The Governance Journey of Solana: Insights from the Failure of the SIMD 0228 Proposal

Summary

Recently, a highly anticipated Solana governance proposal SIMD 0228 failed to pass. The voter participation rate reached a historic high for Solana, approaching 50% of the total token supply, but the final support rate did not reach the required supermajority threshold of 66.67%.

The background of the proposal is that Solana has returned to a calm phase after the Memecoin craze. Trading volume has dropped from nearly $100 billion at the beginning of the year to less than $10 billion, which is below the initial levels seen during the rise of Memecoin.

With the Memecoin craze, Solana has become one of the most successful public chains in this round of bull market. As the hype fades, Solana faces the challenge of repositioning itself. It was at this time that Solana's main capital supporters proposed the 0228 proposal, leading to intense debates within the community. Different parties argued passionately on social media until the voting concluded.

In this debate process, we can see many shadows of the past when changes were pushed in the Ethereum community. The proposal is urgent, involving long-term considerations and short-term solutions, and of course, there are some difficult-to-articulate interests at play. However, the transparency of the entire process allows us to glimpse the current attitudes and strategies of the Solana core team.

Although the proposal was not approved, the proposer still sees it as "a victory", citing the high participation rate and widespread discussion as a demonstration of Solana's decentralized governance capabilities.

Let us delve into the game behind the governance of this proposal, its significance, why it was not passed, and whether the entire process was fair and effective.

SIMD 0228: A Hasty Proposal

Proposal Content

The proposal 228 aims to dynamically adjust the inflation rate based on the staking rate, with the goal of maintaining a 50% staking rate and gradually reducing the issuance rate of SOL.

Solana currently adopts a time-decreasing inflation model. If the proposal is passed, short-term staking rewards will decrease ( fluctuating between 1% and 4.5% based on the staking rate ), and the long-term inflation rate will approach 1.5%.

Unlike some optional proposals, 0228 is mandatory and, once initiated, will affect the interests of all stakers.

Supporters' Viewpoints

The proposal was put forward by a partner of a certain capital company and received support from some investment institutions and researchers. The main reasons include:

1. Reduce unnecessary token issuance to lower inflation costs.

The current fixed inflation model is seen as "blind issuance", without considering the actual economic activity or security demand of the network. High inflation essentially dilutes the rights of SOL holders, especially in the current high staking rate situation.

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

High staking rates have led to a large amount of SOL being locked up, inhibiting the flow of capital in the DeFi ecosystem.

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

Due to the issuance of additional SOL being subject to taxation in the United States, inflation will cause value to flow out of the ecosystem.

Fundamentally, this reflects that Solana has entered a stable phase, and the inflation model set in the early stages needs to be adjusted to accommodate the new development phase.

Opponent's Viewpoint

A faction led by the chairman of a certain foundation opposes the hasty passage of this proposal. The controversy centers on whether such a significant proposal should be implemented in such a short time.

Many opponents are concerned that small validator nodes may thus be lost, harming the level of decentralization of Solana. However, some node operators have expressed support, believing that Solana's subsidy policy and development prospects remain attractive.

Both parties are dissatisfied with the current inflation model, and the disagreement lies in whether reforms should be hastily implemented within two weeks.

In addition, there are some potential interests to consider:

• A large number of SOL holders, especially those who can obtain high returns from non-staking ecosystems, naturally hope to reduce the inflation rate.
• Stakeholders involved in promoting institutional adoption may hold opposing views, concerned that a dynamic inflation mechanism increases uncertainty.

Timing Selection

The proposal is likely being made at this time based on the following considerations:

1. Solana's trading volume remains high, and node income is considerable; therefore, the adjustment of the staking mechanism will not provoke strong opposition.

2. The re-staking of Solana is about to start, which can bring additional benefits to nodes and reduce dependence on inflation rewards.

3. Referring to the similar proposal made by Ethereum last year, we hope to release more liquidity under the premise that economic security is sufficient.

However, the final result showed that the proposal was not approved. Possible reasons include: validators being cautious about the proposal, insufficient discussion leading to disagreements, and small validators being concerned about short-term income pressures. This also reflects that various parties in Solana have not yet reached a consensus on the future development direction of the chain.

The Positive Significance of the Governance Process

Although the proposal was not approved, the entire process demonstrated several advantages of Solana governance:

1. Discuss transparency and openness, with all parties speaking frankly on social media and providing sufficient arguments.

2. Value the voices of the community, and respond to and discuss the suggestions from project parties and builders.

3. High participation, 74% of the staked supply participated in voting.

4. The decision-making mechanism is clear, and the process is predictable.

5. High efficiency, from proposal to completed voting in less than two months.

These characteristics demonstrate the execution and openness of the Solana ecosystem, serving as a governance case worthy of study for other public chains.

Conclusion

The SIMD 0228 proposal reflects that Solana, after experiencing a period of prosperity, is facing the choice of institutional adoption and continuing to develop consumer applications. The contradictions in the distribution of interests have begun to surface, which is the catalyst for the entire event.

Supporters hope to leverage the current boom in on-chain activities to rapidly push for reform. However, the haste has led to insufficient discussion and a lack of consensus among validators. Nevertheless, this governance process still reflects the execution capability and openness of the Solana ecosystem, making it a thought-provoking attempt.