On the morning of March 13th, the Solana community witnessed a highly anticipated voting outcome: Proposal SIMD-0228 failed to pass with 43.6% approval, falling short of the required two-thirds majority. This proposal, initially presented by Multicoin Capital in January of this year, aimed to adjust SOL's inflation model from a fixed pattern to a dynamic one. The proposal set a target staking rate of 50% to enhance network security and decentralization. If the staking rate exceeded 50%, the supply would decrease to curb further staking; if it fell below 50%, the supply would increase to incentivize staking. The inflation rate would fluctuate between 0% and the highest value based on the current issuance curve. Currently, Solana's inflation mechanism is fixed, with the issuance rate of rewarded SOL for staking remaining constant. If the proposal had passed, the inflation rate would adjust based on market dynamics. According to a Coin Metrics report, as of February, Solana's inflation rate stands at 4%, lower than the original 8%, but still above the 1.5% terminal target, currently decreasing at an annual rate of 15%.

In essence, this proposal originally sought to adjust the issuance of SOL tokens to lower the inflation rate and make the network's economy healthier. After the results were announced, discussions on Platform X quickly heated up, with voices of both supporters and opponents echoing.

How Does the Community Perceive This?

With Proposal SIMD-0228 failing to pass, some users, like @Airdrop_Guard, interpreted this outcome as a "retail rebellion against another failure of capitalists." On the eve of the vote, supporters of the proposal were hopeful, believing that this reform could be a turning point for Solana. He pointed out that the current Solana network's annual emission inflation rate is 4.91%, adding 28 million SOL tokens annually, which, at the current market price, equates to an additional $3.46 billion in selling pressure. The proposal SIMD-0228 was introduced to address this issue through dynamically adjusting the inflation rate. Regrettably, this compromise solution did not garner sufficient support and ultimately was not implemented.

Others who supported Proposal SIMD-0228 likewise believed that reducing inflation was a great opportunity to add value to SOL. Helius Labs founder @0xMert_ advocated for support of the proposal from a long-term perspective: "This is for the health and future of the network; we can't miss this opportunity."

Supporters believe that if the proposal had passed, SOL would not only attract more investors but also solidify Solana's position in the blockchain world. In their eyes, SIMD-0228 is an economic "booster" that would make Solana stronger. User @Web3Precious on Platform X stated: "Reduced inflation equals scarcer SOL, which is more valuable to us stakers." To him, the current fixed issuance is like constantly "printing money," whereas the new model could make the network more efficient and competitive.

The opponents of the proposal breathed a sigh of relief. They were mainly concerned that if SIMD-0228 were to pass, although it would superficially reduce inflation, it might sacrifice Solana's core advantage—decentralization. @solblaze_org has spoken out multiple times on X, warning, "This proposal could ruin Solana's decentralization, and we must oppose it!" His reason is that reducing staking rewards would make it difficult for small validators to survive, eventually leading to network power centralization in the hands of a few large players.

@David_Grid has also expressed similar concerns: "What about small validators? They are the foundation of the network." Opponents of the proposal believe that SIMD-0228 may make Solana more like a "rich people's club," contradicting the original intention of equal participation in blockchain. Some have also questioned the timing and details of the proposal, believing that implementing it now carries too much risk and may bring unpredictable impacts to the DeFi ecosystem.

Who Is Pushing Forward, Who Is Resisting?

The core of the SIMD-0228 proposal is straightforward: to change the issuance rules of SOL tokens from a fixed schedule to a flexible, market-demand-based model. Specifically, it aims to adjust the issuance based on the staking participation rate, reducing the annual inflation rate from the current 4.5% significantly to 0.87% or even lower. Supporters believe that this could make SOL scarcer, stabilize the price, and ultimately increase the overall network's value. In simpler terms, it is to transform SOL from an "minting machine model" into an asset more like "hard money."

Related Reading: "Solana's Inflation Model Modification Proposal, Can It Further Boost SOL Price?"

So, the question arises, why is there such a significant divide over a proposal that seems so beneficial to all? Former Solana Foundation member @bennybitcoins pointed out that the main conflict lies in the interests of large validators versus small validators.

According to @wublockchain12's analysis, in the current SIMD-0228 vote, over 60% of the validator group staking less than 500k SOL voted against it; in the 500k~1M staking group, over 51% voted in favor, but nearly 20% abstained; in the over 1M staking group, almost 66% voted in favor. Since the voting rule requires that the percentage of affirmative votes must reach 2/3 of the total votes (affirmative + negative), even though the large validators tend to be in favor, the proposal still met the approval threshold.

From the voting results, the proponents of the proposal often include large SOL holders and institutions who seek to increase the token value through reducing inflation, aiming for greater returns. Some large staking pools and foundation members may view this as an opportunity to drive up the SOL price, attracting more external capital into the Solana ecosystem. Additionally, large validators have an advantage in terms of "transaction fees + MEV" income, so the reduction in staking rewards may not significantly impact their income.

The opposition camp is mainly composed of small validators and DeFi project developers. Small validators rely more heavily on staking rewards in the "staking rewards + transaction fees + MEV" income structure, and a reduction in staking rewards would significantly affect their income, potentially making it difficult to cover node operation costs, leading to potential network centralization. The DeFi community is concerned that inflation adjustments may impact liquidity and user participation, weakening the ecosystem's vitality.

However, Solana co-founder toly stated that SIMD-0228 did not pass, but SIMD-0123 did, and since both proposals aimed to reduce validator income, "opposing 228 was not just for the sake of each camp's interests."

Furthermore, the stance of the Solana Foundation has also attracted significant attention. Foundation Chair Lily Liu had previously publicly stated that the proposals were not mature enough and could impact SOL's asset growth. She leans towards maintaining a fixed yield to reduce market volatility. As of the time of writing, the Solana Foundation has not made a clear statement regarding the voting results.

Despite differing views, the vote showcased the vitality of the Solana community. With a participation rate as high as 74%, it demonstrated the cohesion of the Solana community, with almost no one willing to remain on the sidelines, illustrating everyone's commitment to the network's future. As @Mable_Jiang put it, "Over the past few days, the active participation and intense debates among community members have been very touching and pleasantly surprising—this is exactly how a healthy governance of an open public blockchain should be. Community leaders like @calilyliu and @aeyakovenko have different views on the proposal, but they can still express their opinions 100% true to themselves without worrying too much about political factors. Believe it or not, this is far from taken for granted; it requires slowly cultivating a culture within the community."

Perhaps, SIMD-0228's failed vote is not the end, but rather a new beginning. Supporters may continue to push for similar reforms, while opponents may more firmly defend the principles of decentralization. Every debate in the community is outlining a clearer picture of Solana's future, and this open dialogue and spirit of participation may be Solana's most valuable asset.

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