On the morning of March 13, the Solana community welcomed a highly anticipated voting result: the SIMD-0228 proposal failed to pass with 43.6% of the votes in favor, failing to reach the required two-thirds majority. The proposal was proposed by Multicoin Capital in January this year to adjust SOLs inflation model from a fixed mode to a dynamic mode. The proposal sets a target staking rate of 50% to enhance network security and decentralization. If the staking rate exceeds 50%, the issuance will be reduced to inhibit further staking; if it is below 50%, the issuance will be increased to encourage staking. The inflation rate will fluctuate between 0% and the highest value based on the current issuance curve. Currently, Solanas inflation mechanism is fixed, and the issuance rate of SOL for staking rewards remains unchanged. If the proposal is passed, the inflation rate will be adjusted according to market dynamics. According to Coin Metrics, as of February, Solanas inflation rate was 4%, lower than the initial 8%, but still well above the terminal target of 1.5%, and is currently declining at a rate of 15% per year.
In short, the proposal was originally intended to reduce inflation and make the network economy healthier by adjusting the issuance method of SOL tokens. After the results came out, the discussion on the X platform quickly heated up, with supporters and opponents voiced one after another.
What does the community think?
The SIMD-0228 proposal was not passed, and some users such as @Airdrop_Guard interpreted this result as another failure of the retail investor uprising against the capitalists. On the eve of the vote, supporters of the proposal were hopeful that this reform would bring a turnaround for Solana. He pointed out that the current annual emission inflation rate of the Solana network is 4.91%, and 28 million SOL tokens are added each year, which is equivalent to an increase of $3.46 billion in selling pressure at current market prices. The SIMD-0228 proposal was proposed to address this problem by dynamically adjusting the inflation rate, but unfortunately, this compromise failed to gain enough support and was ultimately not implemented.
Others who support the SIMD-0228 proposal also believe that reducing inflation is an excellent opportunity to make SOL more valuable. Helius Labs founder @0x Mert_ called for support for the proposal from a long-term perspective: This is for the health and future of the network. We cant miss this opportunity.
Supporters believe that if the proposal is passed, SOL will not only attract more investors, but also consolidate Solanas position in the blockchain world. In their eyes, SIMD-0228 is an economic booster that makes Solana stronger. X user @Web3 Precious said: Reduced inflation means more scarce SOL, which is more valuable to those of us who stake. In his view, the current fixed issuance is like printing money non-stop, and the new model can make the network more efficient and competitive.
Opponents of the proposal breathed a sigh of relief. Their main concern is that if SIMD-0228 is passed, although inflation is reduced on the surface, it may sacrifice Solanas core advantage - decentralization. @solblaze_org has spoken out many times on X, warning: This proposal may destroy Solanas decentralization, we must oppose it! His reasoning is that reducing staking rewards will make it difficult for small validators to survive, and ultimately lead to the concentration of network power in the hands of a few large players.
@David_Grid also expressed similar concerns: What about small validators? They are the cornerstone of the network. Opponents of the proposal believe that SIMD-0228 may make Solana more like a rich mans club, which violates the original intention of equal participation in the blockchain. Others questioned the timing and details of the proposal, believing that it is too risky to implement it now and may bring unpredictable impacts to the DeFi ecosystem.
Who is pushing and who is resisting?
The core of the SIMD-0228 proposal is straightforward: change the issuance rules of SOL tokens from a fixed schedule to a flexible, market-demand-based model. Specifically, it hopes to adjust the issuance volume based on the staking participation rate, significantly reducing the annual inflation rate from the current 4.5% to 0.87% or even lower. Supporters believe that this will make SOL more scarce, the price more stable, and ultimately increase the value of the entire network. Simply put, it is to change SOL from a printing machine model to an asset that is more like a hard currency.
Related reading: Can Solanas inflation model modification proposal help push SOL prices further up?
So the question is, why is there such a big disagreement about a proposal that seems to benefit everyone? @bennybitcoins, a former member of the Solana Foundation, pointed out that the main contradiction lies in the conflict of interests between large and small validators.
According to @wublockchain 12’s analysis, in this SIMD-0228 vote, more than 60% of the validators with less than 500k SOL staked voted against; more than 51% of the validators with stakes between 500K and 1M voted in favor, but nearly 20% abstained; nearly 66% of the validators with stakes over 1M voted in favor. Since the voting rule requires that the percentage of votes in favor must reach 2/3 of the total votes (in favor + against), even if a large group of validators tends to agree, the passing threshold is eventually reached.
Judging from the voting results, those who support the proposal often include investors and institutions that hold a large amount of SOL, who hope to increase the value of tokens by reducing inflation and obtain greater returns. Some large staking pools and foundation members may see this as an opportunity to increase the price of SOL and attract more external capital into the Solana ecosystem. In addition, large validators have more advantages in terms of transaction fees + MEV income, and the reduction of staking rewards may not have much impact on income.
The opposing camp is mostly composed of small validators and developers of DeFi projects. In the income structure of staking rewards + transaction fees + MEV, the proportion of staking rewards for small validators may be relatively high. The reduction of staking rewards will greatly affect income, and it may even be difficult to cover the node operation costs, and eventually be squeezed out of the network. The DeFi community is worried that inflation adjustments will affect liquidity and user participation, weakening the vitality of the ecosystem.
However, Solana co-founder Toly said that SIMD-0228 did not pass, but SIMD-0123 passed. Given that both proposals are aimed at reducing the income of validators, opposing 228 is not just for the interests of each camp.
In addition, the attitude of the Solana Foundation has also attracted much attention. Lily Liu, the chairman of the foundation, has previously publicly stated that the proposal is not mature enough and may affect the asset growth of SOL. She prefers to maintain a fixed rate of return to reduce market volatility. As of writing, the Solana Foundation has not made a clear statement on the results of this vote.
Despite the conflicting opinions, this vote demonstrated the vitality of the Solana community. The participation rate of 74% proved the cohesion of the Solana community. Almost no one wanted to stay out of it, which in itself shows that everyone attaches great importance to the future of the network. As @Mable_Jiang said, The active participation and heated debate of community members in the past few days have been very touching and surprising-this is exactly what healthy governance of an open public blockchain should look like. For example, community leaders such as @calilyliu and @aeyakovenko have different opinions on the proposal, but they are still able to express their opinions 100% true to themselves without worrying about too many political factors. Believe it or not, this is by no means a matter of course. This requires a culture to be slowly cultivated in the community.
Perhaps, the failed vote on SIMD-0228 is not the end, but a new starting point. Supporters may continue to push for similar reforms, while opponents will more firmly defend the principle of decentralization. Every debate in the community is drawing a clearer outline for Solanas future, and this spirit of open dialogue and participation may be Solanas most valuable asset.
