Solanaโs community is considering a proposal that could potentially reduce inflation by 80%. The governance proposal, known as SIMD-0228, will usher in a new model that rewards users with greater participation levels.ย
Authored by Multicoin Capital partners Tushar Jain and Vishal Kankani, the proposal received significant support from Anzaโs lead economist, Max Resnick. The idea, according to some community members, is to ensure economic sustainability for Solana.
The New Proposal to Fix Inflation Concerns
Solana currently follows a predetermined inflation schedule that starts at 8% annually and gradually declines toward 1.5%. However, critics argue this model leads to excessive token emissions. As a result, SOL could suffer a value decline, which would discourage DeFi activities on the network. Solana currently operates one of the biggest DeFi ecosystems in crypto.
The new proposal seeks to fix inflation concerns. It suggests adjusting token issuance based on staking activity. The idea is that if staking participation goes beyond 33%, inflation could drop from 4.5% to as low as 0.87%. Similarly, if it falls below that threshold, the inflation rate will increase to boost staking, ensuring network security.
๐๐ฌ ๐๐จ๐ฅ๐๐ง๐ ๐จ๐ฏ๐๐ซ๐ฉ๐๐ฒ๐ข๐ง๐ ๐๐จ๐ซ ๐ฌ๐๐๐ฎ๐ซ๐ข๐ญ๐ฒ?
SIMD-0228 claims it is.
With about 65% of Solana’s tokens staked, adding more doesn’t significantly boost security. Yet, Solana’s system for releasing new tokens doesn’t reflect thisโits fixed rate was set forโฆ
โ Vishal Kankani (@kankanivishal) February 25, 2025
As stated earlier, Solana co-founder Anatoly Yakovenko and other supporters believe the proposal will reduce inflation pressure and result in a more sustainable economic model. However, concerns remain. Some argue that lower staking rewards could squeeze out smaller validators. As a result, larger players would wield more network powers. Plus, others worry that an inflation increase during low staking periods might shake investor confidence and trigger sell-offs.
Solana’s High-Stakes Vote Could Reshape Its Token Economy
As per reports, voting on this proposal will take place during epoch 753 on March 6, 2025. In addition, the proposal needs a 66.67% majority vote to pass. If approved, it could significantly reshape Solanaโs token economy, but the risks remain a key point of contention as the vote approaches. Some within the community view this as a deciding factor, especially as Solana’s user activity recently dived.
Does the fud come from the top? Validators are also likely to vote themselves a lot less money. Inflation will likely drop by 4% if 228 passes. https://t.co/0dkXSRHKXY
โ toly ๐บ๐ธ (@aeyakovenko) February 19, 2025
Solana’s TVL recently plummeted by 40%. These stats show that Solana’s community need to get it right or risk losing investor confidence in native projects.
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