Solana SIMD 0228 proposal not passed: A significant advancement in ecological governance?

Recently, a significant decision that affected all participants in the Solana ecosystem - the SIMD 0228 proposal - ultimately failed to pass. This vote set a record for participation in Solana's history, approaching 50% of the total token supply, but the proportion of supporting votes did not reach the required supermajority threshold of 66.67% for approval.

The background of this proposal is that Solana, after experiencing a wave of Memecoin fever, has gradually returned to a calmer phase of on-chain activity. The weekly trading volume has dropped from nearly $100 billion at the beginning of the year to less than $10 billion, a decrease of 90%, now below the levels seen at the onset of the Memecoin rise.

As the popularity of Memecoins wanes, Solana, one of the most successful public chains in this bull market, is facing challenges of transformation and re-positioning. It is at this moment that Solana's largest capital supporter, Multicoin, proposed the 0228 proposal, sparking intense debate within the community. Stakeholders engaged in heated discussions on social media until the very last moment of the voting.

In the debate process of this proposal, we can see many shadows of the past when reforms were promoted in the Ethereum community. The proposal has a short time window, involving long-term considerations and short-term solutions, and of course also includes some difficult-to-articulate interest considerations. However, its high transparency allows us to gain insight into the current attitudes and strategies of the leaders in the Solana ecosystem.

Despite the proposal being rejected, the proposal initiator Tushar from Multicoin still sees it as "a victory," citing the high voter participation rate and extensive community discussion, which demonstrated the capacity for decentralized governance on Solana.

Let's dive deep into the game, significance, and reasons why this proposal was not approved, and assess whether its governance process was fair and effective.

SIMD 0228: A Hasty Proposal

Proposal Content

The proposal aims to dynamically adjust the inflation rate based on the staking rate, with the goal of maintaining a 50% staking rate and reducing the issuance speed of SOL in the long term.

Solana currently adopts a time-decreasing inflation model. At the launch of the mainnet on ( in March 2019, an inflation rate of 8% was set and has gradually decreased, currently around 4.8%, with a long-term target of 1.5%-2%.

If the proposal is approved, short-term staking rewards will decrease, fluctuating between 1% and 4.5% based on the staking rate. The long-term inflation rate will be close to 1.5%.

The current staking rate is 70%, so after 0228 passes, the short-term staking rewards for SOL will decrease, the long-term issuance will reduce, and the staking yield will be adjusted in real-time based on the staking rate.

Unlike some proposals where validators can choose whether to participate, 0228 is mandatory and will affect the interests of all stakers.

) Supporters' Views

The proposal was put forward by Tushar and Vishal from Multicoin Capital, supported by Anza and former Consensys researcher Max. The main reasons include:

1. Reduce unnecessary token issuance to lower inflation costs.

The current fixed inflation model is seen as "clumsy issuance" because it does not take into account the actual economic activity or security demand of the network. With an inflation rate of 4.8% calculated at the beginning of 2025, approximately $3.82 billion will be newly issued annually based on a market capitalization of $80 billion. This high inflation essentially dilutes the value of SOL holders, especially with the current high staking rate of 65.7% - network security is well ensured.

This proposal shifts the staking concept from "overpaying to ensure security" to "seeking the minimum necessary payment".

2. Release capital to promote the development of the DeFi ecosystem

The current high staking rate of 65.7% has led to a large amount of SOL being locked, suppressing the flow of capital in the DeFi ecosystem. The founder of a certain DeFi project pointed out, "Staking encourages hoarding but reduces financial activity." This is similar to the logic in traditional finance where high interest rates suppress investment.

It is worth noting that the supporters of the main DeFi protocols on Solana are also the venture capitalists who propose the projects, so releasing liquidity into DeFi is also an important motivation.

3. Reduce the "leaky bucket effect" and enhance the autonomy of the ecosystem.

The "leaky bucket effect" refers to the significant wear and tear and loss of value within an ecosystem during economic activities. Since the newly issued SOL is considered ordinary income and subject to taxation in the United States, the amount generated by inflation will proportionally extract value from the entire ecosystem. It is estimated that the Solana ecosystem has lost approximately $650 million in tax revenue and $305 million in exchange fees.

From the perspective of first principles, Solana has entered a stable phase, and the early-set inflation model appears unreasonable. The development of public chains should be oriented towards enhancing economic activity, and the inflation plan should be adjusted accordingly.

A venture capital partner summarized that true profits should come from the overflow of demand over supply, rather than from a fixed inflation setting that facilitates cold starts. In the long run, the arguments of the supporters do have some merit. When the public chain ecosystem has passed the cold start phase, a more ideal economic system is naturally needed to promote development.

( Opponent's Viewpoint

The opposition, led by Lily, the chair of the Solana Foundation, believes that it is inappropriate to implement this proposal in such a short time. This proposal, which will greatly change the attributes of assets, will affect participants at different levels, including network layer engineers, product layer developers, and economic institutions. Currently, the discussion mainly focuses on core network layer and product layer personnel, with fewer voices from the product layer and institution-led economic layer groups, who are farther from the information channels. Therefore, it should not be rushed through without sufficient justification.

Many opponents are concerned that small validators may dwindle. Small nodes do not have the same scale effects and bargaining power as large nodes, and inflation reduction may first eliminate this group of small nodes, harming the decentralization of Solana. However, after communicating with some Solana nodes, it was found that most nodes still support it because Solana provides a lot of subsidies, and everyone trusts the value of SOL itself as it continues to improve. This reflects the strong cohesion of the Solana community.

Clearly, both parties are dissatisfied with the current inflation pattern and believe improvements are necessary. The controversy lies in whether to implement it hastily within two weeks.

In addition, there are also some considerations of interest. A large number of SOL holders, especially those who can obtain high returns from non-staking ecosystems ) DeFi ###, naturally do not wish for inflation to remain at a high level. A typical representative here is the venture capital behind Solana and the projects it supports.

One important direction for Solana's adoption currently is by institutions, including ETFs and more traditional institutional use cases. Stakeholders driving institutional adoption may hold opposing views. SIMD argues that there is controversy over whether institutional adoption is beneficial; proponents believe that traditional institutions are more averse to high-inflation assets, while opponents worry more about the uncertainty of assets that are subject to dynamic changes in inflation rates.

The uncertainty of the mechanism may further hinder institutional adoption - institutions can assess asset attributes under a fixed mechanism, but if the mechanism keeps changing, it will create obstacles for evaluation. Therefore, for institutions, it is either to proceed quickly or to wait until the initial adoption is completed before negotiating together - by then, there will be more conflicting interests, making it potentially harder to reach a consensus.

Why choose this time for (?

This raises a question: why propose and push such a proposal so hastily?

This may be due to Solana maintaining a large trading volume amid the residual heat of the meme craze, with current fees and MEV income for nodes still at a high level, thus adjustments to the staking mechanism will not cause much controversy. In 2024, Solana's total MEV revenue reached 675 million USD, showing a clear upward trend, with node MEV revenue in the fourth quarter even exceeding inflation rewards. Because of this, nodes currently have a relatively low sensitivity to short-term inflation income. If activities on the Solana chain completely cool down, the reduction in income caused by this proposal will surely provoke opposition from the staking community.

The Restaking of Solana is about to start, and projects like Renzo and Jito are already showing signs. Looking at the history of Ethereum, the emergence of liquid staking and Restaking will bring huge subsidy benefits to staking and validators, and it can also reduce nodes' dependence on inflation rewards.

The Ethereum Foundation proposed a plan to improve the inflation curve in the middle of last year, similarly anchoring the staking rate to a fixed ratio to reduce excessive staking. The argument at that time was to release more liquidity while reducing the substitute role of LSTs like Lido ETH, under the premise that economic security had far exceeded demand.

The proposal sparked a brief discussion after it was put forward. This is the Ethereum industry once again reviewing the POW economic mechanism after the transition to POS. Both the proposal and the discussion process presented a large amount of computational deductions in support, but ultimately failed to progress due to unclear theoretical foundations. Ethereum's economic argument may have provided a reference for 228, but the opposition it faced also reflects the difficulties in advancing such "reduction" benefit proposals.

The final result was expected. It may be that under the leadership of the foundation, the validators formed a pessimistic view of the proposal, worrying about its impact on institutional adoption. Alternatively, this decision may have indeed been too hasty, leading to a lack of consensus among the validators and resulting in voting discrepancies. It could also be that smaller validators are concerned about short-term income pressures and collectively chose to oppose it. A broad discussion does not necessarily mean it is in-depth; shallow discussions can easily lead to disagreements. The hastily promoted proposal also reflects the unclear understanding among various parties regarding Solana's positioning and development stage, resulting in consensus pain over the next direction after the meme coin super cycle.

![SIMD 0228 Proposal Failed: A Major Victory for Solana Governance?])https://img-cdn.gateio.im/webp-social/moments-10622e66dd008da4d337392c7bcd46d0.webp###

The governance process itself is a victory

Although this proposal was rushed, there has been a highly transparent and open discussion that erupted in just a few weeks. Both sides spoke frankly on social media, with no moderates, directly expressing their views and providing arguments. This discussion model allowed everyone to understand the considerations of all parties. At the most intense moments, online discussions were even held, where the parties expressed their opinions.

Another highlight is the emphasis on community voices. The candid suggestions from numerous Solana project parties/builders on social media have been responded to and incorporated into discussions. Proposals are no longer obscure texts; instead, they are transformed into the voices of each community member for discussion. One controversial point in voting is that stakers cannot directly participate in opinion voting, which brings a dilemma for many large nodes - how to coordinate the opinions of all stakers and make a final decision. This is a problem faced by all public chains, and Solana has highlighted this issue for the first time.

The proposal attracted 74% of the staking supply participation, demonstrating a high level of community engagement. SIMD's clear voting mechanism and threshold for participation make the decision-making process more transparent and predictable. In contrast, the proposal decision-making process in Ethereum is relatively ambiguous, relying mainly on discussions and consensus among core developers, lacking a formal voting mechanism.

Finally, there is the efficiency of the proposal. Although we criticize it for being too hasty, it is remarkable that it took less than two months from proposal to completion of voting, showcasing the efficiency of implementing ideas from top to bottom in this ecosystem. This is also the reason why the initiators of the proposal consider it a victory.

Summary

Overall, the SIMD228 proposal reflects that Solana, after experiencing a prosperous period of innovation in asset issuance models, has entered a decision-making stage for institutional adoption and continued development of on-chain consumer applications, with the emergence of conflicting interests being the catalyst for the entire event.

Supporters hope to quickly promote reforms through small frictions during the prosperous period of on-chain activities, but the haste seems excessive, leading to intense but insufficient discussions, inadequate support and education for small validators, resulting in a lack of consensus among validators. The lifecycle of proposals is very short, and this process reflects the execution power and openness of the Solana ecosystem, making it an excellent governance case worth learning from for all ecosystems.