A proposal aimed at substantially altering Solana’s inflation model has been turned down by stakeholders, yet it is being celebrated as a win for the governance framework of the network.
“Although our proposal did not pass the vote, it represents a significant victory for the Solana ecosystem and its governance structure,” remarked a co-founder of a prominent investment firm on March 14.
Close to 74% of the staked supply participated in the voting process for proposal SIMD-228, which involved 910 validators. Of those, only 43.6% supported the proposal, while 27.4% opposed it and 3.3% chose to abstain, based on data from an analytics platform. The proposal required 66.67% approval to be enacted but garnered only 61.4%.
The co-founder emphasized that this was the largest governance vote in the cryptocurrency space, considering both the number of voters and the market cap involved, across any ecosystem, chain, or network.
“This served as a significant social stress test—one that assessed community engagement rather than technical capabilities—and the network successfully navigated through a broad range of differing views and interests,” he stated.
The Solana team on social media highlighted that the turnout for SIMD-228 exceeded that of every U.S. presidential election over the past century.
The SIMD-228 proposal sought to shift Solana’s inflation model from a fixed schedule to a flexible, market-responsive approach. Under this new framework, inflation rates would adjust dynamically based on staking activity instead of following a predetermined reduction timeline.
Currently, Solana’s supply inflation starts at 8% annually, decreasing by 15% each year until it stabilizes at 1.5%. Some estimates suggested that the new structure could have potentially reduced inflation by as much as 80%. At present, Solana’s inflation rate stands at 4.66%, with only 3% of the total supply staked.
High inflation levels can lead to selling pressure, negatively impacting SOL prices and discouraging network utilization. The proposed system aimed to adjust inflation rates linked to staking levels to help stabilize the network and limit unnecessary token issuance.
Potential benefits included enhanced network security through increased inflation during periods of low staking participation, adaptive adjustments in response to real-time staking activity instead of adhering to a rigid schedule, and encouraging greater use of SOL in decentralized finance.
However, it was noted that lower inflation could pose challenges for smaller validators in maintaining profitability, the proposed model introduced added complexity, and unforeseen fluctuations in staking activity might create instability.
There was minimal movement in SOL prices following the decision, with the cryptocurrency slipping 1.5% to just under $125 at the time of this report.
Nonetheless, it has seen a nearly 60% decrease over the past two months as the memecoin craze receded. Revenue for the Solana network has also fallen by more than 90% since its primary use was tied to minting and trading memecoins.