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The news that FTX’s Metaplex tokens got snapped up on the private market got me thinking about Solana coming through the FTX estate sales pretty intact. In the past, I’ve been told that the OTC deals for steeply-discounted SOL were widely telegraphed and involved token vesting, so investors were unphased.

Instead, SOL tokens might need to fight a different bogeyman:

Debates flare up over SOLonomics

With crypto markets stuck in a holding pattern and many Solana projects delaying big announcements until the Breakpoint Conference, people seem to be bored.

To fill the momentary void, some of the online crypto world has taken up arguing about Solana’s tokenomic structure — not a new debate by any means, but one that we’re yet to really engage with in Lightspeed. 

The main complaint about SOL’s tokenomics these days seems to be that its supply is growing via inflation too quickly. Sources I spoke to seemed split on whether this is in fact a problem Solana should or will address, or if it’s all a non-issue.

Inflation on the Solana network refers to the ongoing creation of new SOL tokens, which are distributed as rewards to validators and stakers. This process incentivizes validators to secure and maintain the blockchain, ensuring network security and decentralization. In simpler terms, inflation is how Solana compensates validators for their essential role in processing transactions and securing the network, while also providing stakers with a yield for participating in the system.

When Solana first enabled inflation, it was set that the token supply would increase by 8% per year, but the inflation rate is set to fall by 15% yearly. Today, inflation is closer to 5%. Long term, it will decline to 1.5%. 

This 5% inflation figure is commonly cited as a reason to be more bullish on Ethereum relative to Solana, as the ETH supply is inflating at a rate of around 0.7% currently. Inflation puts downward pressure on the price of SOL, since the existing supply is diluted by new tokens. There’s a bit more nuance here, since you can argue that inflation amounts to a value transfer from non-stakers to stakers, since inflation rewards eventually are paid out to stakers. 

Still, in a new Lightspeed podcast episode, Blockworks Research analyst Dan Smith told me he predicts economic changes are coming for Solana in 2025.

“I feel this changing in the wind,” Smith said, where it “doesn’t feel necessary” to be emitting so many SOL tokens in inflation.

Nate, an anonymous figure helping run the Aurora validator, said he thinks the current inflation level creates a lot of “value extraction,” adding that it would probably be workable to cut validator rewards in half.

Still, Solana is a large network with several stakeholders, and a change like altering the inflation rate — and thus the amount of reward doled out to validators — would take some serious coalition building.

Switchboard co-founder Chris Hermida said he could see proposals coming up to lower inflation, but it doesn’t seem like there will be a “massive outcry” at the current inflation rate, especially when the rate is “(relatively) similar to many other large networks.”

— Jack Kubinec

Blockworks and the Solana Foundation are hosting Solana Founders Summit at Permissionless. Join a curated group of ~60 Solana industry leaders and founders for a day of workshops and off-the-record conversations.

Tonight’s US presidential debate could provide a jolt to what has otherwise been a sluggish past few weeks for crypto’s premier memecoin platform, Pump.fun:

As you can see, political media moments have led to token deployment spikes in the past, most notably when Elon Musk interviewed Donald Trump on an X space in early August. The idea is that viewers will launch tokens based on what is said as the events unfold in hopes of having their meme go viral and garner lots of investment.

When Trump debated Joe Biden in June, we likened it to the Super Bowl for memecoins. Now following weeks of decline, Pump.fun will hope it can have two Super Bowls in one year.

— Jack Kubinec

A spirited debate has emerged within the Solana community over whether the blockchain’s Network Extensions are truly revolutionary or simply a clever rebranding of Ethereum-style L2s.

Bull take:

Network Extensions represent a fresh approach to scaling within Solana’s ecosystem. Rather than creating an entirely separate network, these extensions keep everything tied to the L1 while expanding capabilities in specialized areas like state compression and Neon EVM (an Ethereum Virtual Machine that allows Ethereum-based applications to run on Solana). As the Solana Foundation’s @Austin_Federa explains, “Instead of offloading execution, we’re offloading specialization.” Bulls believe this keeps Solana nimble and better suited to handle unique applications without the fragmentation seen with Ethereum’s L2s.

Supporters argue that Solana isn't copying Ethereum’s L2 model. Instead, these extensions maintain a seamless user experience within the L1, as noted by @dariaagad: “Network extensions aren't separate layers. They're deeply integrated into the Layer 1 infrastructure, expanding capabilities without creating a new network layer. This is fundamentally different from how L2s operate.”

Bear take:

Skeptics argue that Solana’s Network Extensions are just Ethereum L2s under a different name. Cyber Capital's @Justin_Bons dismisses the concept as “a silly semantic distinction I do not care to defend,” claiming that scalable L1s don’t need offshoots. He asserts, “Network Extensions are just L2s & SOL does not need them; neither does any scalable L1.” For Bons and the bear camp, this feels like a marketing exercise aimed at competing with Ethereum.

@uPeterKris added that it’s, “Baffling to see Solana fuding ETH L2s and then come up with literally the same thing. Exemplar intellectual gymnastics.” Bears believe this contradiction undermines Solana’s strengths. @CleanPegasus joked that, "It’s a layer 2 only if it comes from the Ethereum region of France, otherwise it’s just a sparkling network extension."

— Jeffrey Albus

Blockworks Research is conducting a survey to gain insight into the institutional staking landscape. This data will help industry leaders adopt their strategies as the industry matures.

If you're an institutional staker, we want to hear from you (and if you’re new to Blockworks Research, get 20% off of our service while you’re at it!)

A message from Luke Leasure, analyst at Blockworks Research: