Solana Foundation Chair Lily Liu commented on the “Solana Improvement Proposal SIMD-0228,” stating, “The SIMD-0228 proposal is not very mature and will negatively impact SOL during critical periods of asset growth. Changing network parameters may benefit network security but be detrimental to assets, and vice versa. We need to view significant changes from a systemic perspective. Most public discussions revolve around creating secure and efficient markets, as the active participants in these discussions on CT, Discord, forums, and GitHub are network engineers, not asset managers or institutions. Fixed rates are not foolish and arbitrary; they are predictable. In capital markets, predictability is valuable. Dynamic pricing is excellent for efficiently allocating resources, but for assets, fixed yields reduce volatility, thereby lowering the discount rate.”
Negative Impact on Asset SOL During Critical Growth Periods
Blockchains are networks; they also have a native asset. The network and asset sub-ecosystems are interdependent. Changing network parameters may benefit network security but be detrimental to assets, and vice versa. We need to take a systemic view of significant changes. Most public discussions focus on creating sweet and efficient secure markets, as the active participants in these public discussions on CT, Discord, forums, and GitHub are network engineers, not asset managers or institutions. They do not appear in these forums or cannot. They are also accustomed to “submitting to developers” because they believe SIMD is a sophisticated concept. This often happens. However, when this is the first significant economic policy change affecting all parts of the economy in five years, the asset ecosystem should be at the forefront and center.
Fixed Rates Are Not “Foolish and Arbitrary”; They Are Predictable. Predictability is Valuable in Capital Markets
Dynamic pricing is excellent for efficiently allocating resources, such as network security. But for assets, fixed yields reduce volatility, thereby lowering the discount rate. Whether intentionally or unintentionally, the Solana ecosystem has stumbled upon an asset that has a strong growth story on the principal and offers attractive, predictable yields. While there is no perfect tradfi analogy here, someone described it to me as “it is both a stock and a bond at the same time.” We are newcomers to this block; to attract interest, High Yield has caught people’s attention. Similarly, yields do not automatically imply selling pressure. They can be reinvested without affecting the underlying securities. We also cannot discuss selling pressure without considering the impact of economic changes on buy-and-hold pressure. If the characteristics of the asset change, why would people assume that buy-and-hold pressure will remain unchanged?
This is Not Just Theory – It is Empirical Truth
In Europe, where staking ETPs are allowed, Solana ETP is the #1 crypto product. It is even larger than Bitcoin and, of course, larger than Ethereum. Asset management companies state the reasons are clear: for buyers, it is due to the growth story of the principal and the attractive, predictable yields. For managers, yields mean more profit potential, incentivizing them to promote the product. Financial firms should not be disparaged as “intermediaries.” They have distribution, willing customers, product-market fit, and opportunity costs; this is how they earn revenue.
Big Beautiful Yield is Also a Growth Budget for the Ecosystem
Inflation and the resulting staking yields provide Solana with the most powerful and innovative LST ecosystem. And this is just the beginning. Solana is witnessing more financial innovations regarding crypto-native products and primitives that can only happen here – to some extent because yields provide a growth budget for innovation and support vertical integration revenue sources for things like Payfi.
The Infrastructure of Internet Capital Markets Needs Stability, Security, and Predictability
Aside from Bitcoin, blockchains have been the infrastructure for a shared financial internet; the infrastructure for liquidity connecting 5.5 billion people. The participation of various institutions (yes, even those that do not agree with the theoretical analysis of “real yields vs. nominal yields”) is crucial. Institutions need stable, predictable infrastructure. We forget that the last blockchain disruption occurred just a year ago and may too easily assume that our recent successes are an unstoppable trend.
What is the Greater Risk?
What are the greater risks and costs our ecosystem faces: overpaying for security or underinvesting in growth? In terms of security: for years, we have been loyal customers of centralized VC chains. We have finally overcome this. But now we have 228, which is a VC proposal for a centralized network! In terms of growth: we have achieved impressive growth – we need to continue investing. Other ecosystems have noticed our rise and are preparing to compete. The “status quo thinking” assumes that the current trends of our ecosystem will continue. Instead, we should seize every advantage we may have to expand our lead.
Systemic Thinking, Not YOLO Thinking
First 96, then 228 to compensate… oh, and then 123 and the next voting costs (which are tough!), or small validators may be excluded from the market. These follow-up effects are well-known and entirely predictable. They can be easily anticipated and incorporated into a comprehensive proposal. Let us not confuse the emotional feeling of “we act quickly” with pushing every sufficiently good proposal that comes before us. A person behaves differently at $100B and $1B – they must. Especially when building infrastructure for internet capital markets.