Howdy!

Still making your mind up on SIMD-0228? Listen to this Lightspeed episode with Multicoin’s Tushar Jain and this episode with Mert Mumtaz and Dan Smith.

Today, we’ve got the SIMD-0228 debate, Jito’s good positioning, and Helius’ guide to building on Solana:

Solana Foundation president cautions SIMD-0228 could spook institutions

Multicoin Capital’s proposal to change Solana’s emissions mechanism was introduced in January to generally positive reviews. But as a vote on the proposal draws nearer, more critics are emerging.

Perhaps the most notable skeptic has so far been Lily Liu, president of the Solana Foundation. In an X spaces debate Tuesday afternoon, Liu urged Solana to take a more holistic approach on inflation — and said institutional investors could be scared off by unpredictable staking rewards. 

SIMD-0228 is a Solana governance proposal penned by Multicoin Capital, currently being shepherded by Anza lead economist Max Resnick. It seeks to replace Solana’s current pre-set emissions curve with a market-based mechanism that raises or lowers inflation based on the percentage of Solana that is being staked. 

Solana emits SOL to leaders who propose blocks. Those validators pass the inflation along to SOL holders staking SOL with them. Some SOL gets siphoned off along the way to tax obligations for jurisdictions where staking rewards count as income or validators (like the ones run by centralized exchanges) who charge commissions. Resnick likens the government and CEX portions as water dripping out of a “leaky bucket.”

SIMD-0228 would lower Solana’s inflation from its current 4.5% to less than 1% under current staking levels. This would put less water in the proverbial leaky bucket. The proposal targets a 50% staking ratio, down from 63% currently, but emissions would be lower than their present levels in any event. 

Perhaps unsurprisingly for a proposal sure to cut into validator revenue, SIMD-0228 has its share of critics as well. 

Liu’s critiques have so far focused on the lack of data collection and analysis on the expected impact of SIMD-0228, as well as how market-based staking rewards could scare away larger capital allocators. 

“Widely fluctuating yields turned away institutional demand” from ATOM, which also adopted a market-based emission approach, Liu said. 

In an X Spaces Tuesday afternoon, Liu doubled down.

“We need to think about the asset ecosystem,” Liu said, noting that she had gathered feedback from institutional players indicating that investors tend to like reliable dividends. Liu also called for Solana to slow down and take time to develop a more “holistic” perspective on monetary policy. 

SIMD-0228 proponents argue the proposal is good for institutional adoption because reducing emissions could help adoption of SOL ETFs, which are in the process of gaining SEC approval. The SEC is yet to approve staking ETFs for ether, and it’s unclear how ETF liquidity would be affected by having staking rewards to think about.

The vote on SIMD-0228 is currently set for Thursday, March 6.

— Jack Kubinec

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Jito could be an underrated beneficiary of SIMD-0228:

Staking rewards come from MEV, fees, and (mainly) issuance. In a world where issuance decreases, MEV becomes a proportionately greater source of staking rewards.

In a SIMD-0228 world, Jito would hold more cards — and I doubt we’d see a dip in Jito block engine fees.

— Jack Kubinec

The Helius team has dropped a guide on best practices for building financial apps on Solana. While it’s mostly aimed at devs, there are implications for us all.

Solana apps don’t just send and receive tokens. They constantly calculate balances, lending rates, swaps, and more. A single mistake in how these numbers are handled can cause rounding errors, open the door to exploits, or lead to out of control inflation. Helius’ overview covers the fundamentals: always use integers instead of floats, multiply before dividing to avoid precision loss, stick to consistent rounding policies to prevent token leakage...maybe I'm just a nerd, but isn't it interesting to look under the hood sometimes?

Takeaway: The math side of things may seem abstract if you're not dealing with it everyday, but the effects aren’t. When DeFi platforms and protocols get this wrong, you end up with problems. So if your money matters to you, it behooves you to have a cursory understanding of these things. Solana’s speed amplifies both good and bad math, so making sure projects follow best practices is profoundly important.

— Jeffrey Albus

For Builders Who Don’t Just Talk — They Ship.

This conference is for the engineers, founders, and devs building the next cycle’s backbone. If you’re scaling infra, rewriting DeFi, or experimenting with new primitives, Permissionless IV is where you stress-test your vision.

Speaker applications? Open.
Hackathon devs? Your ticket is covered.

June 22-26 | Brooklyn, NY

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