Solana Community Flags High Centralization Risk in Proposed Upgrade

A section of the Solana community has criticized the SIMD-228 proposal, citing high centralization risk. The proposal seeks to reduce the asset inflation rate by 80% by moving from a fixed-rate token emission to a market-based model. Over the past week, mixed views circulated on digital asset spaces. At the time of writing, proponents have secured the necessary quorum (71.85%) in favor.

Validators Lambast Possible Risks

Crypto enthusiast Dave wrote on X that the move will favor larger validators over smaller players. He added that this will lead to high centralization and a scenario where the rich get richer.

Solana validator SolBlaze.org noted that SIMD-0228 threatens Solana’s decentralization and the wider ecosystem. While it sounds good in theory, presently, the fixed 15% inflation decrease will be taken to extreme levels. According to the validator, rewards will plunge up to 80% with users looking for better yield. This reduced stake affects network security and disproportionately affects small validators. 

These network participants at 0% interest maintain servers and get block fees. Furthermore, Solana Foundation President Lily Liu described the proposal as half-baked, pointing to the benefits of a predictable capital market. She added that infrastructure remains the foundation of most networks and needs a certain level of stability.

“What’s the greater risk and cost to our ecosystem: overpaying for security, or underinvesting in growth? On security: we were dogged for years as the centralized VC chain. We finally overcame that. But now we have 228 which is a VC proposal that centralizes the network! On growth: we’ve achieved impressive growth – and we need to continue to invest. Other ecosystems have noticed our ascent and are gearing up to compete,” Lui wrote. 

Solana’s Co-founder Backs The Proposal

Solana’s co-founder Anatoly Yakovenko backed the proposal, allaying the decentralization concerns. In an X post, he explained that the cost of inflation hitting $1-$2 billion annually will spark losses for small validators and wealth managers. Another argument for the proposal is the incentive for participation to secure the network while inflation drops.

Per the release, higher inflation drives centralization. On the other hand, low inflation fuels Solana’s decentralized finance (DeFi) presence. “Additionally, a high staking rate can be viewed as unhealthy for new DeFi protocols, since it means the implied hurdle rate is the inflation cost. Lowering the “risk-free” inflation rate creates stimulative conditions and allows new protocols to grow.”