Analysis of Solana Governance Proposals: SIMD-228 and SIMD-123

What’s Next for Solana? Understanding the Governance Proposals That Could Define Its Future.

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Today, we’re doing something a little different: analyzing the governance proposals that have been at the center of discussion within Solana over the past few weeks. Below, you’ll find a clear and concise summary of all the key details you need to know about this topic.

After thorough research, I’ve compiled the essential points to help you understand, in a simple and direct way, what’s at stake with these proposals and how they could impact the Solana ecosystem. Let’s dive in!

Introduction

At the beginning of 2025, the Solana community, especially validators and key stakeholders, is evaluating two major governance proposals known as SIMD-228 and SIMD-123. These proposals aim to adjust Solana’s internal economy, covering aspects such as SOL inflation policy and the distribution of network rewards among validators and delegators, both changes are part of Solana’s formal on-chain governance process, requiring active participation from validators in discussions and voting on significant protocol modifications.

Broadly speaking, SIMD-228 proposes a reduction in SOL’s inflation rate, shifting from a fixed model to a dynamic one based on network conditions. Meanwhile, SIMD-123 suggests a mechanism for automatically redistributing block rewards (fees) among delegators, something that currently does not happen in Solana by default.

The following article provides a detailed breakdown of each proposal, a comparative analysis, and an evaluation of their potential impact on the Solana network, including delegators, validators, and decentralization. Additionally, we will examine the current voting status and discuss the broader implications of these changes.

Detailed Explanation of SIMD-228

SIMD-228 is a proposal aimed at reforming Solana’s monetary policy by introducing a ‘smart emissions’ mechanism, where SOL issuance dynamically adjusts based on staking participation. Currently, Solana follows a fixed inflation schedule that gradually reduces over time — from 4.7% in 2024 down to a long-term target of approximately 1.5%, this predetermined model does not take real network activity (transactions, fees, MEV revenues, etc.) into account when adjusting supply, the proponents of SIMD-228 argue that this ‘blind issuance’ is suboptimal and propose shifting to a market-based model that optimizes token emissions.

SIMD-228 adjusts the SOL inflation rate dynamically based on the percentage of the supply that is staked: the fundamental idea is that higher staking participation reduces the need for high emissions to attract validators, while lower staking participation justifies higher inflation to incentivize security.

Detailed Explanation of SIMD-123

SIMD-123 addresses another fundamental aspect of Solana’s economy: the distribution of block rewards (transaction fees and tips) among validators and delegators. Currently, Solana does not natively distribute block rewards to delegators, under the current system, a validator who produces a block receives all associated fees directly and only inflation rewards are shared with stakers. SIMD-123 proposes a protocol-level solution to automatically distribute block rewards among delegators at the end of each epoch, validators would be able to set a commission rate on block rewards, and the remaining portion would be proportionally distributed to delegators.

Comparison Between Both Proposals

Although SIMD-228 and SIMD-123 address Solana’s economy from different angles, they share a complementary relationship. Below is a comparison of key aspects:

1. Scope of Change: SIMD-228 operates at a macroeconomic level, modifying the global inflation rate of the network, affecting all participants equally. In contrast, SIMD-123 is a microeconomic change focused on the incentive structure- it reconfigures how rewards are distributed among different actors (validators vs. delegators) but does not alter the total amount of SOL issued by the network. In simple terms, SIMD-228 redefines “how much” is minted and under what conditions, while SIMD-123 redefines “how” certain existing revenues are distributed within the protocol.

2. Effect on Staking Rewards: Under SIMD-228, the base staking reward (inflation) will decrease if network participation remains high. For example, under current conditions, the annual staking reward rate would drop from ~4–5% to ~1–2% in SOL. This means that both delegators and validators would receive less newly issued SOL as a reward for validating/participating. Conversely, SIMD-123 does not change the inflationary reward; instead, it adds transaction fees to the staking reward pool (distributing them proportionally). As a result, delegators would earn slightly more (due to shared fees), while validators would retain a smaller share of those fees. In other words, SIMD-228 reduces the total staking yield, while SIMD-123 redistributes the source of that yield, increasing the proportion derived from network activity (fees) rather than token issuance, some community members have pointed out that combining both measures could balance the impact — the slight yield increase from SIMD-123 for delegators could partially offset the inflation reduction from SIMD-228. In fact, certain validators expressed that their support for reducing inflation would be stronger if accompanied by fee distribution to stakers, ensuring that delegators retain an attractive incentive even with lower inflation.

3. Impact on Incentive Structure: With SIMD-228, Solana would rely more on “market-based” incentives (fees, MEV) to compensate validators and delegators, rather than on inflationary SOL issuance, this shifts Solana toward a self-sustaining security model, where if network usage is high (many transactions paying fees), total rewards remain competitive even with lower inflation, but if economic activity declines, inflation could temporarily increase to attract sufficient staking participation. SIMD-123, on the other hand, focuses on aligning incentives between delegators and validators. Currently, there is a slight asymmetry- validators benefit from additional fee revenue that delegators do not receive, which could discourage delegators if they feel they are not capturing the full value of their stake, with SIMD-123, delegators would have a direct incentive linked to fee revenue (not just inflation), which could increase staking participation or, at the very least, improve staker satisfaction by ensuring they maximize their returns. However, for validators, this introduces a new competitive element — the fee commission rate could become a differentiating factor in attracting delegations.

SIMD-228 balances incentives at the network vs. staker level (reducing extra payments when the network already compensates via fees), while SIMD-123 balances incentives at the validator vs. delegator level (ensuring both benefit proportionally from all revenue sources).

4. Voting Process and Thresholds: Both proposals went through Solana’s on-chain governance process, with some key similarities and distinctions. Neither proposal is a simple parameter adjustment; both require modifications to the base code, meaning voting is conducted through a supermajority of validators. In practice, Solana employs a “stake-weighted voting” mechanism — a snapshot of delegated stake is taken (for these proposals, in epoch 752), and voting tokens proportional to each validator’s stake are issued, these tokens (representing voting power equivalent to staked SOL) must be claimed and then sent to designated addresses representing Yes, No, or Abstain for each proposal. Both SIMD-228 and SIMD-123 set identical requirements: a minimum quorum of 33% participation (meaning at least 33% of all voting tokens issued must be used, including abstentions) and a qualified majority of ≥ 66.67% “Yes” votes (Yes vs. No) for approval. This ensures that a change is adopted only if at least two-thirds of the stake-weighted voting power actively supports the proposal. The voting process for both proposals ran in parallel and was coordinated — both votes opened in early March 2025 and remained open until the end of epoch 755.

Regarding differences, SIMD-228 generated a very active debate in both the official forum and community channels (for example, the proposal was modified to extend the implementation period from 10 to 50 epochs in response to concerns). Meanwhile, SIMD-123, being more technical, generated a less public but still divided debate. However, in terms of voting procedures, both followed the same steps, timelines, and approval requirements, reflecting the maturity of Solana’s governance process.

5. Complementarity vs. Independence: SIMD-228 and SIMD-123 are independent from each other — each can be implemented separately without relying on the other. In fact, both could be approved, only one could pass, or neither could pass, depending on the validators’ votes. However, the community has often discussed them together since both proposals impact the ecosystem’s reward flow, if only SIMD-228 is approved, inflation would be reduced without changing how fees are distributed. If only SIMD-123 is approved, inflation would remain the same, but fee distribution would be adjusted. If both are approved, Solana’s incentive structure would change significantly: the network would mint far fewer new SOL, while at the same time, all on-chain value generation (fees, MEV) would be distributed more equitably among staking participants.

There is a view that SIMD-123 helps mitigate the impact of SIMD-228 on delegators by providing them with additional revenue, while SIMD-228, in turn, helps mitigate potential excessive inflationary effects when implementing SIMD-123 by limiting the total reward pool to be distributed. In any case, from a design perspective, SIMD-228 is a “monetary policy” proposal, while SIMD-123 is a “reward distribution policy” proposal, both aiming to strengthen Solana’s economy but in different dimensions.

Impact on the Solana Network (Delegators & Validators)

The implications of these proposals on the Solana network as a whole are profound, especially in terms of economic rewards for participants and potential effects on decentralization. Below are the expected impacts on delegators, validators, and the decentralized structure of the ecosystem:

– Delegators (Stakers): SOL delegators may experience changes in their profitability and their role within the ecosystem. With SIMD-228, the annual staking reward in SOL will decrease compared to the current trajectory, as the base inflation rate will be lower. In simple terms, a delegator who currently earns ~5% APY in SOL (before commission) could see this nominal return drop to around ~1.5–2% APY in SOL once the new model is implemented. It is important to note that this nominal change may be accompanied by indirect benefits: if the inflation reduction achieves its goal, the value of SOL will be less diluted over time, potentially increasing the real purchasing power of the rewards received (i.e., fewer newly issued SOL in circulation could result in less downward price pressure, although this depends on many external factors). Plus, as previously mentioned, SIMD-123 would partially offset the inflation reduction by adding transaction fee revenue to delegators, increasing their effective APY. If SIMD-123 is approved, stakers would automatically begin receiving these trickle-down SOL rewards from network activity, which they had previously not benefited from.

In simple words, for an average delegator: if only SIMD-228 is approved, they will need to prepare for a lower yield in SOL and possibly reconsider their return expectations; if only SIMD-123 is approved, they will see a slight increase in rewards (depending on how well their validator captures fees). In any case, delegators will continue receiving their proportional share of total staking rewards; neither proposal reduces their relative participation in staking rewards (in fact, SIMD-123 increases it). An additional benefit for delegators is greater confidence and simplicity: they will know they are not leaving “tips on the table”; all value generated from their delegation will be distributed to them in each epoch in a verifiable manner.

– Validators: For validator node operators, these changes present a challenge in terms of revenue and economic sustainability. Many validators, especially independent or smaller ones, operate on tight margins and face significant fixed costs (equipment, servers, bandwidth, security), they currently finance their operations through the portion of staking rewards they receive (either from the commission they charge their delegators on inflation rewards or from transaction fees they capture directly), SIMD-228 will reduce the total amount of SOL that validators earn for producing blocks, as annual issuance will decrease. Although the percentage commission they charge does not change, they will be receiving that percentage from a smaller total amount, this means lower gross revenue to cover expenses unless it is offset by an increase in SOL’s price or higher fee revenue.

SIMD-123, on the other hand, directly cuts off a revenue stream that was previously exclusive to the validator (fees) and redistributes it. If a validator chooses not to share fees (by setting a 100% commission on them), it is likely that many delegators or stake pools will shift toward other validators who do share fees, making it unsustainable to retain all fees. It is most likely that validators will engage in a “race to the bottom” on fee commission rates, similar to what has happened in other networks where most validators end up lowering their commissions to attract stake. As a result, validators will see a decrease in their operational profitability compared to the status quo: less SOL from inflation (SIMD-228) and less SOL from fees (SIMD-123). Those with greater self-stake or backing from large institutional delegators may be able to sustain themselves better, but smaller validators, who rely on every lamport to cover costs, will feel the pressure.

This reduction in income could have several effects. In the worst-case scenario, some validators may be forced to shut down their nodes if continuing operations becomes unprofitable, especially those who were already operating on the edge. In fact, during the debate, it was suggested that a non-trivial fraction of validators might exit the active set: estimates from SIMD-228 supporters indicated a possible loss of around 100 validators (out of ~1,300 current ones), and some pessimistic scenarios projected losses of 200–250 validators, as suggested by certain analysts. This would represent approximately 8% to 20% of all operators, likely concentrated among the smaller ones. Although these are speculative estimates, they reflect real concerns about the potential exit of marginal validators. Even among those who continue, strategic adjustments may be necessary: for example, validators may seek alternative arrangements to sustain themselves (collaborations with MEV bots, sponsorships, cross-subsidies from other business models, etc.).

It is worth noting that, aware of these concerns, the community has discussed parallel measures to reduce validator costs, such as lowering the cost of voting in each slot or optimizing the efficiency of the validator client (which is under development apart from these proposals). Also, the gradual implementation of SIMD-228 over 50 epochs is a way to give validators time to adapt and, ideally, by the time emissions have decreased significantly, the ecosystem will provide other income sources (greater activity in L2s, more MEV sharing, lower infrastructure costs, etc.).

It is important to note that not all effects are negative for validators: larger or more professional validators could benefit from an environment where SOL is scarcer (and therefore more valuable), partially offsetting the lower amount of SOL received with a higher USD value per token. Plus, with SIMD-123, validators will gain in transparency and attractiveness to delegators, which could make it easier for them to grow their stake (even if it comes at the cost of sharing more of their rewards). Lastly, a healthier long-term economic model for the network (the goal of SIMD-228) also provides validators with a more stable horizon, reducing the risks of hyperinflation or devaluation that could discourage future participation. In summary, in the short term, validators bear the highest cost of these reforms (lower direct income), while in the long term, the expectation is that a stronger SOL and a more participatory staking system will compensate for that burden.

Current Voting Status

Both proposals have gone through the formal governance process during the first quarter of 2025: voting for SIMD-228 and SIMD-123 took place simultaneously, beginning in early March 2025 following the respective discussion phases in the Solana developer forum. As scheduled, voting tokens were issued in epoch 753 and the voting window remained open until the end of epoch 755 (approximately mid-March 2025). During this period, validators were able to claim their tokens and cast their votes by sending them to the designated Yes, No, or Abstain addresses.

At the time of writing this article, the SIMD-228 proposal (“Staking Participation-Based Emissions”) has achieved majority support and met the minimum quorum requirement. According to data published on March 12, 2025, over 71% of the votes cast have been in favor of SIMD-228, comfortably surpassing the required 66.67% threshold. Additionally, it was confirmed that participation exceeded 33%, ensuring that quorum was met. In other words, barring any unexpected developments before the close of epoch 755, all indications suggest that SIMD-228 will be approved by the community. If the trend holds until the end of the voting period, the proposal will enter the preparation phase for implementation, coordinated with core development teams.

It is worth noting that this level of support is not coincidental: numerous major validators, Solana Foundation figures and even Solana co-founders publicly backed this measure, generating broad consensus in favor of reducing inflation. The vote on SIMD-228 reflects this alignment of perspectives: a collective effort to optimize the network’s monetary policy, even at the cost of significant changes.

For SIMD-123 (“Protocol-Level Block Reward Distribution”), voting is still ongoing (concluding simultaneously at the end of epoch 755). Official final results had not been announced at the time of this article. However, community sentiment can be inferred from statements and forum discussions — there is also considerable support for SIMD-123, particularly from high-profile validators and technical participants in the ecosystem. For example, leading infrastructure providers in the Solana ecosystem, such as Helius, have publicly expressed their support for SIMD-123, recognizing the importance of formalizing the distribution of fees to delegators.

Many validators view the proposal favorably, as it helps standardize and bring transparency to a practice that some had already been implementing manually. However, opinions have not been unanimous. In community debates, some small validators have voiced strong opposition, arguing that this proposal could severely impact their economic viability. As a result, the SIMD-123 vote may show a slightly higher percentage of “No” votes compared to SIMD-228, reflecting these concerns, even so, indications suggest that quorum has also been reached and that the vote is leaning significantly in favor of “Yes.” The final decision will depend on whether the required two-thirds supermajority is achieved, given that a large percentage of staked SOL is controlled by major validators (who largely support the proposal), it is expected that SIMD-123 will also be approved. However, this will be formally determined at the close of epoch 755, when votes will be officially counted.

From a procedural standpoint, it is important to highlight that both proposals followed the established governance guidelines transparently. The approval thresholds (quorum ≥33% and supermajority ≥66.7%) have proven to be stringent but achievable, ensuring that only proposals with broad consensus are adopted, the fact that SIMD-228 reached quorum and surpassed 70% support before the deadline indicates a strong commitment from validators to active network governance.

This sets a positive precedent — even complex and controversial proposals can be decided through the governance mechanism, demonstrating the maturity of Solana’s decision-making process. After the vote, in the event of approval, the Solana Foundation typically communicates the next steps — including the software versions that will incorporate the changes and coordination with validator clients (Solana Labs and Firedancer), an official announcement confirming approval and providing implementation details is expected in the days following the end of the voting period, allowing the community to prepare for the transition.

Conclusion

SIMD-228 and SIMD-123 represent two key governance proposals that could redefine Solana’s economy on multiple levels, from monetary issuance to the distribution of incentives among participants. Throughout this article, we have broken down their objectives, rationale, and differences, relying exclusively on official data and communications from Solana’s governance process to provide a clear and objective perspective.

In summary, SIMD-228 introduces a shift toward inflation controlled by network dynamics, potentially reducing new SOL issuance by up to 80%, ensuring that the minimum necessary issuance is maintained to secure the network, this would align Solana’s monetary policy with its current reality of high on-chain activity, gradually shifting the burden of validator compensation from inflationary rewards to transaction fees generated by network usage. Meanwhile, SIMD-123 addresses a long-standing issue in the staking mechanism: allowing delegators to benefit from all validator-generated revenue, not just inflation-based rewards. If approved, it will establish an automatic distribution of transaction fees, reinforcing fairness and transparency in staking rewards.

Of course, these reforms are not without challenges: concerns have been raised regarding the potential exit of small validators and the impact this could have on decentralization. Solana’s governance process now faces the task of balancing economic efficiency with network resilience and power distribution. The voting and debate phases have proven to be a valuable exercise in community deliberation, both supporters and critics have presented data, simulations, and arguments in the public forum, enriching the collective understanding of these proposals.

At the end of this process, each reader and community member will be able to form their own informed opinion on SIMD-228 and SIMD-123. This article has compiled the available official information, including technical descriptions, declared motivations, potential effects, and the current status of the decision, with these facts in hand, it is up to each individual to assess whether these changes represent a step forward for Solana.

If approved, Solana will proceed with the implementation of these improvements throughout 2025, closely monitoring their real effects on the network, if they are not approved, the intense debate surrounding them will still mark an important milestone, highlighting the importance of active participation in on-chain governance to shape the platform’s future.

Regardless of the outcome, the experience of SIMD-228 and SIMD-123 leaves an important lesson: Solana is committed to evolving through community consensus, adjusting its fundamental parameters as the network grows. This reflects the maturity of the ecosystem, where difficult decisions are approached with data, open discussion, and inclusive voting mechanisms. The coming months will reveal the final outcome of these proposals and allow their practical impact to be assessed, but even now, they have contributed to a deeper understanding of Solana’s economy among all participants.

Sources:

The explanations and data presented in this article are based on the official documentation of the proposals in the Solana developer forum, quantitative analyses, statements from recognized community members, and the governance voting records published by the Solana Foundation (e.g., the official governance GitHub repository), relevant excerpts from these sources have been explicitly cited throughout the article to support each key assertion.

I hope this document helps clarify the broader picture and assists the community in thoroughly understanding what SIMD-228 and SIMD-123 entail, enabling each participant to draw their own well-informed conclusions.

Analysis of Solana Governance Proposals: SIMD-228 and SIMD-123 was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.