The Case for Cutting Solana's Inflation: Max Resnick's Vision for a Leaner Network

The debate over Solana's inflation rate has emerged as one of the most consequential governance discussions in the network's history. In a recent episode of Lightspeed, Max Resnick from Anza joined host Jack to discuss the failed inflation reduction proposal from early 2025, why he remains convinced that Solana is dramatically overpaying for security, and what changes might be coming in future governance attempts. The conversation revealed not just the technical and economic arguments for inflation reform, but also the political and communication challenges that advocates face when trying to implement meaningful change in a decentralized network.

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The Inflation Vote That Almost Passed

The early 2025 proposal to modify Solana's inflation schedule represented a watershed moment for network governance, even in its failure. The proposal sought to replace the current predetermined inflation curve with a market-based mechanism that would dynamically adjust inflation rates based on network activity and staking demand. Despite not reaching the required threshold for passage, the vote demonstrated unprecedented engagement from the Solana community.

Max Resnick was quick to contextualize what many characterized as a defeat: "62% of the stake that voted for it, 75% of the stake voted, which is 50% more turnout than any vote ever in Solana. And 62% of those who voted voted yes, and only 38% voted no." These numbers paint a picture of a proposal that commanded significant support but fell short of the 66% supermajority required for passage. The high turnout itself was notable, suggesting that inflation reform resonates deeply with stakeholders across the ecosystem.

The failure to reach the supermajority threshold highlights the inherent difficulty of implementing changes that affect existing business models within the network. As Resnick acknowledged, "Some people's businesses make a lot of money off inflation," creating a structural resistance to reforms that would reduce the nominal yields that many validators and staking services depend upon for their revenue models.

Understanding the Leaky Bucket of Inflation

Resnick introduced a compelling metaphor to explain why Solana's current inflation policy is economically inefficient: the "leaky bucket." This framework identifies two primary sources of value leakage from the network through its inflationary mechanisms: taxes and middlemen. The tax component alone represents a staggering drain on the ecosystem's resources.

"The US government is making a lot of money off Solana's inflation policy right now on the order of $200 to $400 million a year, depending on where the price is at any time," Resnick explained. This represents capital that flows directly out of the Solana ecosystem into government coffers, providing zero benefit to network security or development. The wide range in the estimate reflects the volatility of SOL's price, but even at the lower end, $200 million annually is a substantial sum that could otherwise remain within the ecosystem.

The tax liability arises from a peculiar accounting treatment of staking rewards. When new SOL tokens are created and distributed to stakers, the US government treats this as taxable income, even though the fundamental economic reality is that stakers are simply maintaining their proportional share of the network. As Resnick put it, "We're creating new Solana tokens. That's the mechanism. You create some new tokens and you give them to people who already hold the tokens. And somehow the US government steps in because you're doing that and says, through some accounting wizardry, you've done this, now we want our cut."

The Security Argument: Comparing Solana to Ethereum

One of the most compelling arguments for reducing Solana's inflation centers on network security. Proof-of-stake networks use staked tokens as economic collateral to secure the network against attacks. The more value that is staked, the more expensive it becomes for a malicious actor to acquire enough stake to compromise consensus. However, there is a point at which additional security becomes unnecessary and the costs outweigh the benefits.

Resnick pointed to direct comparisons with Ethereum to illustrate this point: "You multiply the SOL stake times the price of SOL and compare it to the ETH stake times the price of ETH. In many cases, we have more security on Solana in that sense." Despite this equivalent or superior level of economic security, Solana's inflation rate remains significantly higher than Ethereum's, leading Resnick to ask the obvious question: "So why are we paying six times more than we need to?"

This comparison is particularly powerful because Ethereum is widely regarded as having robust security guarantees. If Solana has achieved similar or better economic security at a lower market capitalization, the argument for maintaining higher inflation rates becomes increasingly difficult to justify on security grounds alone. The excess inflation, in this view, is simply wasteful spending that benefits no one except tax collectors and intermediaries.

Real Yield Versus Nominal Yield: A Fundamental Misunderstanding

The distinction between real yield and nominal yield lies at the heart of much of the confusion surrounding staking returns. Resnick took time to explain this concept clearly, addressing what he sees as a widespread misunderstanding among SOL holders about the actual returns they receive from staking.

Nominal yield refers to the percentage return that appears in staking interfaces and marketing materials—typically around 7-8% APY for Solana validators. This number represents the raw increase in SOL tokens a staker receives over time. However, this headline figure can be misleading because it fails to account for the dilutive effect of inflation on all token holders.

"Suppose all of the SOL was staked and we made 5% new SOL every year and we distribute it to all the stakers," Resnick explained. "Now you have more SOL in your balance, but the fraction of the SOL supply that you have is the same." This is the key insight: if you're staking and receiving inflation rewards, you're essentially just maintaining your proportional ownership of the network, not actually growing it.

To illustrate this concept, Resnick drew an analogy to fiat currency: "It's the same way that if the US government prints a bunch of new money, and rebases the dollar, like the US government could say everybody who holds a US dollar is going to get $2 in their account tomorrow. And nothing would happen other than that. Everybody would have to reprint their menus and they would reprint their menu. They would double the prices."

The real yield—the actual return after accounting for inflation—is considerably lower than the nominal figure. It consists primarily of tips and priority fees that validators receive for processing transactions, which are then partially distributed to delegators. This distinction matters enormously for anyone trying to make informed decisions about staking versus other uses of their SOL.

The Tax Implications of Nominal Versus Real Returns

The disconnect between nominal and real yields creates particularly perverse tax outcomes for US-based stakers. When you receive staking rewards, you're taxed on the nominal value of those rewards, even though much of that "income" is simply offsetting the dilution your existing holdings would otherwise experience from inflation.

Consider a simplified example: if you hold 100 SOL and the network inflates by 5%, your 100 SOL would represent a smaller fraction of the total supply after inflation. By staking and receiving 5 SOL in rewards, you maintain your proportional ownership—but you're taxed as if you've earned income equal to the dollar value of those 5 SOL. In economic terms, you've broken even on your share of the network, but you've incurred a tax liability.

This is why Resnick characterizes the current inflation policy as essentially paying the US government "for no reason." A lower inflation rate would mean smaller nominal staking rewards, but if those rewards more closely matched the real economic value being generated by the network, the tax burden on stakers would decrease substantially. The $200-400 million annually that Resnick estimates flows to the US government represents a pure deadweight loss to the Solana ecosystem—money that could otherwise be invested in development, distributed to actual productive activities, or simply retained by token holders.

The Market-Based Mechanism Proposal

The original proposal advocated for a market-based approach to inflation management rather than maintaining the current predetermined schedule. Under this system, inflation would automatically adjust based on network conditions—specifically, the level of staking demand and the amount of revenue being generated by network activity.

The core logic is elegant: when network revenue (often referred to as REV) is high, there's strong organic demand for SOL and validators are earning substantial income from transaction fees and tips. During these periods, high inflation is unnecessary to attract stakers, so the rate should decrease. Conversely, when REV is low and validators need additional incentives to maintain their operations, inflation could increase to ensure adequate staking participation.

Resnick used a vivid example to illustrate how this would work in practice: "If a shock happens in REV, Trump launches another coin, and all of a sudden REV goes way up, everybody wants to stake, that REV brings the staking rewards up, and everybody coming into stake brings the actual returns to staking down because the inflation goes down."

This creates a self-regulating system that responds to market conditions rather than following an arbitrary schedule that may or may not align with the network's actual needs at any given time.

The Shock Absorber Effect

One of the criticisms leveled against the market-based mechanism was that it would make validator returns more volatile and unpredictable. Resnick pushed back strongly against this characterization, arguing that critics had made "a fundamental mathematical misunderstanding" about how the system would operate.

Rather than amplifying volatility, Resnick contends that a market-based system would actually serve as a "shock absorber." When network activity spikes and REV increases dramatically, the resulting decrease in inflation would partially offset the increase in fee-based income, smoothing out the total returns to validators. Similarly, when activity decreases and fee income drops, higher inflation would help cushion the impact on validator economics.

"It's actually a shock absorber is not a shock amplifier," Resnick emphasized. The key insight is that inflation and REV tend to move in opposite directions under a market-based system, creating a natural hedge against volatility in either direction. This would actually make validator business planning more predictable over time, not less.

The failure to effectively communicate this counterintuitive dynamic was something Resnick took responsibility for: "It's ultimately on us to have explained that better. But next time we go in, I think we will have a much clearer explanation of all these things."

Communication Challenges in Decentralized Governance

Resnick's reflection on the failed proposal revealed important lessons about communication in decentralized governance. Even when you have the technical and economic arguments on your side, success depends on your ability to convey those arguments to a diverse audience with varying levels of expertise.

"Sometimes it's like, you know all these things, and then you don't realize that the person you're talking to is actually a performance dev. And they know a shit ton about networking, and they don't know about real versus nominal returns or whatever," Resnick explained. "And you just have to put things out in a much clearer way than we did."

This observation speaks to a broader challenge in blockchain governance: the stakeholders who need to approve major protocol changes often have deep expertise in specific technical domains but may lack background in economics, finance, or other relevant fields. Effective advocacy requires translating complex concepts into accessible language without sacrificing accuracy or nuance.

Resnick expressed confidence that improved communication would lead to better outcomes in future governance attempts: "And I think we do that. It will do better."

The Politics of Contentious Proposals

The binary nature of the original proposal—essentially a yes/no vote on implementing the market-based mechanism—contributed to its contentious reception. When stakeholders are forced to take absolute positions, the natural result is polarization and defensiveness, even among parties who might find common ground on many aspects of the issue.

"It was a little bit contentious last time. And I'm not sure it needed to be, but that's just how these things go," Resnick reflected. "And because it was a binary outcome, it was super contentious."

This observation suggests that future proposals might benefit from being structured as a spectrum rather than a binary choice. If stakeholders could vote on a range of options—different inflation rates, different implementation timelines, different mechanisms—it might be easier to build consensus around an acceptable middle ground.

"We're all on the same page, Solana wins," Resnick noted. "Just like we have some disagreements about the math or whatever. And if it was a continuum, maybe it would have been less contentious, which would be nice."

New Governance Infrastructure

One of the key developments since the failed vote has been progress on governance infrastructure that would address some of the procedural concerns raised during the process. A particular point of contention was that stakers who had delegated their SOL to validators did not have a direct mechanism to express their own preferences if they disagreed with how their validator voted.

"Last time we had this version of the vote where some people were a little unhappy that they had stake on a validator if they didn't get to vote," Resnick explained. "So we're just kind of hoping that that infrastructure, which is getting built out by some teams will be there so that anybody who has stake can—like you're staking with a validator, but you're not beholden to what that validator votes on that thing. You can vote your own stake as well."

This infrastructure would represent a significant improvement in governance legitimacy. When delegators can override their validator's vote on specific issues, the resulting outcomes more accurately reflect the will of actual token holders rather than being filtered through the preferences of a smaller number of validator operators.

The development of this infrastructure is one reason why advocates for inflation reform have chosen to wait before bringing a new proposal. Launching a vote before these tools are available would face the same criticisms as the previous attempt, potentially undermining support that might otherwise be available.

The Galaxy Research Proposal

In addition to the market-based mechanism championed by Resnick, other proposals have emerged in the ongoing discussion about inflation reform. Host Jack mentioned a proposal from Galaxy Research that would allow validators to vote directly on how much to lower the inflation rate, rather than implementing an automatic market-based adjustment.

Resnick expressed openness to this approach while noting some technical challenges: "It is a little bit of a technical challenge to do this thing where we have stakers, kind of the ability to override the validator vote. So you stick with a validator, they vote, if you like it, you can let it sit. If you don't like it, you can vote a different way if you want to."

The complexity arises from the sheer number of stake accounts on Solana. "There's over a million stake accounts," Resnick noted. "And so just the technology of doing this is a little hard. And when you add in this, like, you can specify some continuous value, it's even harder."

Despite these challenges, the concept of moving from a binary vote to a continuous spectrum of options has appeal in terms of reducing contentiousness and building broader consensus.

A More Gradual Approach

Learning from the experience of the failed proposal, Resnick indicated that future attempts would likely take a more gradual approach to implementation. Rather than proposing an immediate switch to a new mechanism, advocates are considering a phased rollout that would give the ecosystem time to adjust.

"I also think we'll do it a little bit more gradually. It'll probably be a two year rollout. It will be a gentler thing that we'll propose," Resnick explained.

This approach addresses concerns from validators and other stakeholders whose business models depend on current inflation rates. A sudden change in the economic parameters of the network could create hardship for some operators, even if the change is economically beneficial for the network as a whole. A two-year transition period would give everyone time to adapt their strategies and business plans.

The gradual approach also provides an opportunity for course correction. If unforeseen problems emerge during the transition, there would be time to identify and address them before they become entrenched. This kind of cautious experimentation is consistent with the broader ethos of responsible blockchain development.

The Path Forward for Inflation Reform

Despite the setback of the failed vote, Resnick remains committed to pursuing inflation reform on Solana. The fundamental arguments haven't changed: the network is overpaying for security, hundreds of millions of dollars are being unnecessarily transferred to the US government in taxes, and a more market-responsive approach would better align inflation with the network's actual needs.

"My thoughts are the same, which is that inflation should go down," Resnick stated plainly. "Again, I think that the way that it makes sense to value things is from a fundamental perspective."

The strategy for the next attempt will incorporate lessons learned from the first effort: clearer communication about the economic dynamics at play, a more gradual implementation timeline, infrastructure that enables direct participation by delegators, and potentially a structure that allows for more nuanced positions than a simple yes/no vote.

The Broader Implications for Solana

The inflation debate has implications far beyond the immediate question of staking yields. It touches on fundamental questions about how proof-of-stake networks should balance security, efficiency, and stakeholder interests. The outcome will help define what it means to govern a decentralized network responsibly.

Solana's approach to this challenge will be watched closely by other networks facing similar questions. If the community can successfully implement a more efficient inflation mechanism while maintaining security and broad consensus, it will demonstrate the maturity of decentralized governance and provide a template for others to follow.

The high turnout in the failed vote—50% higher than any previous Solana governance vote—suggests that the community takes these issues seriously and is willing to engage with complex economic questions. This level of engagement is itself a positive sign for the network's long-term health and adaptability.

Validators and the Inflation Question

The validator perspective on inflation reform is complex and not monolithic. While some validators may benefit from higher inflation rates through larger nominal staking rewards, they also bear the costs of running increasingly sophisticated operations to remain competitive. Lower inflation that reduces tax burdens and improves the fundamental economics of the network could ultimately benefit validators even if their nominal yields decrease.

Moreover, validators who take a long-term view of their relationship with the network understand that sustainable tokenomics are essential for Solana's continued growth and adoption. An inefficient inflation policy that enriches the US government at the expense of the ecosystem is not in anyone's long-term interest, including validators.

The fact that 62% of voting stake supported the reform proposal suggests that many validators already recognize this. Building on that base of support and addressing the concerns of the remaining 38% will be crucial for any future proposal.

The Role of Stakers in Network Governance

The discussion highlighted an important tension in proof-of-stake governance: the relationship between validators and the delegators who stake with them. When governance decisions are made by validators voting with their total delegated stake, the preferences of individual delegators may not be accurately represented.

The upcoming infrastructure improvements that would allow delegators to override their validator's vote on specific issues represent a significant step toward more direct democracy in blockchain governance. This changes the calculus for validators, who will need to consider not just their own preferences but also the views of the stakers who have entrusted them with their tokens.

This evolution in governance mechanics could have far-reaching effects beyond the inflation question. As delegators gain more direct influence over protocol decisions, the nature of the validator-delegator relationship may shift toward something more like a partnership of equals rather than a simple principal-agent arrangement.

Economic Efficiency and Network Competitiveness

From a competitive standpoint, Solana's inflation policy affects its relative attractiveness compared to other networks. Investors and users making decisions about where to allocate their capital consider total returns, including the impact of inflation on their holdings.

A network that can maintain equivalent security with lower inflation is, all else equal, more economically efficient than one that pays more for the same outcome. This efficiency translates into competitive advantage over time, as capital flows toward networks that offer better risk-adjusted returns.

By reducing unnecessary inflation and the associated tax leakage, Solana would improve its fundamental value proposition for all stakeholders. This is not just about making stakers marginally better off—it's about positioning the network for sustainable long-term growth in an increasingly competitive landscape.

The Importance of Fundamental Analysis

Throughout the conversation, Resnick emphasized the importance of analyzing tokens from a fundamental perspective rather than focusing on surface-level metrics like nominal yield. This approach treats SOL like any other financial asset, subjecting it to rigorous economic analysis.

"I think that the way that it makes sense to value things is from a fundamental perspective," Resnick stated. This mindset—applying traditional financial analysis to crypto assets—is increasingly important as the industry matures and attracts more sophisticated institutional participants.

When institutional investors evaluate SOL, they look beyond headline staking yields to understand the actual economic flows. They consider tax implications, real versus nominal returns, and the long-term sustainability of current policies. Networks that can demonstrate economically rational governance will be better positioned to attract this institutional capital.

Building Consensus Through Education

One of the key takeaways from the failed proposal is the importance of education in building governance consensus. Many stakeholders who might support inflation reform lack the economic background to fully understand the arguments in its favor. Addressing this knowledge gap is essential for future success.

Resnick's acknowledgment that different stakeholders have different areas of expertise points toward a more targeted communication strategy. Rather than assuming a uniform level of economic sophistication, future advocacy efforts might develop different materials for different audiences—technical explainers for developers, financial analyses for investors, operational impacts for validators.

This kind of thoughtful, audience-aware communication represents a maturation of governance advocacy in the blockchain space. As protocols become more complex and stakes grow higher, the ability to build broad coalitions around technical changes becomes increasingly important.

The Timeline for Future Action

While Resnick did not commit to a specific timeline for bringing a new proposal, he indicated that advocates are waiting for governance infrastructure improvements to be completed. This suggests a willingness to prioritize legitimacy and procedural fairness over speed.

"We're just kind of hoping that that infrastructure, which is getting built out by some teams will be there," Resnick explained. Once that infrastructure is in place and delegators can directly participate in governance votes, the conditions will be more favorable for another attempt at inflation reform.

In the meantime, the conversation continues. Each discussion—whether in governance forums, podcasts, or social media—provides an opportunity to refine the arguments, address concerns, and build the coalition necessary for eventual success.

Conclusion: A Work in Progress

The Solana inflation debate exemplifies the challenges and opportunities of decentralized governance. On one hand, it demonstrates the difficulty of implementing changes that affect entrenched interests, even when those changes are economically sound. On the other hand, it shows a community engaged in serious, substantive debate about the fundamental economics of their network.

The 62% majority that supported the original proposal represents a significant base of support for reform. Combined with improved communication, better governance infrastructure, and a more gradual implementation approach, there is reason to believe that future proposals will have a good chance of success.

For Solana, getting inflation policy right matters enormously. The difference between an efficient network that minimizes waste and an inefficient one that enriches tax collectors could amount to hundreds of millions of dollars annually. Over time, that difference compounds, affecting everything from network development to competitive positioning to the wealth of individual token holders.

Max Resnick and other advocates for inflation reform have made clear that they're in this for the long haul. The failed vote was not an ending but a learning experience, one that will inform more effective advocacy in the future. For Solana stakeholders who share the view that the network is overpaying for security, that persistence offers hope that meaningful change is still possible.

Facts + Figures

• 62% of voting stake supported the inflation reduction proposal in early 2025, but it failed to reach the 66% supermajority threshold required for passage.

• 75% of total stake participated in the inflation vote, representing 50% higher turnout than any previous governance vote in Solana's history.

• $200-400 million annually is estimated to flow to the US government in taxes on Solana staking rewards, according to Max Resnick's analysis.

• Over one million stake accounts exist on Solana, creating technical challenges for implementing governance systems that allow individual delegators to override validator votes.

• Solana's economic security, measured by total stake value, is comparable to or exceeds Ethereum's in many cases, despite Solana paying significantly higher inflation rates.

• Current nominal staking yields on Solana are approximately 7-8% APY, though real yields after accounting for dilution are significantly lower.

• A two-year rollout period is being considered for future inflation reform proposals to allow the ecosystem time to adjust.

• 38% of voting stake opposed the inflation reduction proposal, with some opposition tied to business models that benefit from current inflation rates.

• The "leaky bucket" framework identifies taxes and middlemen as primary sources of value leakage from Solana's inflationary token distribution.

• Galaxy Research has proposed an alternative mechanism that would allow validators to vote directly on inflation rate adjustments.

• New governance infrastructure is being developed to allow delegators to vote independently from their validators on specific protocol decisions.

• The market-based mechanism was designed to act as a "shock absorber" for validator returns, reducing volatility rather than amplifying it as critics suggested.

• Real yield versus nominal yield represents a fundamental concept that many stakeholders misunderstand, leading to confusion about actual staking returns.

• The supermajority requirement of 66% creates structural difficulty for any proposal to pass, especially when it affects established business models.

Questions Answered

Why did Solana's inflation reduction proposal fail in early 2025?

The proposal failed because it did not achieve the 66% supermajority threshold required for passage, despite receiving 62% support from voting stake. The vote actually demonstrated unprecedented engagement, with 75% of total stake participating—50% higher turnout than any previous Solana governance vote. Part of the challenge was that some validators and staking services have business models that benefit from higher inflation rates, creating structural opposition to reform. Additionally, advocates acknowledge that communication about the economic benefits could have been clearer, particularly in explaining complex concepts like real versus nominal yields to stakeholders with primarily technical backgrounds.

How much is the US government collecting in taxes from Solana's inflation?

According to Max Resnick, the US government collects an estimated $200-400 million annually in taxes from Solana staking rewards, with the range depending on SOL's price at any given time. This occurs because staking rewards are treated as taxable income, even though they primarily represent stakeholders maintaining their proportional share of the network rather than earning genuine income. Resnick characterizes this as a "leaky bucket" where value unnecessarily flows out of the Solana ecosystem to government coffers. He argues that lower inflation would reduce these tax liabilities without meaningfully impacting network security.

What is the difference between real yield and nominal yield in Solana staking?

Nominal yield is the headline staking return—typically around 7-8% APY—that represents the raw increase in SOL tokens a staker receives. Real yield is the actual economic return after accounting for the dilutive effect of inflation on all token holders. When new SOL is created and distributed to stakers, they're essentially just maintaining their proportional ownership of the network, not growing it. As Resnick explained, if all SOL were staked and 5% new tokens were created annually, everyone would have more tokens but the same fraction of the total supply. Real yield consists primarily of tips and priority fees that represent genuine economic value being generated by network activity.

Is Solana's network less secure than Ethereum's?

No—in fact, Solana's economic security is comparable to or exceeds Ethereum's by some measures. When you multiply the total staked SOL by its price and compare it to the equivalent calculation for staked ETH, Solana often shows higher economic security. This is significant because it undermines the argument that Solana needs high inflation to maintain adequate security. Resnick asks why Solana should pay roughly six times more in inflation than necessary if security is already on par with Ethereum. This comparison suggests that current inflation levels are wasteful rather than essential for network security.

What would the market-based inflation mechanism do?

The proposed market-based mechanism would automatically adjust inflation rates based on network conditions rather than following a predetermined schedule. When network revenue (REV) is high and there's strong organic demand for staking, inflation would decrease because additional incentives aren't needed to attract stakers. When REV is low, inflation would increase to ensure adequate staking participation. Resnick argues this would act as a "shock absorber" for validator returns—when a major event causes REV to spike, the resulting inflation decrease would partially offset increased fee income, smoothing out total returns rather than amplifying volatility.

Why are advocates waiting to bring a new inflation proposal?

Advocates are waiting for governance infrastructure improvements that would allow individual stakers to vote independently from their validators on specific protocol decisions. During the previous vote, some stakers were unhappy that their vote was determined by their validator's choice without recourse. With over a million stake accounts on Solana, building this infrastructure is technically challenging but important for governance legitimacy. Once delegators can override their validator's vote when they disagree, future proposals will have stronger democratic foundations and potentially broader support.

What changes will the next inflation proposal likely include?

Future proposals are expected to include several modifications based on lessons from the failed vote. A more gradual implementation timeline—potentially a two-year rollout—would give the ecosystem time to adjust rather than implementing changes immediately. Communication will be clearer and more targeted to different audiences with varying levels of economic expertise. The proposal may also move away from binary yes/no voting toward a spectrum of options that allows for more nuanced positions. Additionally, new governance infrastructure should enable direct delegator participation in voting.

How does inflation create tax liability for US-based Solana stakers?

When stakers receive inflation rewards, the US government treats these as taxable income based on the dollar value of the tokens received. However, much of this "income" simply offsets the dilution that stakers would otherwise experience from inflation—it maintains their proportional ownership of the network rather than increasing it. The result is that stakers pay taxes on nominal gains that don't represent actual economic enrichment. Resnick calls this "accounting wizardry" that costs the Solana ecosystem hundreds of millions annually. Lower inflation would reduce nominal rewards and therefore reduce tax liability while potentially maintaining equivalent real returns.

What is the "leaky bucket" framework for understanding Solana inflation?

The "leaky bucket" is Resnick's metaphor for how value unnecessarily leaks out of the Solana ecosystem through its current inflation policy. The two main leaks are taxes (the $200-400 million flowing annually to the US government) and middlemen who profit from high nominal yields. Because staking rewards create taxable events even when they primarily represent maintaining proportional ownership, and because various service providers take cuts of inflated yields, significant value flows out of the ecosystem without providing commensurate benefits. Reducing the leak—through lower inflation—would keep more value within the Solana ecosystem.

Did the inflation proposal have significant support despite failing?

Yes, the proposal received substantial support by most measures. With 62% of voting stake in favor and only 38% opposed, it had a clear majority—just not the 66% supermajority required for passage. The 75% voter turnout was the highest in Solana's history, representing 50% more participation than any previous governance vote. This demonstrates that inflation reform resonates with a large portion of the Solana community. Resnick views these results as a foundation to build upon rather than a defeat, suggesting that improved communication and governance infrastructure could push future proposals over the threshold.