit by more than $600mn within three years.
That is a meaningful improvement to the bottom line. It is not a complete solution.
