Another Solana analysis: How does Solana pay for its low fees?

^{Disclaimer: I'm not saying it's the only project with these attributes, and I'm not advocating against it. However, everyone should be aware of criticism and look outside their bubble. Always draw your own conclusions.}

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1. The crypto trilemma

https://preview.redd.it/9tipaty14a1c1.png?400&format=png&auto=webp&s=9f213b91f6b66bacc9de7b3a16ba6395aaea59e2

Long story short, you have to pay validators and stakers to provide security. But there are two ways: 1) pay with fresh coins 2) pay with fees. Solana can't do the second one because the fees on L1 must be low (which is the main argument for Solana). There is no way to pay 0.2 cents for a transaction and still maintain a huge network of validators and provide staking with a reasonable APY.

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2. The inflation problem

This chart explains how Solana can stay so cheap while still paying all the validators and stake pools:

https://i.redd.it/h76bnqyd4a1c1.gif

61% inflation in circulating supply since the beginning of 2021, or in average 18% per year (source: messari.io). The offical site says: "Solana's initial inflation rate is 8% annually, decreasing by 15% year-over-year, reaching a long-term fixed inflation rate of 1.5% annually."

This is also interesting: "A fixed proportion (initially 50%) of each transaction fee is burned (destroyed), with the remaining going to the current leader processing the transaction." (source: docs.solana.com)

This appears to be scheme to make people think that there is some sort of deflationary context, when in fact there isn't. Fees are being paid for indirectly by investors who hope that the price will go up anyway. It's a gamble on the future and that there will be enough new investors coming in.

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3. What problems will the future bring?

If inflation is lowered, stakers and validators will receive less reward. The only way to solve this problem is with higher fees or a higher price (which is what investors obviously hope for). A higher price would automatically lead to higher fees.

Again, I'm not advocating against buying Solana. As long as you're just looking for a quick buck, so be it.

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|Edit: I've done some math here because somebody asked. The ratio of fees compared to staking rewards seems to be around 1:95 - or I've made a mistake. Please feel free to correct me.