SIMD-0228 is a proposal that would change Solana’s inflation mechanism. The Solana community has gone into an uproar over the idea. Either it’s a ploy designed to destroy Solana decentralization. Or, it’s a CIA-style sabotage that will prevent the proposal from passing.
As far as I know, the voting will still begin at Solana Epoch 753 around 8:30 PM ET.
This week, the Lightspeed podcast episode roundup featured Helius CEO Mert Momtaz as well as Blockworks Research’s data leader Dan Smith and myself. SIMD-0228 supporters say Solana overpays for security, and that market-based methods are more efficient. Detractors claim the SIMD-0228 could lead to a centralization of the network power.
However, my editors have told me that I should add some analysis to the reporting of news. So, I will give my opinion.
Although network centralization is a concern — MEV tips will contribute proportionately more REV, so Jito will have relatively more power, for instance — what’s more important is that Solana doesn’t lose the scrappy pragmatism that made it so popular in the first place. Validator revenues should be derived from the real value created by MEV fees and priority charges. SIMD 0228 will probably be approved.
The next week we will have more information on this, but I believe there are more intriguing discussions to be had about SIMD0096. It was a decision to not burn half the Solana Priority Fees that was made in February. Since 100% of the fees now go to validators, Solana’s inflation has climbed a bit — from 3.7% to 4.6% on an annualized basis, Blockworks Research analyst Carlos Gonzalez Campo told me on this week’s other Lightspeed podcast episode.
This is a predictable result. It’s interesting to see how unpredictably some of the responses have been since SIMD-0096 went live.
Campo stated that if users and validators had been perfectly rational then they should have paid less priority fees. Solana has removed the 50% tax that was applied to fee revenues, allowing validators to charge half of what they used too. But so far, priority fees have stayed constant — perhaps indicating that competition between users isn’t putting downward pressure on priority fees.
Moreover, the revenue generated by validators from prioritizing fees has been proportionally lower than before SIMD-0096. The users used MEVs more often, but validators could not convince them to change to priority fees. It’s too early to draw any conclusions about absolute trends, but the data is still fascinating.
Campo provided an intriguing goalpost to ensure the success of SIMD-0096: A reduction in Solana’s number of processing units. They are not included in protocol services to include transactions and the proliferation of TPUs adds complexity for developers and costs. SIMD-0096 — which was first pitched as a way to prevent side deals — could prevent new TPUs from coming to the network.
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