solana blockchain crypto

Solana Economics

  • Rewards validators in two ways
    • Protocol-based rewards
      • New tokens created on a predetermined inflation schedule
      • Generated from inflationary issuances
      • Given on a protocol-based inflation schedule
    • Transaction fees
      • Participant-to-participant transfers


  • Total Current Supply
    • Total amount of tokens that have been generated
    • Excludes tokens burnt
    • 500,000,000 SOL were instantiated in the genesis block
  • Inflation Rate (%)
    • Annualized growth rate of the Total Current Supply at any point in time
  • Inflation Schedule
    • Deterministic description of token issuance over time
    • De-inflationary schedule
      • Inflation starts at its highest value and the rate reduces over time
    • Parameterized by three numbers:
      • Initial Inflation Rate (%)
        • Rate when inflation first enabled
        • Token issuance rate can only decrease at this point
      • Dis-inflation Rate (%)
        • Rate at which inflation is reduced
      • Long-term Inflation Rate (%)
        • Stable, long-term inflation rate
  • Effective Inflation Rate (%)
    • Inflation rate observed on the network
      • After accounting for other factors that can decrease Total Current Supply
        • 50% of each transaction fee is burned (remaining goes to validators)
        • Loss of private keys, slashing events, etc. reduce supply
  • Staking Yield (%)
    • Interest earned on SOL network
    • Used to avoid token dilution due to inflation
  • Token Dilution (%)
    • Change in proportional representation of a set of tokens within a larger set due to introduction of new tokens
    • Staked or un-staked tokens due to the introduction and distribution of inflation issuance
  • Adjusted Staking Yield (%)
    • Change in fractional token supply ownership of staked tokens due to distribution of inflation issuance
    • Positive dilutive effects of inflation

Transaction Fees

  • Paid to process instructions on Solana
    • Paid by submitter, collected by a validator
  • Each transaction is processed by the current leader validation-client
    • Once confirmed as a global state transaction, the transaction fee is paid to the network

Why transaction fees?

  • Compensate validators
  • Reduce network spam
  • Provide long-term economic stability of the network through a protocol-captured minimum fee per transaction

Why burn some fees?

  • Helps retain leader incentive to include as many transactions as possible
  • Provides an inflation limiting mechanism that protects against "tax evasion" attacks (side-channel fee payments?) RESEARCH
  • Can help prevent malicious validators from censoring transactions

Calculating transaction fees

  • Calculated based on two main parts:
    • Static set base fee per signature
    • Number of compute units used during the transaction
  • Each transaction has a maximum number of compute units (compute budget)

Prioritization fee

  • Recently introduced (when?)
  • Additional fee paid to boost how a transaction is prioritized
    • Results in faster transaction execution times

Storage Rent Economics

  • Accounts with data must pay "rent" to keep their state in memory