What to know:
- The bullish SIMD proposal suggests increasing SOL supply to buy a company, then using its revenue for SOL buybacks and burns.
- It moves Solana toward M&A-style treasury use, offering potential value for investors and developers.
- Next steps hinge on a SIMD vote and execution, which could set a model for other chains.
A new idea has been floated among Solana stakeholders, suggesting one of the biggest positive proposals (SIMD) would not only stop the token supply but actually increase it through the issuance of SOL in a short time to raise funds for a company acquisition.
The strategy is very straightforward: issue more SOL, acquire a company that generates income, and then make sure that this company’s income flows are directed into a protocol-level buy-and-burn program.
The Proposal and Key Characters
The plan is mainly focused on Solana validators, the Solana Foundation, and treasury governance through future SIMD. Rather than reducing the inflation to appease the supply hawks, the network will rather mint SOL and spend it to buy up a company that is generating income in the real world. Acquisitions and buybacks will most probably involve exchanges, institutes, and ecosystem funds.
This revenue stream will then be used to purchase SOL in the market and burn it, because of this setting up a self-reinforcing loop.
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Inflation As Capital
This method resembles corporate capital allocation to a far greater extent than normal token economics. If Solana employs inflation as a means to acquire assets, it could effectively bring outside earning potential into the ecosystem akin to how publicly traded companies use shares for takeovers.
Source: Magnific
It gives a different perspective for investors and institutional players, that is “lower issuance” versus “higher yield per token”. This situation is also an opportunity to see the limitations of validator governance when it comes to large treasury movements.
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Challenges, Shifts, and What Follows
This new method fits into a general 1, 2 years trend of L1s looking for sustainability not only by staking rewards. The major advantages are having different sources of revenue and creating deflationary pressure via burns.
On the flip side, you may get a dilution of the shareholding, or you may run into execution failure, or end up in governance centralization.
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