Multicoin execs propose changing SOL emission rate to avoid high inflation and overpaying for security on Solana

Two Multicoin Capital partners, Tushar Jain and Vishal Kankani, have submitted a proposal to change Solana’s emissions schedule. The writeup on Github has seemingly received support from a number of leading Solana commentators, including Helios Labs’ Mert Mumtaz, he told The Block. 

Since Epoch 150 in 2021, Solana has used a fixed emission schedule that does not adjust based on network activity or economic conditions. Jain and Kankani have proposed updating this to a dynamic model, which they called "Smart Emissions.”

If approved, Smart Emissions would increase when stake drops to secure the network, incentivizing participation. However, in times of high network use, and when there are a lot of stakers, it would minimize SOL issuance to the “minimum necessary amount” needed to secure the network.

“The current Solana emissions schedule is suboptimal given the current level of activity and fees on the network because it emits more SOL than is necessary to secure the network,” Jain and Kankani write. “Markets are the best mechanism in the world to determine prices, and therefore, they should be used to determine Solana’s emissions.”

The proposal comes following a breakout year for Solana, which became the center of a booming memecoin subculture. In 2024, for instance, Solana saw daily volumes jump to $10 billion, generating $27.6 million in daily fees during peak periods.

Jain and Kankani note that with this growth in network activity, stakers have been earning sufficient income from fees and maximal extractable value and do not need to rely on emissions meant to incentivize and subsidize staking participation. 

In particular, the new system would adjust the emission rate based on how the current “staking participation rate” — the percentage of total SOL staked compared to all SOL in existence — deviates from the target rate. The authors set the target rate at 50%, meaning if the actual participation rate dips below, emissions would adjust upwards to incentivize stakers to rejoin the network. 

This is because, arguably, Solana is overpaying for network security. They note that there are several downsides to “high inflation,” including increased risks of centralization — because tokens accrue to stakers who earn rewards, diluting the share of those who don’t — and the public perception that “PoS inflation is equivalent to a publicly listed company doing a small share split every two days.”

While many blockchains have different approaches to circulating their tokens, once an issuance schedule is set, it usually remains in place — a mentality that Jain and Kankani call the “Bitcoin Hangover.” When designing the network, Satoshi Nakamoto set a hard cap of 21 million bitcoin tokens that will gradually be introduced via a fixed schedule. 

"While immutability suits Bitcoin’s mission to become digital gold, it doesn’t map to Solana’s mission to synchronize the world’s state at light speed," they write.