Solana Inflation May Drop 80% if SIMD-0228 Passes, Vote Goes Live in 10 Days

Solana’s upcoming governance proposal, SIMD-0228, is causing a stir amongst network participants. 

Authored by Multicoin Capital’s Tushar Jain and Vishal Kankani with support from Anza’s Lead Economist Max Resnick, SIMD-0228 reimagines Solana’s emission schedule.

Despite early enthusiasm towards the proposal, Solana community members aren’t convinced programmatic $SOL emissions are the best way forward.

Solana Community Divided on SIMD-0228 Discussion

When Multicoin execs Jain and Kankani first floated the idea of programmatic, smart $SOL emissions based on staker participation, the proposal was met with excitement and open arms. 

Implementing dynamic $SOL emissions, SIMD-0228 proposes decreasing emissions as staker participation rises and increasing emissions as participation falls. 

SIMD-0228 Inflation Calculator

In theory, the new model incentivizes staking participation with boosted rewards when the rate is low, while reducing inflation and sell pressure when participation is high. Based on Solana’s current staking rate, $SOL emissions would drop from 4.5% per year to as low as 0.87%.

The Solana Foundation’s Head of Staking, Ben Hawkins, argues in favor of the proposal, asserting that dynamic $SOL emissions will result in lower inflation, reduced selling pressure, and a more sustainable economic model for the network long term.

Hawkin’s sentiment is reinforced by Laine, a popular validator. However, while Laine asserts that “smart emissions” are a better long-term solution for Solana, the operator acknowledges that reduced staking rewards could discourage stakers from keeping funds committed to the network.

Meanwhile, Solana co-founder Anatoly Yakovenko has voiced his support for SIMD-0228, arguing that pragmatic emissions give Solana a “chance to correct the mistakes of our youth.”

Despite expert’s optimism, Solana community members have highlighted their concerns in the proposal’s official discussion forum.

One of the central themes expressed among those who oppose the proposal is that SIMD-0228 could favor larger stakers and threaten decentralization. Xen argues that dynamic $SOL emissions could be disastrous for smaller validators, who could get priced out of profitable validator operations. 

Meanwhile, Leapfrog implies that  SIMD-0338 could lead to large concentrations of emissions being distributed to a small group of validators, causing an imbalance of stake.

However, one could argue that such an imbalance is unlikely. Under the dynamic model, network participants would be incentivized to stake their $SOL to reap the benefits of boosted emissions, countering this concentration.

SIMD-0228 voting is scheduled for epoch 753, which is expected to begin on March 6th.

$SOL Burn Rate Drops

Following the implementation of SIMD-0096, Solana token emissions have re-emerged as a critical discussion point within the ecosystem. 

Since SIMD-0096 went live, 50% of transaction priority fees that were previously burned are now allocated to validators. While this change has boosted validator rewards, SIMD-0096 has eliminated one of Solana’s biggest token anti-inflation mechanics.

After consistently floating between 15%-25%, $SOL’s burn rate has fallen to around 1.2% following the implementation of SIMD-0228. As a result, token inflation has increased dramatically, potentially leading to increased selling pressure and validators realize profits on emissions.

While it won’t implement a new burn mechanic, SIMD-0228 should help to reduce token inflation and support $SOL burn rate long-term. Advocates of the proposal contend that reducing token inflation in a sustainable manner is a step in the right direction. 

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