SOL Inflation Cut Proposal Struggles to Gain Support from Solana Validators

Solana Proposal to Cut SOL Inflation by 80% Faces Strong Resistance from Validators

A proposal aimed at dramatically reducing Solana’s (SOL) inflation rate is struggling to gain enough support from network validators, making its approval uncertain. The governance proposal, known as SIMD-0228, seeks to implement a market-driven emission model that could help sustain Solana’s long-term value and boost decentralized finance (DeFi) activity.

At press time, 37.8% of validators had voted in favor of the proposal, while 18.5% opposed it, and 1.2% abstained, according to Dune Analytics. Out of 1,334 active validators, 746 (about 58%) have participated in the vote so far. With the final decision expected at Epoch 755 in around 11 hours, current data suggests the proposal is headed for rejection.

A Shift in Token Emission Strategy

The proposal aims to align Solana’s token emissions with current network activity, ensuring that security costs do not exceed what is necessary. Advocates argue that with Solana now handling billions in daily on-chain volume, the original inflation model may no longer be justified.

“Back in 2023, Solana’s daily on-chain volume was often below $100 million, but today, it regularly surpasses billions. This makes now the right time to reassess the inflation rate,” said Logan Jastremski, co-founder of Frictionless Capital, in a post on X.

If passed, SIMD-0228 would slash SOL’s inflation rate from 4.5% to around 0.87%, representing an 80% reduction.

Potential Price Impact and Decentralization Risks

Analysts at Tagus Capital suggest that a successful vote could positively impact SOL’s price by reducing staking rewards and the issuance of new SOL.

“If approved, the lower inflation rate could drive up SOL’s value due to reduced supply,” the firm noted in its Thursday newsletter. “However, slashing staking rewards may push smaller validators out of the network, raising concerns about Solana’s decentralization.”

With voting nearing its deadline and resistance from validators remaining strong, the fate of SIMD-0228 is still in question. If rejected, Solana may need to explore alternative ways to refine its monetary policy while maintaining network security and decentralization.