Solana is about to get a lot less inflationary! A proposal called SIMD 228, which aims to drastically cut inflation, has passed with around 70% of the vote. This means Solana’s annual inflation could plummet to a measly 0.92%, down from its current rate.
What’s SIMD 228 All About?
SIMD 228 introduces a “static curve” that links SOL issuance to how much SOL is staked. If the current staking rate (around 64%) stays the same, inflation will drop to that 0.92% after a short adjustment period. However, if less than 50% of SOL is staked, the inflation rate will actually go up.
Why the Change?
The proposal’s creators argue Solana is currently overpaying for security. They believe the network is issuing more SOL than needed to reward validators, especially now that transaction fees are contributing more to the network’s income. They call the current system a “leaky bucket,” with too much value leaving the system as validator rewards.
Other arguments for SIMD 228 include:
- Real vs. Nominal Yields: Inflation-based rewards dilute the value for non-stakers, and the network wants to shift towards fee-based rewards for validators.
- Market Responsiveness: A dynamic inflation rate is seen as better than a fixed one, as high inflation can hurt the price of SOL.
Arguments Against SIMD 228
Not everyone’s happy about the change. Some critics argue:
- Custodians and ETPs Benefit from High Yields: These entities often take a cut of staking rewards without bearing the risk, so a lower inflation rate hurts their profits.
- Unpredictable Inflation Could Scare Investors: Changing the inflation rate, especially with increased institutional interest in Solana, could be risky.
- Smaller Validators Might Suffer:
Lower inflation could reduce validator profitability, potentially harming network decentralization.
What Happens Next?
If the “yes” votes hold, SIMD 228 will be implemented over about 100 days. At the time of writing, SOL is trading at around $123. The change is a big deal for Solana, and it will be interesting to see how it affects the network’s long-term health and growth.
