Dear Solana Community,
P2P.org strongly believes in sustainable tokenomics as a foundation for long-term adoption and stability. We’re fully on board with the idea of minimizing inflation, and ensuring that value redistribution is kept efficient while still maintaining network security.
However, after reviewing SIMD-228, we have several concerns that prevent us from supporting it in its current form. Many of our stakers have shared similar reservations, and we want to make sure their voices are heard.
Security Considerations and Open Questions
While a dynamic emission model presents potential advantages over the current policy, further research is needed to fully understand the trade-offs between MNA and MVI. A deeper exploration is required to define an ideal validator set and assess how a new issuance model would support it under different market conditions.
Regarding the proposed threshold, we believe it warrants additional discussion, particularly from a security perspective.
- The network remains secure as long as no single entity controls more than 2/3 of the total stake (66.666%), as this would allow them to manipulate transactions (e.g., double-spending).
- A separate risk exists at 1/3 of total stake (33.333%), where an entity could halt consensus, disrupting network operations. While this scenario doesn’t provide direct financial gain, it could be strategically leveraged alongside market positions.
With the proposed optimal staked ratio of 33.333% (staked supply / total supply), the first type of attack would be highly impractical, as acquiring a 66.666% share would require purchasing a very large part of the unstaked supply and also gaining control over a portion of the already staked funds. However, the second type of attack—where an entity acquires and stakes more than 25% of unstaked SOL to obtain >33.333% of the total staked supply—remains a potential concern.
We encourage further discussion on these aspects to ensure the model is both robust and aligned with Solana’s long-term security and decentralization goals. The relationship between unstaked token acquisition and network vulnerability is illustrated in the accompanying figure.
Analysis of APR and Staked Ratio Considerations
The forum discussion explores a hypothetical scenario where the market seeks a 7.5% inflationary rewards APR. Under this assumption, with a terminal inflation rate of 1.5%, such a yield would only be achievable if the staked ratio drops to 20%, which is considered a potentially high-risk level. We’d like to explore this further:
- Long-Term Inflation Trajectory – The terminal inflation rate of 1.5% is projected to be reached in September 2032 (see dynamics chart). This means any impact on staking APR would unfold gradually over time under the current model, and the discussed risk is not present at the moment.
- 7.5% APR as a Market Target – It’s unclear why 7.5% APR was specifically chosen as the benchmark. Historically, Solana’s staking yields have dipped below this level multiple times without causing significant changes in the staked ratio.
- Defining an optimal Staked Ratio – Further clarification on how the proposal defines an optimal staked ratio would be helpful. Understanding the underlying assumptions behind this threshold could provide a more comprehensive view of potential risks.
We believe discussing these aspects further will help refine the proposal’s assumptions and ensure a well-rounded approach to staking dynamics.
Timeline Considerations
The proposed implementation schedule includes a 6-month hold period followed by 50 epochs (100 days) for gradual rollout, leading to full activation within approximately 9 months. Given the current state of the ecosystem, this timeline raises important concerns:
- Readiness of Block Reward Mechanisms – Native mechanisms for block rewards sharing are unlikely to be in place within this timeframe. Without these mechanisms, delegators would experience a significant reduction in staking returns, with inflation dropping from 4.68% to 0.83%—a 5x decrease—in a relatively short period.
- Impact on Stakers – The rapid reduction in rewards could disrupt incentives for staking participation, particularly given the absence of alternative mechanisms to mitigate the impact.
- Urgency of Implementation – The risks associated with the current inflation model are projected to emerge over the long term, raising the question of whether such an accelerated rollout is necessary at this stage.
Given these factors, we believe a more measured approach may be beneficial. We encourage further discussion on the rationale behind the urgency of this timeline and whether adjustments could better balance security, incentives, and network stability.
Potential Impact on Validator Set Composition
The proposal lacks a framework for optimal validator set definition across staking scenarios and doesn’t adequately address how the new issuance curve affects validator sustainability and decentralization.
With reduced issuance, block and MEV rewards become critical factors in validator yields. This could lead to centralization as larger validators have better access to optimization opportunities.
A side note: this issue is likely to become even more pronounced if SIMD-123 isn’t implemented, as it would lead to increased competition in the development of reward-sharing mechanisms.
We are inclined to vote NO— but we remain open to discussions and refinements to ensure the best outcome for the network. We will continue to negotiate with our stakers and partners to find a balanced approach.—while we align with the long-term vision of reducing inflation, the current proposal lacks the necessary research and safeguards.
Staker-Driven Governance—We remain committed to engaging with our stakers. If a staker directly requests that their stake votes, we will split our voting weight accordingly.
We support the direction of SIMD-228 but recommend further refinement to ensure Solana’s economic security is preserved, especially in scenarios where staking participation declines.
We appreciate the effort behind this proposal and encourage continued discussions to strengthen Solana’s staking and issuance model in a data-driven and secure manner.
— P2P.org Team
