Solana’s Inflation Adjustment Proposal Rejected

Multicoin Capital co-founder Tushar Jain stated that despite the proposal failing, this was an important step for the Solana ecosystem and its governance process.

The vote saw participation from 910 validators, representing 74% of the staked supply. However, only 43.6% voted in favor, while 27.4% voted against and 3.3% abstained. The proposal required 66.67% approval to pass but received only 61.4%.

Solana’s X team emphasized that the voter turnout was higher than every U.S. presidential election in the last 100 years.

What Was the Proposal’s Goal?

SIMD-228 aimed to transition Solana’s inflation system from a fixed schedule to a dynamic, market-based model. The new system would adjust inflation rates based on staking participation to prevent excessive token issuance.

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Currently, Solana‘s annual inflation rate starts at 8%, decreasing by 15% per year until it reaches 1.5%. However, the new model could have reduced inflation by up to 80%. As of now, Solana’s inflation rate stands at 4.66%, with only 3% of the total supply staked.

High inflation can increase selling pressure, lower SOL’s price, and discourage network activity. The proposed system aimed to stabilize the network by adjusting inflation rates based on staking participation while encouraging more active use of SOL in DeFi.

How Did This Affect SOL’s Price?

The rejection of the proposal did not trigger significant volatility in SOL’s price. SOL dropped 1.5% on the day, falling just below $125. However, following the memecoin bubble burst, SOL has lost nearly 60% of its value over the past two months. Additionally, Solana’s network revenue has declined by over 90% due to reduced memecoin minting and trading activity.

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