Solana's Bold Move: Slashing Inflation by 80% Raises Decentralization Concerns

Coin WorldWednesday, Mar 5, 2025 7:04 am ET

1min read

Solana's New Proposal Aims to Slash Inflation by 80%, Raising Concerns About Centralization

The Solana (SOL) community is gearing up for a significant vote on SIMD-0228, a governance proposal that could cut the network's annual inflation by up to 80%. The vote is scheduled for epoch 753, around March 6.

The proposal, authored by Multicoin Capital's Tushar Jain, Vishal Kankani, and Anza's Lead Economist, Max Resnick, introduces dynamic, market-driven "smart emissions" instead of a fixed issuance schedule on Solana. The goal is to reduce inflation while ensuring network security by adjusting SOL emissions based on staking participation.

If staking is high, emissions decrease. Conversely, emissions would rise if staking participation drops. Jain, in support of the proposal, stated, "Given Solana’s thriving economic activity, it makes sense to evolve the network’s monetary policy with 'mart emissions'."

A target staking rate of 50% is proposed, with inflation capped at 1.5% and a lower bound of 0%. This model minimizes sell pressure, enhances sustainability, and aligns rewards with network needs. As Maximal Extractable Value (MEV) earnings grow, the proposal envisions a future without SOL emissions, making SOL scarcer and potentially more valuable in the long term.

Solana co-founder Anatoly Yakovenko has voiced strong support for SIMD-0228, stating, "We have a chance to correct the mistakes of our youth." mert Mumtaz, CEO of Helius Labs, has also weighed in on the ongoing debate, expressing his support for the proposal.

However, the proposal has raised concerns among some community members and analysts. Matthew Sigel, Head of Digital Assets Research at VanEck, has highlighted the potential impact of SIMD-0228, along with two other major Solana proposals—SIMD-096 and SIMD-0123—on validator revenues and decentralization.

Sigel estimates that validator earnings could decrease by as much as 95%, making operations unsustainable for smaller validators. With only 458 validators having enough stake (over 100,000 SOL) to

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