What is SOL used for?

The SOL token has two main use cases: to pay for gas fees on the network and for staking to secure the blockchain. The Solana network requires a small amount of SOL to execute transactions on the blockchain. Validators on the network are required to stake SOL to process network activity in return for staking rewards and transaction fees (paid in SOL).

SOL tokenomics

The total supply of SOL is uncapped with a perpetual inflation rate. Solana initially launched with 500M tokens, after which the Solana foundation burned 11M tokens. The initial distribution of tokens consists of investors (37%), founders (25%), and community reserve fund (38%). SOL is constantly being emitted as an inflationary reward for validators. The initial inflation rate is 8% and will decline 15% per year until it reaches an annual rate of 1.5%, which is expected by 2031. The total supply is expected to expand to nearly 700M tokens by year 8.

How does SOL accrue value?

A portion of fees (~50%) paid to execute transactions on the Solana network are burned, reducing the supply, and increasing the SOL token's scarcity. This deflationary effect will largely be offset in the beginning by inflationary token emissions to reward validators. Stakers receive inflationary emissions as well as the remaining portion of each transaction fee.