Solana's new inflation reduction proposal SIMD-0411: a reduction of 22.3 million SOL over 6 years, where does the community stand on this?

Original: Odaily Odaily Daily

Author: CryptoLeo

The devout SOL guardians have recently found some comfort, as the Solana community has proposed a new initiative called SIMD-0411 (translated as “double suppression of the inflation rate,” which can be understood as not yet deflationary but with a decreasing inflation rate). This proposal was initiated by Solana community contributors Lostin and helius Dev Ichigo and is currently in the governance discussion phase, with voting set to begin soon.

The proposal suggests doubling the SOL inflation deceleration rate from -15% to -30%. After parameter adjustments, the SOL inflation rate will drop from the current 4.18% to 1.5%, with the time frame moved up from early 2032 to early 2029. This means that it will only take 3.1 years to reach the inflation target of 1.5%. It is expected that under this parameter, the future issuance of SOL will decrease by 22.3 million pieces over the next 6 years (according to the existing mechanism, the SOL supply will be 721.5 million pieces after 6 years, while under the SIMD-0411 mechanism, the SOL supply will be 699.2 million pieces after 6 years). Based on the SOL price of 140 dollars at the time of writing, this amounts to approximately 3.12 billion dollars.

What are the differences between the simplified secure version of SOL SIMD-0228 and SIMD-0411?

Let's first review the inflation plan for the SOL token, which was originally designed with an initial inflation rate of 8%, an inflation reduction rate of 15%, until it gradually decreases to a final inflation rate of 1.5%, which is currently 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 called 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 target staking rate of 50% to enhance network security and decentralization. If more than 50% of SOL is staked, the inflation rate decreases, suppressing further staking by reducing rewards; if less than 50% of SOL is staked, the inflation rate increases, raising rewards and encouraging staking. According to the situation of the Solana network at that time, the final inflation rate was set to 0.87%.

However, due to the complexity of the proposal and strong opposition from the community, it ultimately did not succeed. The reasons for the opposition from most ordinary community members were reflected in the conflict of interest between large validation nodes and small validation nodes.

Large validation nodes support the SIMD-0228 proposal, and the rapid decrease in inflation leads to a rise in token prices, resulting in greater returns;

Small validators are concerned that a decrease in staking rewards will significantly reduce their income, and some DeFi projects are worried about liquidity issues. If small validators exit, Solana's power will concentrate in the hands of a few large validators, affecting the degree of decentralization of the network.

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 rate of inflation decrease while maintaining the existing consensus of a 1.5% final inflation rate. It achieves this by merely adjusting a single parameter, rather than redesigning the entire inflation system like SIMD-0228. It offers a minimal, predictable, and low-risk approach to enhance the inflation design of the SOL token without increasing the complexity of the protocol. Simpler and easier to govern.

What is the community's opinion?

For this SIMD-0411, everyone's evaluations are still mixed, with both good and bad opinions.

Positive Outlook: Institutions are Optimistic, Encouraging Innovation and DeFi Activity

The SOL treasury company DeFi Dev Corp (DFDV) has also expressed support for SIMD-0411, and DFDV analysis states:

1. In addition to the reduction of 22.3 million SOL, SIMD-0411 applies a single and easy-to-understand parameter adjustment, avoiding any complex or dynamic monetary logic, enhancing predictability. Moreover, SIMD-0411 also includes a 6-month activation grace period to allow network participants to prepare;

2. Regarding staking rewards, DFDV stated that high staking rewards are reasonable in the early stages of blockchain network development, as they help attract developers, accelerate the decentralization process, and stimulate token demand, but Solana has already passed that stage. As a data comparison:

Solana's protocol revenue increased from $29 million in 2023 to $1.42 billion in 2024, and has reached approximately $1.38 billion so far in 2025: a nearly 50-fold increase within a year. By 2025, Solana's protocol revenue will be more than twice that of Ethereum. Solana took about 4 years to reach $1 billion (Ethereum took 6 years).

The DEX trading volume of Solana grew from $12 billion in 2022 to $55 billion in 2023, reaching $694 billion in 2024, and is expected to reach $1.45 trillion in 2025. Solana's processing volume this year is approximately 1.6 times that of Ethereum's DEX trading volume.

From 2023 to 2025, Solana processed approximately 68.6 billion transactions, while Ethereum only handled 1.27 billion, a staggering difference of 50 times. The annual transaction volume of Solana grew from 12.3 billion in 2023 to 25.9 billion in 2024, reaching 30.5 billion so far this year, while Ethereum's annual transaction volume has remained below 500 million. Solana has achieved scalability (while Ethereum has not).

Solana has consistently outperformed Ethereum in almost all key metrics, including network revenue, transaction data, DEX trading volume, and new wallets, for several consecutive years.

3. Currently, high inflation is also dragging down the performance of the SOL token, which urgently needs to be addressed.

4. Institutional investors, DAT, and ETF issuers prefer to issue assets with predictable, long-term economic benefits that are reliable and have lower structural inflation;

5、The decrease in staking yield will also lead to more SOL flowing into DeFi products, such as lending, LP, stablecoins, etc.;

6. Reduce dependence on token inflation and encourage innovation among network validators.

Concerns: A Series of Problems Caused by the Reduction of Staking Rewards

According to Pine Analytics, the nominal staking yield of SOL will steadily decline after passing SIMD-0411, which are as follows:

About 5.04% in the first year;

About 3.48% in the second year;

About 2.42% in the third year.

In addition, according to the analysis by 0xSpade, after SIMD-0411, in the first year, 10 validation nodes will shift from profitable/break-even to unprofitable, in the second year, there will be 27, and in the third year, there will be 47.

In this regard, DFDV also stated:

1. A lower inflation rate will make the economic benefits of validation nodes more challenging, reduce staking participation, decrease economic security, and trigger short-term volatility;

2. As yield rates decrease, some validator nodes may incur losses or even shut down;

3、The uncertainty of the sudden adjustment of the Solana inflation plan may lead to market volatility;

5、The yields of ETF, staking products, and DAT will decrease;

6、The intervention of token mechanisms may set a bad precedent, and not all networks can follow this mechanism. Most network dynamics and token designs should remain unchanged.

With DAT, ETF, and a decrease in inflation, isn't it time for SOL to take off?

Although the price performance of SOL tokens has not been good this year, there has been significant substantive progress: first, the DAT treasury; although the SOL treasury is not as “high-profile” as BTC and ETH, it is still continuously buying; second, the SOL ETF. SOSOValue data shows that the net inflow for the SOL spot ETF during the week (Eastern Time November 17 to November 21) was $128 million. As of the time of writing, the total net asset value of the SOL spot ETF is $719 million, with an ETF net asset ratio (market value compared to total market value of Bitcoin) of 1.01%, and the historical cumulative net inflow has reached $510 million.

Strategic SOL Reserve data shows that the SOL treasury company and ETF hold a total of 25.581 million SOL, worth approximately $3.55 billion. Amidst other crypto assets being abandoned and continuously bleeding, SOL has welcomed a more solid backing, with a well-funded institutional buying support already in place.

In my eyes as a SOL guardian: "A long pain is not as good as a short pain, since we will eventually reach a 1.5% inflation rate. I am optimistic about SIMD-0411. Of course, the reduction in staking yields may affect ETF data, and it is reasonable to have concerns, but in the long run, the 'new transparent and predictable inflation mechanism' will attract more retail and institutional investors, which completely outweighs the risks brought by 'reduced staking yields leading to some exits'. Moreover, the fluctuations caused by potential short-term selling pressure are likely to lead to future 'continuous new highs'.

I hope SIMD-0411 can pass the voting phase soon and not end in failure like SIMD-0228.