The ambitious attempt by Solana to overhaul its high inflation system hit a wall on the final voting day, as the much-anticipated reform was unable to secure the supermajority required to enact this significant economic modification. The unexpected outcome represents a setback for the Solana stakeholders who had advocated for replacing Solana’s fixed inflation methodology with a market-responsive system. This proposed change could have slashed the network’s annual staking rewards of 4.7% to a mere 1% or less.
A fierce clash emerged between Solana’s influential leaders and investors, who argue that the network’s high staking rewards negatively impact SOL’s price, and the smaller operators apprehensive about the revenue loss that a substantial cut might bring. The final voting round saw a significant push from the opposition, as late-voting validators heavily leaned towards rejecting the proposal. This resulted in the thwarting of the primary effort to decrease Solana’s unusually high staking emission rate.
As one of the most valuable programmable blockchains in terms of market capitalization, Solana distributes a substantial quantity of new tokens to its validators, the entities responsible for powering proof-of-stake blockchains. The eventful week leading up to the final vote resembled a political spectacle, teeming with debates, data analysis, and even a fair share of heated arguments. The voting culminated in a dramatic influx of ballots cast by a large number of Solana’s 1300 validators. Eventually, the opposition triumphed in a high-turnout election that highlighted the rift between large and small validators.
Solana validators are called to vote only in the face of significant economic changes, according to Jonny, the operator of the Solana Compass validator. SIMD-0228 was the third vote of this kind and sparked the highest turnout vote in the network’s history, with over 66% of validators participating. Smaller validators, owning 500,000 SOL or less, overwhelmingly voted against SIMD-0228, while the larger validators, possessing more than 500,000 SOL, voted in its favor.
Proponents of SIMD-0228 believed that it could fix Solana’s inflation issue, which, they assert, pulls down SOL’s price. Their proposed solution was a dynamic system replacing the static 4.7% SOL emissions, which could adjust according to staking trends. However, opponents criticized the proposal as hasty and risky. Some even accused its co-author, the influential investment company Multicoin Capital, of bias. Critics also warned that SIMD-0228 could disrupt Solana’s DeFi economy and deter institutional investors attracted by SOL’s native yield.
Despite the setback, reformists aren’t ready to throw in the towel yet. Max Resnick, one of the proposal’s co-authors and an economic researcher at Anza Labs, stated, “We are going to chat with the ‘no’s’ and find a compromise.”
