The Inflation Governance Dilemma of Aptos: AIP-119 Proposal Sparks Controversy, Ecological Prosperity May Be the Key to Solving the Problem

Inflation governance has always been a core issue in the economic models and ecological development of public blockchains. Recently, the Aptos community has been embroiled in intense debate over proposal AIP-119, which aims to reduce staking rewards. Supporters argue that this is a necessary move to curb inflation and activate ecological liquidity, while opponents warn that it may undermine the decentralized foundation of the network and even lead to capital outflows.

When the game of throttling and open source meets the redistribution of validator interests, Aptos's reform is not only related to the future of the APT token economy but also reflects the deep-seated contradictions in PoS public chain governance. This article will explore how Aptos seeks a breakthrough between high inflation and low activity by analyzing proposal disputes and comparing mainstream public chain models.

The "Surgery" of Inflation Sparks Debate on Healing or Harming the Fundamentals

AIP-119 was proposed by community member moonshiesty on April 17, 2025, on the Aptos Foundation's GitHub. The proposal suggests reducing the base staking reward rate of Aptos by 1% each month over the next three months, with the ultimate goal of lowering the annual percentage rate (APR) from around 7% (or 6.8%) at that time to 3.79%. This proposal is essentially aimed at mitigating APT inflation by reducing the staking rewards, which, while beneficial for the long-term health of the ecosystem, would affect the core interests of large staking nodes accustomed to passive income, thus sparking intense debate within the community.

Supporters believe that this proposal can not only quickly reduce the inflation of APT, but also incentivize token holders to transfer funds to other DeFi activities on the chain, rather than relying solely on passive staking.

However, there are also many opposing voices. Some point out that significantly reducing staking rewards will have a greater impact on smaller validators. The profit margins of many validators may be compressed to a level that cannot cover operational costs (around $30,000 per year), forcing them to withdraw from the network. This may actually weaken the decentralization of the Aptos network, ultimately concentrating power and resources among larger validators.

A co-founder of a financial platform calculated a specific figure in a forum. Currently, validators holding 1 million APT incur annual server costs of about $72,000 to $96,000 (this figure is significantly different from the $35,000 proposed by the proposer). If the yield is reduced to 3.9%, the final return may only be $13,000, resulting in a deficit. Only those holding more than 10 million APT can barely make a profit, which will directly eliminate small validators.

In addition, some comments suggest that the reduced staking yield (3.79%) is less competitive compared to other chains that offer higher returns (such as Cosmos at about 15%), which may lead large holders and institutions seeking high yields to transfer funds to other networks, reducing Aptos's TVL and liquidity, thereby creating a risk of capital outflow. The lower staking yield will also decrease the attractiveness of Aptos DeFi protocols to liquidity providers, affecting the growth of the protocols and user participation.

The Common Challenge of PoS Governance: The Balancing Act of Rewards and Inflation

In fact, this proposal is similar to the previously proposed SIMD-0228 proposal on Solana, which was ultimately rejected. Both attempts to suppress network inflation by lowering validator yields reflect the challenges of interest conflicts in public chain governance. This governance dilemma is more pronounced in the POS consensus mechanism.

To evaluate whether the Aptos proposal is reasonable, the best method is to compare how several public chains with similar mechanisms balance this issue and what effects are produced.

Currently, Aptos's token inflation model issues 7% annually. According to the AIP-30 proposal, the maximum reward rate is planned to decrease by 1.5% each year (relative to the previous year's value) until it reaches an annual lower limit of 3.25% after more than 50 years. As of April data, the staking rate of APT has reached 76%, maintaining a high proportion among public chains. In terms of fee burning, all transaction fees on Aptos are currently burned. However, since Aptos's on-chain fees are only a few thousand dollars daily, this burning is merely a drop in the bucket in resisting inflation.

From the trend of the token over the past year, Solana is a relatively successful public chain in the POS mechanism. Unlike Aptos's current fixed issuance ratio, Solana's inflation model is a decreasing pattern year by year, starting at 8% and decreasing by 15% each year, currently around 4.58%. This dynamic inflation model seems to align with the expected goals after Aptos's proposal reform. However, for Solana, this inflation is still considered too high by the community, which led to the emergence of proposal 0228. In terms of staking ratio, Solana's current staking ratio is about 65%, lower than Aptos's 76%.

In terms of fee burning, previously 50% of Solana's transaction fees were burned, but after the passage of proposal 0096, this 50% burn was canceled and rewarded to validators, which has further exacerbated Solana's inflation. However, due to the high activity level of the Solana network, it seems to have not been significantly affected by inflation.

Another MOVE-based public chain, Sui, is often compared with Aptos. In terms of staking yield, Sui's yield is relatively low, ranging between 2.3% and 2.5%. Additionally, the SUI token has a hard cap of 10 billion SUI, fundamentally controlling the possibility of unlimited issuance. In terms of staking rate, SUI's staking rate is about 76.73%, which is close to APT. However, regarding fee burning, Sui network's choice is to use rewards, and there is no burning mechanism. Relatively speaking, Sui's hard cap model seems to reduce the community's inflation anxiety, thus also showing a relatively bright performance in price.

In addition, the staking yield of Cosmos is quite typical, reaching as high as 14.26%. From the perspective of the circulating supply of tokens, it also shows a continuous upward trend. Currently, the staking rate of Cosmos is about 59%, and this inflation will continue until it reaches 67%. However, although the staking yield is very high, the price trend of the ATOM token has been continuously declining, dropping from a high of $44 to a low of $3.81, a decrease of 91%.

The Choice of Aptos: Throttle or Open Source?

Overall, among the major POS public chains, none have perfectly solved the balance between inflation rate and network participation. In addressing these games, on one hand, it is necessary to control the inflation rate to maintain the healthy development of the token economic model, and on the other hand, attract validators to participate in network governance through reasonably rewarding staking yields. Ethereum has indeed achieved deflation temporarily through its POS transition and basic fee burning. However, ETH seems to have not experienced a price increase due to solving the inflation issue. In contrast, as of now, Solana's recently passed proposal is about increasing inflation (Proposal 0096), while the proposal to reduce inflation (Proposal 0028) has been rejected by the community. Nevertheless, this does not seem to have greatly affected Solana's token price. Ultimately, it is because Solana's network activity has always ranked among the top of major public chains.

Addressing inflation is like throttling, while enhancing network activity is like opening the spigot. For an active network, the balance between throttling and opening is naturally important; however, for a currently less bustling network, finding ways to enhance activity is the true key to boosting the network's token. Looking at the issues currently faced by Aptos, its TVL is only $1.1 billion, ranking 11th among public chains. Overall, the data is not particularly impressive, and the current number of validators across the network is 149, with 495 full nodes, which is also not very high. If a reduction in yield causes a significant number of validators to exit, there is certainly a risk of serious damage.

Therefore, for Aptos, while considering "throttling" through AIP-119, it may be more prudent to deeply contemplate its potential impact on the validator ecosystem and network decentralization. Compared to aggressively cutting rewards, a more pressing option at this stage may still be how to "open source"—that is, to enhance network activity, attract more quality projects to settle in, thereby building a truly prosperous and sustainable ecosystem. This may very well be the key to supporting APT's long-term value.