Solana Ecosystem Voted ‘No’ to SIMD-0228 Governance Proposal

The Solana ecosystem recently voted on SIMD-0228, a governance proposal to shift the network’s token emission model from a fixed inflation schedule to a dynamic, market-based system tied to staking participation. The goal was to reduce Solana’s inflation rate, potentially by as much as 80%, bringing it down from the current 4.66% to below 1% annually under certain staking conditions. This change was intended to curb unnecessary token issuance, reduce sell pressure, and enhance the network’s long-term economic sustainability.

Despite significant community engagement, the proposal did not achieve the required supermajority of 66.67% approval, garnering only 61.39% of the votes in favor. The vote saw an unprecedented turnout, with 74% of the staked SOL supply participating across 910 validators, marking it as one of the largest governance votes in cryptocurrency history by both participant count and market cap involved.

Key Reasons for Rejection

Over 60% of validators with stakes of 500,000 SOL or less voted against the proposal, primarily due to concerns over profitability. Reducing staking rewards could make it financially unviable for smaller validators to operate, especially those charging little to no commission. This raised fears of reduced network decentralization, as smaller validators might exit, leaving the network more centralized among larger players. Conversely, validators with larger stakes overwhelmingly supported the proposal, as they are less affected by reduced staking rewards due to their scale and profitability margins.

Solana’s current inflation model remains in place, starting at 8% annually and decreasing by 15% each year until it stabilizes at 1.5%. This continues to add new SOL tokens to circulation, potentially exerting sell pressure on the token’s price, especially during periods of low network activity when fewer transaction fees are burned. Critics of the proposal argued that maintaining higher inflation is necessary to incentivize staking, which is crucial for network security under Solana’s Proof of Stake (PoS) model. The rejection reflects a preference among some stakeholders for preserving decentralization over aggressive inflation reduction.

Despite the proposal’s failure, the high voter turnout was widely celebrated as a testament to Solana’s robust governance process. The extensive public debate and participation underscored the community’s engagement and commitment to the network’s future, even amidst differing interests. The debate around SIMD-0228 revealed broader tensions within the Solana ecosystem, particularly regarding the balance between economic incentives, network security, and decentralization.

Proponents, including notable figures like Solana co-founder Anatoly Yakovenko and Multicoin Capital’s Tushar Jain, argued that the current fixed inflation model leads to unnecessary value leakage—estimated at $1–2 billion annually—and that a dynamic model would align Solana’s monetary policy with its economic activity, potentially boosting SOL’s value by reducing dilution. Critics, including Solana Foundation President Lily Liu, cautioned that the proposal was “too half-baked” and could introduce instability, particularly for institutional investors who value predictable yields.

While SIMD-0228 failed, a related proposal, SIMD-0123, passed with nearly 75% approval. This proposal enhances transparency in reward distribution by allowing validators to split a portion of their earnings with stakeholders via an on-chain system, reflecting a community preference for adjusting validator incentives over slashing inflation. The rejection of SIMD-0228 does not mark the end of discussions on Solana’s tokenomics. The significant engagement in the vote suggests that the community remains open to future proposals, potentially with adjustments to address the concerns of smaller validators.

The Solana ecosystem may explore alternative mechanisms, such as revisiting transaction fee burning (altered by the earlier SIMD-0096 update) or introducing hybrid models that balance inflation reduction with validator sustainability. For now, Solana’s inflation rate continues to add new tokens to circulation, and the network’s economic health will depend on factors like transaction activity, DeFi usage, and broader market conditions. The failure of SIMD-0228 highlights the challenges of achieving consensus in decentralized governance, particularly when proposals have uneven impacts across stakeholders, but it also underscores Solana’s capacity for robust community-driven decision-making.