Abstaining from the NEAR 2.9.0 Inflation Vote: Prioritizing Economic Fundamentals
Dear NEAR Community,
The 2.9.0 vote announcement on October 14, with voting starting October 28 for up to 30 days, proposes inflation reduction from 5% to 2.5% to boost scarcity and attract VCs and institutions seeking 100x returns on two- to four-year holds. While lower inflation could enhance long-term security economics, without economic depth, this risks short-term spikes and crashes, with a standard consequence being that community holders serve as exit liquidity for these players. Abstention below 80% allows reforms; defer until demand grows.
Supply Cuts Without Demand Heighten Risks
Emissions halving cuts rewards 50%, straining smaller nodes (30% stake) and risking exits. Top nine validators hold >33% (NearBlocks); volatility drives churn (Messari).
Abstention rationale—economic gaps:
- Weak Token Incentives:
- DeFi TVL: $154M (DefiLlama, Oct 23)—~12x behind Avalanche’s $1.86B.
- No flagship app for fees/users.
- Devs down 27% YoY ecosystem-wide (Electric Capital 2025), >2,500 active but lagging leaders.
- Sparse builders/community.
- Five years in (mainnet Oct 2020), despite over $500M in historical ecosystem investments. Price: ATH $20.44 (Jan 2022) vs. $2.20 now (CoinMarketCap, Oct 23), below $10—speculative, BTC-vulnerable. This pattern underscores how hype sustains interest without converting to sustained utility or holder value.
- The “NEAR the Blockchain for AI” Narrative:
- Narrative plays like “AI chain” (AITP/agents) spike txs but not accrual. Recent discussions have positioned NEAR Intents, Chain Signatures, and Sharded Agents as beacons of hope for AI integration—enabling seamless cross-chain actions, verifiable computations, and distributed agent networks. While these innovations promise enhanced scalability and developer tools, they offer no direct tie to the protocol’s tokenomics or value accrual beyond transactional volume, rendering the narrative aspirational rather than accretive.
- Decentralization/Reward Threats:
- Halved emissions + temporary 100K NEAR aid (annual, distributed quarterly) to support smaller validators on a limited time scale.
- VC and institutional flips amplify swings, often using community holders as exit liquidity.
- Stake centralizes as small holders exit or edge out.
- Governance/Accrual Flaws:
- Oct 14 Foundation update lacks growth plans, though it pilots a 3-month veNEAR rewards program (280K NEAR budget) to test incentives.
- veNEAR: 45-day unlocks unsustainable, poor governance.
- Locks <10% vs. 10–60M forum targets—low credibility.
- Persistent key role concentrations and centralized oversight in decision-making have subtly limited broader innovation and ecosystem momentum, often prioritizing top-down initiatives over grassroots development.
Abstention preserves status quo for fixes.
Framework: Gate on Demand Milestones
Defer; build accrual:
- Metrics-Linked (Immediate): Hold inflation until +20% quarterly TVL or +15% users (Dune-verified).
- Locks/Education (30 Days): veNEAR 12-month min—non-transferable, no liquid rewards, voting focus. Guides + $10M for utility-tied DeFi/AI. Target: 2x locks.
- Incentives (Ongoing): 10% emissions to <1% stakes (>10% returns). Quarterly revert if no +20% growth; 51% vote for shocks.
Foundation/HoS lead (Proposal 5, Proposal 6); 100K NEAR seed. Arbitrum-like: $600M TVL in 6 months.
Key Benefits
- Avoids immediate slash fallout while preserving ~10% APY.
- Bolsters stake equity/resilience against centralization.
- Drives fee generation from genuine demand, not hype.
- Boosts retention +20% via accrual (Messari).
- Backward-compatible; seamless veNEAR transitions.
Test: +20% TVL advances. Pro-rata aid. Sub-80% runway.
From: houseofstake/proposals; Dune/near-sdk.
Security: Audited timelocks/vests.
Final Assessment: Is Cutting Inflation a Good Thing Without Key Growth Strategies?
No—cutting inflation in isolation, without robust demand-side strategies, is unlikely to deliver sustainable benefits and may exacerbate risks for the NEAR ecosystem. Historical precedents, such as Ethereum’s EIP-1559 fee burns (reducing net supply during peaks), succeeded only when paired with scalability upgrades (e.g., The Merge) and user growth, yielding deflationary periods and 300%+ price rebounds from 2022 lows. Solana’s gradual disinflation to 1.5% supported TVL recovery to $5B+ in 2025, but relied on DEX innovations and adoption catalysts, not scarcity alone.
For NEAR—with low TVL ($154M), dev attrition (27% YoY), and narrative dependence—a halving could trigger validator exodus (50% reward cut) and heightened speculation, positioning community as exit liquidity for VCs. As Galaxy Research (2024) notes, tokenomics reforms must integrate utility to evade “boom-bust” cycles; without TVL/user milestones, such cuts often intensify volatility rather than rescue the ecosystem. The proposed gated framework counters this by linking scarcity to verifiable progress, promoting enduring resilience over fleeting hype.
CC0 1.0 – Public Domain.