Solana (SOL) sits near $146.88, with a new governance proposal (SIMD-0228) possibly cutting inflation from 4.5% to 0.87%

Meanwhile, Ethereum (ETH), around $2,236.47, moves to adopt Poseidon for more efficient zero-knowledge proofs.

Solana's community is set to vote on a new proposal that could drastically reduce the blockchain's inflation rate and adjust token emissions based on staking participation.

Solana's community is set to vote on a new proposal that could drastically reduce the blockchain's inflation rate and adjust token emissions based on staking participation.

Solana’s community will soon vote on a proposal that could drastically reduce the blockchain’s inflation rate and adjust token emissions based on staking participation.

The proposal, known as SIMD-0228, was put forward by Multicoin Capital and aims to reduce the output of SOL tokens when there is high activity in staking and increase it when there is low participation.

At present, Solana's annual inflation rate is around 4.5%, which could be slashed to just 0.87% if the new proposal is approved.

The proposal's essence is to modify the Payout Factor, which currently distributes a fixed 180,000 SOL per epoch to validators. The proposal introduces a variable Payout Factor that is determined by a formula:

New Payout Factor = Old Payout Factor * (Target Staking Ratio / Current Staking Ratio)

This formula adjusts the Payout Factor to converge towards the "target" staking ratio, which is set at 75%.

If, for instance, the current staking ratio is 60% and the target is 75%, the Payout Factor will gradually decrease in subsequent epochs to encourage more users to stake and reach the 75% goal.

If the current staking ratio exceeds the target, perhaps due to liquidity mining programs or other incentives, the Payout Factor will slowly increase to discourage excessive staking and maintain a healthy balance.

Solana's Economic Model in Flux

Solana's economic model has seen radical changes recently. In an earlier update, the blockchain halved its burn rate, reducing it from 15–25% to a meager 1.2%.

Moreover, despite optimism surrounding proposals like this one, some members of the community have voiced concerns about smaller validators being squeezed out if the rewards heavily favor large SOL holders.

It remains to be seen whether this new plan will help alleviate these issues or introduce fresh complications.

Solana's token price currently sits at about $146.88, reflecting the cautious optimism in the community about the potential for improved token economics to drive value back into the ecosystem.

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