37% of Solana Validators Endorse Proposal to Reduce SOL Inflation
The SIMD-228 proposal, which seeks to decrease SOL inflation by 80%, has secured 35.7% support from Solana validators thus far.
Data from Dune Analytics indicates that 701 out of 1,327 active Solana (SOL) validators have cast their votes. Of these, 1.2% have chosen to abstain, 17.2% are opposed to the proposal, while 37.5% are in favor. Should SIMD-228 be approved, it would significantly reduce staking rewards, thus lowering the influx of new SOL tokens into circulation.
There are concerns regarding the potential impacts on network decentralization, even though the proposal may alleviate selling pressure. Currently, Solana’s inflation model aims to balance transaction fee burning with staking rewards.
During periods of high network traffic, more fees are burned, helping counter inflation. However, as transaction costs have diminished, fewer tokens are being removed from circulation. Staking rewards are adding to the SOL supply at a 6.8% inflation rate, which may contribute to declining prices.
By lowering staking rewards, SIMD-228 could reduce supply and potentially increase SOL’s value. Nevertheless, smaller validators with low or no commission rates could struggle to remain viable, risking removal from the network.
If a significant number of validators exit, it could weaken the network’s decentralization, raising concerns about its long-term sustainability. Prior to deciding on SIMD-228, Solana developers considered several alternatives, including options with fixed-rate adjustments.
Meanwhile, Solana’s market performance has been lackluster over the past few weeks. As of March 13, SOL is trading at $126, which is over 50% lower than its peak of $293 in January. Data from DefiLlama shows a drop in decentralized finance activity, with the network’s total value locked decreasing from $12 billion in January to $7 billion.
Owing to diminished network usage, particularly as memecoin trading has slowed, monthly fees have also dropped significantly, falling from $250 million in January to $89 million in February.
Approving SIMD-228 might reduce supply pressure; however, its success hinges on the growing demand for the network. Merely lowering inflation may not be sufficient for a strong recovery without an increase in users and activity.