Behind the Failure of Solana’s Proposal: Governance Difficulties Under Node Interest Game

Author: Frank, PANews

The most controversial SIMD-0228 proposal in the history of Solana governance was ultimately declared a failure with less than 66.6% of votes in favor. This vote was not only a technical debate on inflation reform, but also evolved into a war of interests among the validator class.

The top players tried to promote the upgrade of ecological efficiency, while small and medium-sized validators fiercely resisted for their right to survive. When the "democratic cloak" of on-chain governance was torn apart by data, Solana exposed not only the inflation problem, but also the real rift in the interests between large and small validators. How will this storm reshape the future of the ecosystem? The answer may be hidden in the game between code and ballot box.

The game of interests between large and small validators caused the proposal to fail

The main content of the SIMD-0228 proposal is to increase the network pledge rate by dynamically adjusting the inflation rate. Previously, PANew had made a detailed interpretation of the content of the proposal (Related reading: Solana Inflation Revolution: SIMD-0228 Proposal Triggers Community Controversy, 80% Issuance Reduction Hidden "Death Spiral" Risk)

In general, when the proposal is passed, the reduction of Solana block rewards will be a high probability event. When the proposer proposed this idea, he believed that it would not have much impact on the income of the validator. The basis is that the MEV income of the validator will increase significantly in the fourth quarter of 2024. Even if inflation is reduced, reducing block rewards will not affect the overall income level of the validator.

But in fact, according to data from February 2025, the MEV income on the Solana chain has shrunk significantly. Compared with the overall income of US$550 million in January, it fell to US$195 million in February, a monthly decline of 64%. As for the income in March, the foreseeable result is that it will be lower than that in February.

That is, the prerequisites proposed by the 0228 proposal no longer exist, and the most affected are small and medium-sized nodes.

Therefore, in this vote, this polarized attitude can be clearly seen. The voting results show that 67.5% of small nodes with a stake of less than 100,000 SOL voted against, and more than 60% of small and medium-sized nodes with a stake of less than 500,000 SOL voted against, while 51.6% of validators with a stake of 500,000 to 1 million SOL voted in favor, and 65.8% of nodes with a stake of more than 1 million SOL voted in favor.

It can be said that the failure of the SIMD-0228 proposal is actually the interest game between large and small validators on the Solana network.

The survival dilemma of small and medium-sized validators, the sharp decline in MEV income, and 90% of validators are affected

The core reason for this is that the business models of large and small validators are different.

The business logic of large validators is to provide customers with better on-chain services by increasing the share of leading blocks. Therefore, it can be clearly seen in the list of validators that the top few large validators extract less MEV commissions, many of which are 0. These validator operators are either centralized exchanges or providers of RPC services such as Helius.

Small and medium-sized validators are more dependent on block rewards and MEV income. The reasonable source of income for most small and medium-sized validators is mainly based on block rewards and MEV income. Once this income drops sharply, they can only choose to withdraw from the ranks of validators or increase gray income by running sandwich attack robots.

Before analyzing the specific impact of the proposal on small and medium-sized validators, it is necessary to clarify their operating cost structure.

For the smallest unit of validators, the current equipment recommended for running validators requires several important configurations, 512GB of memory, and 10GB of bandwidth. These two items are the most expensive parts. According to this configuration, the server requires a minimum monthly expenditure of about US$800. Plus at least 1,000 SOL staked equity. A total of about $134,000 was invested. If the block reward drops to 0.92% (the expected inflation rate of the proposal), the daily net loss will reach $19.6, and the risk of value loss of SOL tokens will also be borne.

According to the current distribution of validator nodes, the number of validator nodes below 500,000 SOLs exceeds 90%. In order to obtain more stakes, these validators usually adopt a low commission level of 0-5%, that is, they charge very little staking commission from the principals who support the validation, and their main income basically comes from staking their own funds.

Looking at the distribution of priority fees, there are currently 1,333 validators, of which the top 125 large validators account for 75%. The remaining 1,208 small validators share about 25% of the market share. Based on the total on-chain fees of 195 million in February, these 1,208 validators can share a total of 48.75 million US dollars, and each small validator can share an average of about 40,000 US dollars in income.

Take the median node (No. 729) as an example. Based on the amount of self-staking of this node, it can get $3.67 per day, but if the inflation rate is reduced to 0.92%, the node may lose $17 per day.

Solana Co-founder Proposes a New Plan to Reduce Inflation

In fact, there is another SIMD-0123 proposal being carried out at the same time as 0228. Similar to 0228, this proposal is also designed to limit the income of validators. The goal is to automatically distribute the rewards promised by the validator to the client after each cycle through protocol upgrades. Under the current mechanism, validators issue NFTs or LSTs (liquidity pledge tokens) as settlement vouchers, but this settlement method is not public and accurate. Previously, some validators have privately adjusted the commission rate to reduce the benefits to the client.

However, although this proposal did not trigger widespread discussion like 0228, it was eventually passed with 74.91% support. Solana co-founder Toly commented on this on X: "Simd 228 did not pass, but 123 passed. Although both proposals are aimed at reducing the income of validators. Opposing 228 is not just for their own interests."

However, the failure of the 0228 proposal does not mean the stagnation of Solana's inflation reform plan. After the vote, Toly proposed another more moderate plan on X to increase the block CU amount (computing unit), double the network's throughput, and increase the annual deflation rate to 30%.

In general, Toly advocates reducing the cost of a single transaction through engineering optimization and expansion, while improving network efficiency and reducing dependence on inflation, and gradually achieving a sustainable model of "high throughput and low inflation". This solution avoids complex governance games such as SIMD-0228 and relies more on the natural evolution of technological upgrades.

However, this proposal has not yet been formally proposed on the developer forum, it is just a proposition. But in any case, SOL's inflation problem seems to be one of the key issues that the Solana ecosystem must solve next.

The failure of the SIMD-0228 proposal reflects the complex interest structure within the Solana ecosystem and the current situation where the governance model needs to be optimized. Although this proposal ultimately failed, it may be a collective participation success in Solana's governance process. Next, how to balance the interests of all parties while optimizing the token inflation model so that the ecosystem can move forward with a consistent goal may be the most difficult problem in Solana's governance.