NEAR Governance Discussion: Reducing Issuance to 1.6%, and the Path to a Fixed Supply

House of Stake
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NEAR Governance Discussion: Reducing Issuance to 1.6%, and the Path to a Fixed Supply

When Illia withdrew the Sovereign Fund proposal in August, he named the core problem which is that a fund needs someone to decide where the capital is allocated and who receives it. At the core these functions rely on discretionary judgement. SVRN supported the direction with caveats focused on controls, transparency, and verifiability, but the discussion that followed convinced us the problem was core to the design and discretion itself. We landed on the idea that a better path forward is one where nobody has to make a decision on allocation.

So I want to put two things in front of the community. The first is a proposal we intend to take to a vote next week. The second is a direction we’d like to research and design together.

Part 1: Reduce issuance from 2.5% to 1.6%

What it does

→ Lowers NEAR’s maximum annual issuance from 2.5% to 1.6%, gradually, every epoch over 24 months → Keeps the 90/10 split between stakers and the treasury exactly as it is → Changes one parameter.

Why now

NEAR is no longer a network that needs high issuance to bootstrap. The validator set is oversubscribed, Intents is generating real revenue, and that revenue is already buying NEAR on the open market. Meanwhile, 2.5% issuance adds about 89,500 new NEAR to supply every day.

Most of that goes to stakers, and 58.7% of NEAR isn’t staked. Those holders are diluted and receive nothing in return. Part of what stakers receive often leaves the ecosystem entirely to finance tax liabilities incurred from staking. Those that do not sell to cover tax liabilities, are left with dry tax charges.

Over six years, the ramp avoids about 66M NEAR of new issuance. At today’s price, that’s roughly $329M that never enters circulation.

We began this journey as protocol with 1B tokens and today we have 1.3B+ in circulation due to the impact of compounding emissions. In many ways this is in direct contradiction to the systems we aimed to re-invent where inflation targets define monetary policy objectives, and namely the US dollar, which has landed in a spiraling debt crisis.

What it costs stakers

Staking yield moves from about 5.4% today to about 3.5% at the target rate. For someone staking 1,000 NEAR, that’s about 21 fewer NEAR after two years than they’d earn at 2.5%. NEAR would need to be worth 9.4 cents more for that holder to break even and just under half of that comes from the smaller supply alone.

Holders who don’t stake are better off immediately, given they are diluted less on a daily basis.

What happened the last time NEAR cut issuance

The most common concern with any cut is that small validators will shut down, but we are fortunate that we don’t have to guess given our experience in October last year. When NEAR halved issuance from 5% to 2.5%, there were 342 active validators. Over the next three months, dollar revenue per staked NEAR fell about 75% as the price dropped, and the validator set grew to 382. It peaked at 439 in April and is 413 today.

The precedent

Solana passed a similar single-parameter cut in August, while a more complex fee proposal focused on resource based consumption failed in the same voting window. Under the schedule we propose, NEAR achieves a higher staking yield with a smaller relative yield cut, and a larger supply reduction.

How it takes effect

After a House of Stake vote, the change still has to be adopted by validators through the standard upgrade process, the same way the 2025 halving was. The people running the network have to independently agree to it. We propose a 90-day grace period before the first reduction so wallets, exchanges and staking providers can update contracts, adjust terms and normalize to the change.

The full proposal, with every figure, the methodology, the risks and the technical specification, will be posted next week.

Part 2: The end game for NEAR tokenomics

This part is not a proposal. It’s where I believe NEAR should ultimately go, and I’d like the community to help shape how we get there.

I believe NEAR’s issuance should eventually end, with a fixed total supply.

A fixed supply means every NEAR held is a permanent share of the network. It ends the steady dilution of holders, and it ends the cycle of reopening monetary policy every year or two. The network would pay for what it needs out of what it earns.

NEAR is one of very few networks where that’s realistic. Issuance pays stakers roughly $146M a year today. The infrastructure that actually secures and runs the network costs a small fraction of that, with the rest being the cost of economic security. Revenue is growing fast, and the protocol treasury already holds a meaningful reserve.

We are not proposing mechanics today. Replacing issuance with something sustainable has to keep NEAR secure, and it has to fit where the technology is going: chain signatures, confidential compute and TEE-secured infrastructure all change what security needs to look like. Whatever we design should follow the principles this community has already set: no oracle, no validator registry, no discretionary allocation.

We’ll share our research as it develops, and any proposal that comes out of this will go through its own discussion and vote.

Disclosure

I’m CEO of SVRN (NASDAQ: SVRN). SVRN holds 55+M NEAR, most of it staked. We run validator infrastructure through partners, we authored HSP-007 focused on MPC node incentives, and we operate an MPC node under the program.

Part 1 reduces the yield SVRN earns by roughly 970,000 NEAR a year (about $~5M in revenue under US GAAP revenue recognition) and Part 2 proposes a path that would reduce revenue recognition materially further.. Neither creates any benefit for SVRN in standard financial accounting frameworks, but we hold a fundamental belief that building a robust crypto-economic system focused on NEAR as a store of value, alongside a thriving demand economy, will drive material value appreciation to the token in USD terms.

We are happy to trade US GAAP reporting on revenue recognition for a balance sheet in the billions that will be used to further foster and grow the ecosystem.

What I’m asking

For Part 1: please read the formal proposal we post next week, feel free to check the numbers, and if you disagree we are open to feedback.

For Part 2: we have the opportunity to embark on an ambitious mission at the edge of technical advancements, crypto-economic security, and the design of permissionless stores of value. We invite you to participate and share feedback as we iterate towards the ultimate and final design, which we hope will be welcomed by the ecosystem.

The full Phase 1 proposal will be posted for a vote next week.

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I support this. Paying for security with permanent dilution feels like a leftover from the bootstrap era.

Most networks are already cutting emissions. NEAR is in a rarer position, because Intents brings real revenue, and that is the only thing that lets a chain end issuance instead of just lowering it. Would be good to see NEAR go first on that.

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I support reducing NEAR inflation from 2.5% to 1.6%, gradually, per epoch, within 24 months.

You also made good points here in this post about everything around the discussion.

I have a few concerns regarding the fixed supply approach, though.

While I like the idea behind it, discussing the move to a fixed supply at the current state of things is discussing a risky experiment – which is interesting, yes, but still an experiment with significant risks.

There are currently no evidence of a battle-tested, successful blockchain network that did that with a fixed supply. Security, decentralization, credible-neutrality, ecosystem/development/adoption funding… All can be heavily impacted by this move.

We do have examples of fixed-supply networks who are either struggling (Nano, for example, former XRB), or struggled enough to change the model (IOTA, EGLD, etc). Not even Bitcoin itself has tested this model yet, as it still has emission despite the fixed supply goal for the next century.

I’m happy to research and discuss all that, though, as the premise is interesting and valid.

The gradual reduction to 1.6% will be fantastic in that sense… Providing useful and empirical data we can use to analyze impacts of gradual reductions to the points I mentioned.

Interesting times ahead for the NEAR ecosystem, that’s for sure.

Thank you for putting this together and for involving the community in an open discussion.

Best,

Vini B

thecoding.dev owner | thecoding.pool.near validator | vinibarbosa.near delegate

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Hi Vini,

Thank you for your thoughtful note as always and for your support. I’m hopeful the responses below address your points and are useful as we continue the discussion on both parts.

Fixed supply as an experiment: I agree with you that there is no battle-tested example of a network that has made this transition successfully, and that is precisely why Part 2 was presented as a direction and not a proposal. We are not proposing mechanics today, and we will not bring a proposal forward until there is a design that addresses security, decentralization, and ecosystem funding with the same rigor as the issuance change in Part 1. Any proposal that comes out of this work will go through its own discussion and vote.

Precedent from other networks: The examples you raised are helpful. My read is that the common problem across them was not the fixed supply itself but the absence of a sustainable source of funding for security and development once issuance was no longer providing it. A fixed supply only works after that problem has been solved, which is why the principle in the post is that the network pays for what it needs out of what it earns. Your point on Bitcoin is well taken. The supply schedule is fixed, but whether fees can replace the block subsidy remains an open question, so we don’t view Bitcoin as proof of the model either.

Part 1 as a source of data: I think this is the most important point in your note. A gradual reduction every epoch over 24 months will give the community a clear record of how staking participation, validator count, and delegation respond as issuance declines. The last reduction gave us one data point. When NEAR moved from 5% to 2.5%, dollar revenue per staked NEAR fell about 75%, and the validator set still grew from 342 to 413 active today. A second, slower reduction will provide better data, and we would much rather design Part 2 from that record than from theory.

Research: We would welcome your participation in the research. If you do look further at the networks you mentioned, the most useful output would be the specific failure in each case (security spend, validator concentration, or development funding), since that will tell us which constraint a design for NEAR needs to satisfy first.

I hope the thoughts above are helpful, and I’m happy to address any further questions or comments you may have.

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@SalTernullo, thank you for putting this forward, and for the clear disclosure. Speaking in a personal capacity as a NEAR holder, I support Part 1 as described here and the direction set out in Part 2.

On Part 1: NEAR is past the stage where it needs high issuance to bootstrap. At 2.5%, the network still adds roughly 89,500 NEAR to supply every day, and the 58.7% of NEAR that is not staked simply absorbs that dilution. The design is also well judged: a single parameter, a gradual 24-month ramp, a 90-day grace period for wallets, exchanges and staking providers, and adoption by validators through the standard upgrade process. The validator data from the 2025 halving is a reassuring precedent.

On Part 2: I agree that issuance should eventually end. In my view, NEAR currently overpays for security. As you point out, issuance pays stakers roughly $146M a year, while the infrastructure that runs the network costs a small fraction of that. I would like to see security funded as a defined, predictable budget paid out of what the network earns, rather than as a percentage of supply that compounds indefinitely, and designed within the principles the community has already set: no oracle, no validator registry, no discretionary allocation.

I would also treat a fixed supply as a floor rather than the final goal. With HSP-027 already approved to burn 100% of execution gas fees, a NEAR with no new issuance can become net deflationary as usage grows. If we want NEAR to grow as a store of value, holders cannot be diluted indefinitely.

Looking forward to the full proposal next week.

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Thanks for opening this discussion Sal! A few concerns before next vote.

1. What is the token for in the endgame?
If issuance eventually goes to zero, what drives demand for NEAR beyond Intents buybacks? “Store of value” needs a real use case behind it, and I don’t see one defined yet.

2. The last cut didn’t deliver what we hoped.
The 2025 halving came together with veNEAR rewards and a subsidy program for small validators. A year later, House of Stake holds around 5M NEAR, less than 1% of all staked NEAR, and most small validators still can’t run without NF delegation or subsidies. Before cutting again, we should understand why.

3. Validator growth isn’t proof of resilience.
Much of the growth after the last cut came from Meta Pool’s delegation programs, not from independent operators joining on their own. The set has also dropped from 439 to 413 since April. How would a 1.6% cap affect Meta Pool’s programs (or others) and the small validators who were already struggling at 2.5%?

4. Who is deciding? A recurring question
If the body voting on monetary policy (or any others) represents less than 1% of stake, how representative is this decision for the whole network?

My position: leaning no.
I’m not against lower issuance. But we shouldn’t cut the security budget (Part 1) before we have a clear plan for what replaces it (Part 2). Without that full picture, I’d vote no.

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Thank you for the feedback, very much appreciated.

Your comment on point 2 is extremely valid and will consider as we think through this. We have time and will properly contemplate and publish research as we go.

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Thank you Alan for the comment and sharing your concerns.

1.) In my view, the demand economy for NEAR is the sum of the vertically integrated products including Intents and NearAI product suite, as well as the ecosystem of projects built on the system. This is just my opion but we need to design towards a future where NEAR is the asset of choice for agents as they contemplate a wide variety of assets for a store of value and means of value of exchange. This is obviously a highly competitive landscape with much larger incumbents but I believe the technical edge that Near provides is significant as compared to PoW networks.

  1. On this point, I think the cut did have a material impact on the short to mid-term overhang that we experienced in terms of sell pressure and is a contributing factor to the reason that NEAR has outperformed. I believe that this proposal should represent a compelling reason that NEAR holders should participate in governance and vote with their tokens. Participating in House of Stake does not come at a trade off in yield. You can still participate in yield through LSTs while expressing a view on governance. If the system is reliant on subsidies and ‘grant’ type delegations, then it is clearly not sustainable. I am highly supportive of LST designs that are aimed at supporting a sound Nakamoto coefficient, but I think we are beyond the bootstrapping phase of the network and we should not rely purely on NF delegations to maintain a certain node count.
  2. This was a great point raised on the Eco call today and I agree that our basis for assessing the empirical data around the previous halving event did not fully contemplate the incredible role that MetaPool’s node studio has had on scaling validators. With this said, I will note that we observed the median ‘self-stake’ for the tail end validators 200-400 was only 16 NEAR on average across the period since the halving. I’m a big believer in having skin in the the game, which is obviously dependent on economic circumstances of each individual node provider, but I think this evidences that there has been an over-reliance on delegation.
  3. This was not included in the brief for the discussion forum but is covered in the full post for next week. The decision will be approved by House of Stake with a supermajority and then adopted by nodes above the same threshold as the previous halving. My hope in posting this a discussion topic is that we will engage the NEAR token holder community, and if holders feel strongly in support or against, they will finally cross the chasm and join to participate in House of Stake.

For a period, we were in a similar mindset but as we began to do the proper work on Phase 2 we reflected on the significance of the technology implications, mechanic design and market engagement, we ultimately concluding that we should advance Phase 1 which presents the opportunity to save the network millions of NEAR in inflation over two years.

I appreciate and thank you for your feedback on the initial thanking.

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I strongly support this direction.

2.5% annual issuance is still a lot for a network that is maturing this quickly.

Long term, I’d like to see NEAR move toward:

→ Lower issuance, eventually 0%
→ More protocol revenue used for $NEAR buybacks
→ More NEAR burned through network activity
→ Security increasingly funded by actual network revenue
→ A fixed or near-fixed supply over time

The goal shouldn’t be short-term staking yield.

It should be building the strongest token economy possible for NEAR over the next decade.

Less inflation. More value capture.

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Thank you Sal for putting this together. While the macroeconomic argument to lower issuance from 2.5% to 1.6% makes sense on paper, we must carefully examine how this reduction interacts with current validator delegation dynamics—specifically liquid staking protocols like Meta Pool.

  1. The Meta Pool Cliff

A substantial portion of NEAR’s active validator set relies heavily on delegated stake from Meta Pool (which delegates across ~200 validator nodes). If Meta Pool’s delegation program or boost incentives phase out or sunset, a massive segment of these ~200 validators will no longer meet the seat price requirement and will be forced to shut down.

  1. Compounding Yield Squeeze

Reducing the staking APY from 5.4% down to 3.5% over 24 months narrows the margin for small-to-medium node operators even further:

Operational Costs Stay Flat: Infrastructure and server costs do not decrease alongside issuance cuts.

Consolidation Risk: Lower base APY makes small validators almost completely dependent on external delegation programs. If those programs sunset, the validator set will rapidly consolidate into fewer, heavily capitalized pools.

  1. Proposed Safeguards Before Phase 1 Voting

Before finalizing Phase 1,

Fallback Staking/Delegation Frameworks: How will protocol-level incentives replace third-party delegation programs (like Meta Pool) if they end, ensuring these ~200 nodes remain viable?

Fee Revenue Redistribution: Can a larger portion of protocol transaction and Intents revenue be directed toward active validator pools to offset the ~35% drop in yield?

Network growth is vital, but preserving decentralization and node operator diversity must remain a primary constraint during this rollout.

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From a user-support perspective, it would help to have a simple explanation of how staking rewards would change during the 24-month transition. Will the full proposal include a plain-language timeline that wallets and staking providers can share with users? That could help people understand why their rewards are changing.

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Why does this matter? In what way is a network of 100 validators inferior to one with 400, and is the artificial maintenance of these validators worth the cost the protocol incurs for them?
Let me rephrase the question: we could have 2000 validators and spend even more resources on them—but why would we do that?

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Halting a chain is easier when you have 100 validators than 400…

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What are the probabilities of a halt with 400 validators versus 100?

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Also, you can have the whole network running on a couple of machines and reduce the security cost to ~$0

Security and halting risk will increase to maximum.

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So, where is the line between “too few” and “no point in paying for more”?

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