SIMD-228, a proposal to reduce SOL's inflation rate by 80%, failed to meet the required voting threshold for approval after many small, effective people voted.
According to SIMD's voting status, 61.39% of voters supported the SIMD-228 governance vote. This was less than 66.67% required for approval. With a record 74% turnout by the end of the voting on March 13, it was the largest crypto governance vote to date in terms of both market value and participation.
The voting pattern revealed a rift among network members despite high engagement. Over 60% of the few validators below 500,000 Solana (SOL) voted against the proposal. On the other hand, validators with larger interests overwhelmingly supported it and showed how the proposal influenced the various groups.
Solana's current inflation system balances the burning of transaction fees and the generation of staking rewards. More charges will be burned during periods of high network activity, helping to control inflation.
However, fewer tokens have been removed from circulation due to lower transaction costs. Meanwhile, at an inflation rate of 4.7%, reward staking continues to add new SOLs to the market. The goal of SIMD-228 was to reduce staking rewards, as it could slow the growth of Sol supply and increase its value.
Under the proposal, inflation would have fallen below 1% at the current 65% staking rate. However, small validators have been difficult to maintain profitability as many committees have little or no claims. If enough of them left the network, Solana's decentralization could have weakened and raised concerns about long-term stability.
The SIMD-228 failed, but another proposal, SIMD-123, passed with almost 75% support. This change allows validators to distribute rewards more transparently by allowing them to split stakeholders and portions of their revenue through an on-chain system. Research results from just finished votes show that network participants prefer to change validator incentives in lowering inflation.
