The latest proposal for Solana aims to reduce the inflation rate, but what are the opponents thinking?
Original Article Title: "SOL's Latest Proposal Aims to Reduce Inflation Rate, What Are Opponents Thinking?"
Original Article Author: CryptoLeo, Odaily Planet Daily
Devout SOL hodlers have once again found some comfort recently, as the Solana community has put forth a new proposal named SIMD-0411 (translated as Double Inflation Rate Suppression, can be understood as not reaching deflation but reducing the inflation rate). The proposal was initiated by Solana community contributors Lostin and helius Dev Ichigo and is currently in the governance discussion phase, with a vote scheduled in the near future.
The proposal suggests doubling the SOL inflation deceleration rate from -15% directly to -30%. After the parameter adjustment, this change would reduce the SOL inflation rate from the current 4.18% to 1.5% by moving the target date from early 2032 to early 2029, meaning the goal of reaching a 1.5% inflation rate would be achieved in just 3.1 years.
With this parameter adjustment, it is estimated that the future issuance of SOL over the next 6 years will decrease by 22.3 million tokens (based on the current mechanism, the SOL supply after 6 years would be 7.215 billion tokens, while with the SIMD-0411 mechanism, it would be 6.992 billion tokens), totaling approximately $31.2 billion at the current SOL price of $140.

The Simplified Security Version of SOL SIMD-0228, What Sets SIMD-0411 Apart
Let's first review the SOL token inflation plan, which was initially designed as follows: an initial inflation rate of 8%, an inflation deceleration rate of 15%, gradually decreasing to a final inflation rate of 1.5%, currently standing at 4.18%.
SIMD-0411 is not the first proposal to improve the SOL inflation mechanism. Earlier this year, early SOL investors like Multicoin Capital released a proposal named SIMD-0228, which also aimed to modify the Solana inflation model. By adjusting the SOL issuance rate to a dynamic and variable mode, the proposal set a 50% target staking rate to enhance network security and decentralization. If over 50% of SOL is staked, the inflation rate decreases by reducing rewards to further incentivize staking; if less than 50% of SOL is staked, the inflation rate increases to boost rewards and encourage staking. Based on the Solana network conditions at that time, the final inflation rate would be set at 0.87%.
However, because the proposal was too complex and faced strong community opposition, it ultimately did not succeed. At that time, the main reasons for opposition from most community members were reflected in the conflict of interest between large validators and small validators:
Large validators supported the SIMD-0228 proposal, which quickly reduced inflation leading to a price increase in the token, resulting in a larger reward;
Small validators, on the other hand, were concerned that the reduction in staking rewards would significantly decrease their income, and some DeFi projects were concerned about liquidity issues. If small validators were to exit, Solana's power would be concentrated in the hands of a few large validators, affecting the network's decentralization.
Meanwhile, SIMD-0411 can be considered a simplified and secure version of SIMD-0228. Based on this, the solution proposed by SIMD-0411 is more targeted, doubling the inflation reduction rate and maintaining the existing consensus-reached 1.5% final inflation rate. It achieves this by adjusting a single parameter, rather than redesigning the entire inflation system like SIMD-0228. It provides a minimal, predictable, and low-risk way to strengthen the inflation design of the SOL token without increasing protocol complexity, making it simpler, more governance-friendly.
What Does the Community Think?
For this round of SIMD-0411, opinions are mixed:
Positive Views: Institutional Support, Encouraging Innovation and DeFi Activity
SOL Treasury company DeFi Dev Corp (DFDV) also expressed support for SIMD-0411. DFDV's analysis stated:
1. In addition to the 22.3 million SOL emission reduction, SIMD-0411 applies a single and easy-to-understand parameter adjustment, avoiding any complex or dynamic monetary logic, enhancing predictability. Furthermore, SIMD-0411 also includes a 6-month activation grace period for network participants to prepare;
2. Regarding staking rewards, DFDV stated that high staking rewards are reasonable in the early stages of blockchain network development, helping attract developers, accelerate decentralization, and stimulate token demand, but Solana has passed that stage. As a data comparison:
"Solana's protocol revenue grew from $29 million in 2023 to $1.42 billion in 2024 and has reached approximately $1.38 billion year-to-date in 2025: nearly a 50x growth in one year. By 2025, Solana's protocol revenue is more than twice that of Ethereum. Solana achieved $1 billion in about 4 years (Ethereum took 6 years)."
「Solana's DEX trading volume has grown from $120 billion in 2022 to $550 billion in 2023, and further to $6,940 billion in 2024, with an expected $14.5 trillion in 2025. Solana's current processing volume is roughly 1.6 times that of Ethereum's DEX trading volume this year.」
「From 2023 to 2025, Solana processed approximately 686 billion transactions, while Ethereum only had 12.7 billion, a staggering difference of 50 times. Solana's annual transaction count has grown from 123 billion in 2023 to 259 billion in 2024, reaching 305 billion so far this year, while Ethereum's annual transaction volume has always been below 5 billion. Solana has achieved scalability (which Ethereum has not).」
Solana has been superior to Ethereum in almost all key metrics such as network revenue, transaction data, DEX trading volume, new wallets, etc., for several consecutive years;
3. The current high inflation has also weighed on the SOL token price performance, which needs to be addressed urgently;
4. Institutional investors, DEXs, and ETF issuers are more inclined to issue assets that are predictable, offer long-term economic benefits, are reliable, and have structurally lower inflation;
5. A decrease in staking rewards will also lead to more SOL flowing into DeFi products, such as lending, LP, stablecoins, etc.;
6. Reduce reliance on token inflation to encourage network validators to innovate.
Concerns: A Series of Issues Stemming from Reduced Staking Rewards
According to Pine Analytics, following the approval of SIMD-0411, the corresponding nominal SOL staking reward rate will steadily decline as follows:
· Around 5.04% in the first year;
· Around 3.48% in the second year;
· Around 2.42% in the third year.
Additionally, according to 0xSpade's analysis, after the approval of SIMD-0411, there will be 10 validators transitioning from profit/loss equilibrium to non-profitability in the first year, 27 in the second year, and 47 in the third year.
In response, DFDV also stated:
1. A lower inflation rate will make the economic benefit for validator nodes more challenging, decrease staking participation, lower economic security, and cause short-term volatility;
2. As the yield decreases, some validator nodes may operate at a loss or even shut down;
3. The uncertainty of sudden adjustments to Solana's inflation schedule may lead to market fluctuations;
5. The yield of ETFs, staking products, and DAT will decrease;
6. An intervention token mechanism may set a bad precedent, as not all networks can follow this mechanism, and most network dynamics and token designs should remain unchanged.
DAT, ETF, and Reduced Inflation: Is SOL Set to Soar?
Although the SOL token's price performance has not been good this year, there have been significant tangible developments: first, the DAT Treasury, while the SOL Treasury may not be as "loud" as BTC and ETH, it has also been making continuous purchases;
Second is the SOL ETF, as per SOSOValue data: SOL spot ETF saw a net inflow of $128 million in a single week (Eastern time from November 17 to November 21). At the time of writing, the total net asset value of SOL spot ETF is $719 million, with an ETF net asset ratio (market value as a percentage of total Bitcoin market value) of 1.01%, and the historical cumulative net inflow has reached $510 million.
Strategic SOL Reserve data shows that SOL Treasury companies and ETFs collectively hold 25.581 million SOL, valued at approximately $3.55 billion. In a situation where other cryptocurrencies are being abandoned and experiencing continuous outflows, SOL has gained a more solid backing, with ample institutional buying support in place.
In my view as a SOL Guardian: "Better short-term pain than long-term pain, as we are all heading toward a 1.5% inflation rate anyway. I am optimistic about SIMD-0411. Of course, the decrease in staking rewards may impact ETF data, and concerns are valid. However, in the long term, the 'New Transparent Predictable Inflation Mechanism' will attract more retail and institutional investors—a prospect that far outweighs the risks of 'reduced staking rewards leading to some exiting,' especially considering that the likely outcome after the short-term potential selling pressure-induced volatility is future 'continual new highs.'
Hope that SIMD-0411 will pass the voting process soon, and not end in failure like SIMD-0228.
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