Galaxy Digital Floats New Emission Proposal While Withdrawing $58M in $SOL From Exchanges

Despite its rejection, SIMD-0228 discussion clearly illustrated that network participants agreed that Solana’s existing inflation curve was overdue for an update.

Galaxy Digital, a prominent investment firm and Solana’s third-largest validator, argues that a new approach to the governance process is required to help stakeholders reach consensus and see future SIMDs win approval.

Doubling down on their Solana investment, Galaxy’s new proposal comes alongside what appears to be accelerated $SOL accumulation. Onchain data indicates the firm may have acquired an additional $58M in $SOL in the last four days. 

Galaxy Research Follows Up SIMD-0228 Rejection

SIMD-0228, a rejected governance proposal aiming to introduce a dynamic $SOL emission curve based on staking rates, has been called “the biggest crypto governance vote ever.” While SIMD-0228 failed to pass, the fierce debate surrounding the proposal highlighted that most of the Solana community wanted changes.

Network participants were aligned on the fact that the emission schedule should change, but couldn’t reach consensus on exactly how that should be implemented. With so many variables at play, Galaxy Research argues that the Solana community needs more options than a simple Yes/No/Abstain vote can provide.

“In such a proposal where all network participants are impacted differently, and may seek a range of possible outcomes on the affirmative side, proposals with only YES / NO / ABSTAIN may not be the most efficient way to reach consensus.” - Galaxy Research

Galaxy Research’s new approach suggests maintaining the existing disinflationary curve, while proposing multiple new outcomes to steepen the deflation curve to reach a terminal inflation schedule of 1.5%. After collecting votes, data will be aggregated, and a vote-weighted average will determine the new rate.

Galaxy Research asserts that the new model, coined Multiple Election Stake-Weight Aggregation (MESA), offers a more market-driven alternative to reductive 'Yes/No/Abstain' voting.

While Solana thought-leaders have agreed the proposal has merits and is worth discussion, several key players have come forward to highlight what they consider flaws in the model.

Solana Labs’ co-founder Anatoly Yakovenko, Anza Lead Economist Max Resnick, and Sol Strategies CTO Max Kaplan have suggested that aggregating the average of votes incentivizes validators to ‘game’ their answers. Validators will need to vote significantly higher or lower than their desired result to sway the average closer to their preferred outcome based on rival voter behavior.

Alternatively, experts have suggested aggregating the median will more accurately reflect the public’s voting behavior, encouraging them to vote precisely for their desired outcome. 

Is Galaxy Rotating From $ETH to $SOL?

Behind the scenes, it appears Galaxy Digital is doubling down on its $SOL investment, taking advantage of choppy markets to add weight to its $SOL position. Since April 14, onchain data indicates Galaxy Digital has withdrawn over $58M from centralized exchanges.

This supposed accumulation comes on top of Galaxy Digital’s acquisition of the FTX Estates’ locked $SOL. In May 2024, the FTX Estate sold ~25.5M locked $SOL tokens to Galaxy Digital at a unit price of $64. These tokens have since been released into circulation, with onchain data suggesting the firm unstaked around 25% of the $SOL immediately and distributed the assets to various wallets.

Meanwhile, LookonChain reported Galaxy Digital has sent ~$99.46M in $ETH to centralized exchanges in the past six days. While inconclusive, one could argue that Galaxy Digital is rotating its $ETH holdings into $SOL.

Between $ETH outflows and $SOL inflows to Galaxy Digital labelled wallets and the firm’s latest proposal on Solana emission schedule, it’s clear that Galaxy Digital is aligning itself with Solana long-term. 

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