Solana

Bitcoin

<h4><strong>According to <a href="https://twitter.com/DU09BTC/status/1738837846457479480" target="_blank" rel="noopener">Duo Nine</a>, From December 2020 to December 2023, Solana’s token inflation surged from 46 million to 427 million tokens. This makes a 900% increase in just three years. </strong></h4> 
<p>Yet, underneath, various factors come into play. This includes the high costs users pay to keep the network running. Let’s explore more about what is happening in Solana now.</p> 
<h5><strong>What’s Going on with Solana’s Inflation?&nbsp;</strong></h5> 
<p>This astonishing surge has left the cryptocurrency community pondering the implications of such rapid inflation on the Solana ecosystem.</p> 
<p>One of the hidden facets of Solana’s inflation is the substantial cost users bear to use the network. According to a <a href="https://twitter.com/DU09BTC/status/1738490059039682858?s=20" target="_blank" rel="noopener">source</a>, users are collectively paying $100 million in fees every month to facilitate transactions on the Solana blockchain. This sizeable amount reflects the high demand for Solana’s services but also raises questions about the sustainability of the current fee structure.</p> 
<blockquote class="twitter-tweet" data-width="550" data-dnt="true"> 
 <p lang="en" dir="ltr">I just learned that Solana is not self-sustainable and the only reason why it is cheap is that the foundation is subsidizing $100M of gas fees a month<img src="https://s.w.org/images/core/emoji/14.0.0/72x72/1f480.png" alt="💀" class="wp-smiley" style="height: 1em; max-height: 1em;"></p> 
 <p>Source: <a href="https://t.co/fAJ9fUAxtk">https://t.co/fAJ9fUAxtk</a></p> 
 <p>Also, block rewards are fixed in <a href="https://twitter.com/search?q=%24SOL&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$SOL</a> (6% in annual inflation), while transaction fees are… <a href="https://t.co/FuiJYkhwWJ">pic.twitter.com/FuiJYkhwWJ</a></p> 
 <p>— Mardeni (<img src="https://s.w.org/images/core/emoji/14.0.0/72x72/1f9f1.png" alt="🧱" class="wp-smiley" style="height: 1em; max-height: 1em;">, <img src="https://s.w.org/images/core/emoji/14.0.0/72x72/1f680.png" alt="🚀" class="wp-smiley" style="height: 1em; max-height: 1em;">) (@Mardeni01) <a href="https://twitter.com/Mardeni01/status/1738753510169305108?ref_src=twsrc%5Etfw">December 24, 2023</a></p>
</blockquote> 
<p><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script></p> 
<p>While this approach has enabled users to enjoy cost-effective transactions, it has introduced a potential risk. The inherent challenge arises when inflation leads to a crash in token prices, triggering a domino effect. As token values decline, subsidies decrease, <a href="https://www.altcoinbuzz.io/?s=validators" target="_blank" rel="noopener">validators</a> may exit the network, and the entire chain faces the risk of coming to a halt.</p> 
<h5><strong>The Challenge of Never-Ending Solana Tokens</strong></h5> 
<p>The concept of Solana’s infinite supply has sparked concerns of a potential death spiral towards zero. The equation is straightforward: increasing inflation causes token prices to drop, leading to a decline in subsidies. If validators leave because they’re not making enough money, the chain may shut down in the future.</p> 
<blockquote class="twitter-tweet" data-width="550" data-dnt="true"> 
 <p lang="en" dir="ltr">there’s this one too <a href="https://t.co/gzjMzDAGXq">pic.twitter.com/gzjMzDAGXq</a></p> 
 <p>— Jack The Oiler (@Jacktheoiler) <a href="https://twitter.com/Jacktheoiler/status/1738733087574384694?ref_src=twsrc%5Etfw">December 24, 2023</a></p>
</blockquote> 
<p><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script></p> 
<p>While Solana’s model appears sustainable during bullish market conditions, questions loom large about its resilience in a <a href="https://www.altcoinbuzz.io/?s=bear+market" target="_blank" rel="noopener">bear market</a>. In a market downturn, holders may find their SOL holdings devaluing daily, driven by continuous inflation.</p> 
<h5><strong>Conclusion</strong></h5> 
<p>Solana’s impressive rise in inflation and the hidden costs associated with its operation underscore the intricacies of managing a high-performance blockchain. The current economic model, reliant on subsidies, inflation, and low transaction fees, faces challenges that may manifest in a bear market.</p> 
<p><a href="https://www.patreon.com/altcoinbuzz" target="_blank" rel="noopener"><img decoding="async" class="wp-image-124240 aligncenter" src="https://www.altcoinbuzz.io/wp-content/uploads/2023/09/image-7-1-1-300x37.jpg" sizes="(max-width: 714px) 100vw, 714px" srcset="https://www.altcoinbuzz.io/wp-content/uploads/2023/09/image-7-1-1-300x37.jpg 300w, https://www.altcoinbuzz.io/wp-content/uploads/2023/09/image-7-1-1-1024x127.jpg 1024w, https://www.altcoinbuzz.io/wp-content/uploads/2023/09/image-7-1-1-768x95.jpg 768w, https://www.altcoinbuzz.io/wp-content/uploads/2023/09/image-7-1-1-696x86.jpg 696w, https://www.altcoinbuzz.io/wp-content/uploads/2023/09/image-7-1-1-1068x132.jpg 1068w, https://www.altcoinbuzz.io/wp-content/uploads/2023/09/image-7-1-1.jpg 1197w" alt="" width="714" height="88"></a></p> 
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<p><strong>Disclaimer</strong><br> The information discussed by Altcoin Buzz is not financial advice. This is for educational, entertainment, and informational purposes only. Any information or strategies are thoughts and opinions relevant to the accepted levels of risk tolerance of the writer/reviewers and their risk tolerance may be different than yours. We are not responsible for any losses that you may incur as a result of any investments directly or indirectly related to the information provided. Bitcoin and other cryptocurrencies are high-risk investments so please do your due diligence. Copyright Altcoin Buzz Pte Ltd.</p> 
<p>The post <a href="https://www.altcoinbuzz.io/cryptocurrency-news/solanas-inflation-puzzle-risks-and-hidden-costs/">Solana’s Inflation Puzzle: Risks and Hidden Costs</a> appeared first on <a href="https://www.altcoinbuzz.io">Altcoin Buzz</a>.</p>

Solana’s Inflation Puzzle: Risks and Hidden Costs

Altcoin Buzz

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