The SIMD-228 proposal, which seeks to reduce SOL inflation by 80%, has garnered notable attention within the Solana community. As of now, approximately 35.7% of validators have expressed their support for this transformative initiative. Based on insights from Dune Analytics, 701 out of 1327 active Solana (SOL) validators have participated in the voting process. The breakdown reveals that 1.2% of validators have abstained, 17.2% are against the proposal, while a healthy 37.5% are in favor.
If the SIMD-228 proposal is approved, the implications are significant. It would drastically cut staking rewards, subsequently limiting the influx of new SOL tokens into circulation. Currently, Solana’s inflation model is designed to maintain a balance between transaction fee burning and staking rewards. During times of heavy network traffic, transaction fees are typically burnt to help mitigate inflation. However, with a recent decline in transaction costs, fewer tokens are being removed from circulation.
The proposal’s potential to reduce staking rewards could serve to diminish token supply, thereby potentially increasing the value of SOL. Nevertheless, there are growing concerns surrounding decentralization. Smaller validators, particularly those with lower commission rates, may struggle to remain profitable under these changes, leading to fears that a mass exit of validators could compromise network stability.
Moreover, Solana’s market performance in recent weeks raises questions. As of March 13, SOL is trading at $126, down over 50% from its peak of $293 earlier this year. The decline resonates in the decentralized finance (DeFi) landscape, with total value locked plummeting from $12 billion in January to $7 billion. A decrease in monthly fees from $250 million to $89 million further compounds the issue, illustrating a stark drop in network usage coinciding with a cooling off of memecoin activities.
While the approval of SIMD-228 could alleviate some supply pressure, its overall success hinges on the demand for the network. Solely reducing inflation may not suffice to revitalize SOL’s value without a corresponding increase in users and activity.
