Author: Xiaobing
SOL hit $109 on August 27th, setting a new high for the entire year of 2026. It gained 44% in August, its strongest month since 2024. On the same day, Solana's first-ever formal on-chain governance vote concluded, with three proposals that could reshape the network's tokenomics entering the vote-counting stage.
If all three proposals pass, SOL's annual new issuance will decelerate more rapidly, and its average daily burn rate will increase by approximately 14 times.
Whether Solana can be reshaped by governance will be revealed soon.
The World's Busiest Highway, the Cheapest Toll
To understand why this governance vote is important, one must first understand Solana's core structural contradiction.
Solana's network usage is indisputable. It processed 25.3 billion transactions in Q1 2026, over 120 times that of Ethereum in the same period. Its spot DEX market share has ranked first for seven consecutive quarters, accounting for about 30%. It has maintained 100% uptime for over 90 days, with no network-wide outages since February 2024. The on-chain supply of RWA (Real World Assets) exceeded $3 billion in June, accounting for 24% of TVL.
Charles Schwab announced the inclusion of SOL in its crypto trading product line, and SBI Holdings shifted its blockchain business to Solana through a joint venture.
However, SOL holders have gained extremely limited economic returns from this growth.
Solana's total historical fee revenue is approximately $586 million, compared to Ethereum's $13.12 billion, a gap of over 22 times.
The value captured by the application layer is 134 times that of the protocol layer. Galaxy Research's Q2 2026 report shows that Solana network fees decreased 44% QoQ to approximately $155 million, and Network Revenue (REV) dropped 43% from $89.8 million in Q1 to $51 million. In the multi-chain revenue ranking, Solana ranked fourth with a 12% share, behind Hyperliquid, Tron, and Ethereum.
The problem lies in the fee structure.
In February 2025, validators approved SIMD-0096, which allocated 100% of priority fees to block-producing validators, with not a single cent being burned. Priority fees and Jito tips combined account for over 85% of the network's daily revenue. The base fee, which can create a deflationary effect, only accounts for a small portion, and only 50% of it is burned. The result is: Solana burns approximately 650 SOL daily, while issuing about 60,000 new SOL daily. A network with the world's highest daily transaction volume still maintains a steady net inflation rate.
21Shares summarized this dilemma in one sentence: "Scale has been proven; value capture has not."
Three Proposals: Installing Toll Booths on the Highway
The three governance proposals initiated on August 22nd are the latest attempt by the Solana community to repair this crack. First, let's introduce the three proposals:
SGP-0001 (Solana Constitution): Establishes a formal on-chain governance framework. Voting power is allocated based on stake weight. Ordinary stakers have the right to override validators' votes. This is the institutional foundation for the latter two proposals.
SGP-0002 (Double Deflation Acceleration): Proposed by engineers from infrastructure company Helius, it doubles the annual deflationary decay rate from 15% to 30%. The current inflation rate is about 3.8%. Under the original plan, it would only reach the terminal inflation rate of 1.5% by 2032. The new plan compresses this timeline to 2029, reducing issuance by approximately 18.9 million SOL over six years, worth about $1.5 billion at current prices.
SGP-0003 (Resource & Entry Fee Restructuring): Proposed by R&D company Temporal, it splits the flat base transaction fee into two parts: a fixed entry fee paid to block producers, and a resource fee priced based on actual computational resource consumption and burned in full. If implemented, the average daily SOL burn could jump from about 650 to between 7,500 and 9,000, an increase of nearly 14 times.
As of August 27th, before the voting deadline, participation for SGP-0002 had reached 33.84%, meeting the one-third quorum requirement. Approve votes accounted for about 25.84% of the voting weight, Deny votes about 5.54%, and Abstain about 2.65%. Approve votes constituted over 80% of the valid votes. Helius committed about 16 million SOL in support, Jupiter committed 12.47 million SOL, and Jito pre-authorized approval for all three proposals through its internal governance mechanism.
Who is Opposing?
Not all participants support these changes.
The NASDAQ-listed Solana Company (ticker HSDT) supports SGP-0001 but voted against SGP-0002 and SGP-0003. CEO Joseph Chee cited timing as the reason: "Institutions need stable, auditable economic parameters for multi-year planning. Suddenly changing staking rewards and transaction cost structures at a stage when Solana ETFs are just beginning to attract traditional capital could slow institutional adoption."
There is a direct profit motive behind this opposition.
Solana Company's Q2 revenue was $2.526 million, of which staking revenue accounted for $2.512 million, a staggering 99.4%. Accelerating deflation means staking rewards would drop from the current ~5.25% to ~2.25% within three years, directly cutting into its lifeblood.
A deeper tension lies in the governance mechanism itself. Under Solana's new governance framework, validators default to voting with the full weight of all delegations they manage, unless individual stakers actively override. This means a validator reliant on staking income can use SOL delegated to it by others to vote against reducing staking rewards, while most delegators might be completely unaware their stake is being used this way. CryptoSlate's analysis directly points out this principal-agent problem.
The pressure on smaller validators is more concrete. 21Shares' model shows that if SGP-0002 is implemented, some smaller validators with higher operating costs may become unprofitable and be forced to exit. This could, in the short term, exacerbate the trend of validator centralization, running counter to Solana's decentralization vision.
Lessons and Variables
This is not Solana's first attempt to fix the inflation issue.
In March 2025, SIMD-0228 proposed an 80% direct cut to the inflation rate, adopting a dynamic issuance mechanism based on staking participation. The result was 61.39% of staked SOL voting against, and the proposal was rejected.
The core reason for rejecting SIMD-0228 is the same as now: validators are unwilling to cut their own income sources. However, the current proposal is designed to be more moderate; SGP-0002 only accelerates the decay slope, avoiding a cliff-edge cut. The technical implementation, SIMD-0550, is specifically designed with a continuous anchoring mechanism to avoid discontinuous jumps in issuance upon activation.
However, even if both SGP-0002 and SGP-0003 pass, the voting result is only a "directional mandate." The actual protocol changes would still require subsequent SIMD technical implementation, testing, and on-chain activation. There could be a window of several months between the vote passing and actual enactment.
SOL's current position is delicate.
Having fallen over 60% from its ATH of $293, rebounding 44% in August to $109 reflects a mix of technical oversold recovery, pre-pricing of governance expectations, and sector rotation from BTC breaking $80k. The RSI has entered overbought territory. Short-term traders should note the risk of "buy the rumor, sell the news" after the governance vote results land. For long-term holders, the core question to answer is only one: Can Solana translate its indisputable network usage into economic returns for SOL holders?
