The SIMD-228 proposal, which aims to cut Solana’s (SOL) inflation rate by 80%, has gained 35.7% support from Solana validators so far, according to Dune Analytics data.
Current Validator Voting Breakdown
Out of 1,327 active Solana validators, 701 have cast their votes:
- 37.5% support the proposal
- 17.2% oppose it
- 1.2% abstained from voting
If SIMD-228 is approved, it would drastically reduce staking rewards, lowering the rate at which new SOL tokens enter circulation. While this could help curb selling pressure, it has also raised concerns about Solana’s network decentralization.
How Would the Proposal Impact Solana?
Solana’s current inflation model seeks to balance transaction fee burning with staking rewards. During periods of high network activity, more fees are burned, reducing the supply of SOL. However, as transaction costs decline, fewer tokens are removed from circulation, while staking continues to introduce new SOL at an inflation rate of 6.8%.
The SIMD-228 proposal would:
- Lower staking rewards, reducing overall supply.
- Potentially boost SOL’s price by curbing inflation.
- Put smaller validators at risk, especially those with low or no commission rates, potentially forcing some to shut down.
A major concern is that if too many validators exit the network, Solana’s decentralization may be compromised, raising questions about its long-term security and resilience.
Solana’s Recent Market Struggles
Solana’s market performance has been weak in recent weeks. As of March 13, SOL is trading at $126, more than 50% below its peak of $293 in January. The decline aligns with reduced decentralized finance (DeFi) activity on the network:
- Total value locked (TVL) has dropped from $12 billion in January to $7 billion, according to DefiLlama.
- Monthly transaction fees have declined significantly from $250 million in January to $89 million in February, as memecoin trading cools off.
Will Cutting Inflation Be Enough?
While SIMD-228 could reduce supply pressures, its success depends on whether Solana’s network demand grows. Without a rise in user activity and transaction volume, cutting inflation alone may not be sufficient to spark a strong price recovery.
The debate over SIMD-228’s impact on Solana’s decentralization, staking rewards, and long-term growth will likely continue as more validators weigh in on the proposal.
