NEAR has introduced significant token economics updates in recent months, notably halving inflation in late 2025 and introducing the NEAR Intents fee switch, which routes Intents fees into $NEAR buybacks, earlier this year, and most recently staking for NEAR AI inference. These were important upgrades to make NEAR economics stronger and more sustainable while also accelerating the flywheel across all NEAR products including Intents and NEAR AI.
I consider the first five years of NEAR Mainnet as the bootstrapping phase. Our vision has always been the same: NEAR is working to ensure that all people can control their own assets, data, and power of choice. We’ve built and evolved a lot of first-rate technology and products in the first five years of the journey, now achieving steady revenue generation, fully unlocked NEAR supply, and establishing viable decentralized governance with House of Stake. Now as we approach the sixth anniversary of Mainnet, I want to propose the next phase of NEAR’s evolution, reflecting the maturity and success of the ecosystem – I feel this is a good time to propose a new way of making token economics more sustainable.
I propose that 1) we should establish a protocol sovereign fund that uses its proceeds to pay for public goods of the ecosystem, such as security 2) the fund’s treasury should be composed of the current and future protocol treasury as described in the NEAR White Paper, protocol revenue earned to date, and future protocol revenue.
I intend for this post to be a conversation starter between stakeholders including validators, token holders via House of Stake, and members of the NEAR community. While my role in the NEAR ecosystem as co-founder of the protocol and CEO of NEAR Foundation is unique, I believe our ecosystem belongs to all of us and is not truly resilient or decentralized if the founder is calling all the shots. So, this is very much a proposal and not a mandate.
Lessons from the Real World
One inspiration I have been studying is sovereign funds of countries like Norway and Singapore. They have leveraged their land sales and oil revenue, which is naturally cyclical in value over time, into national sovereign wealth funds that reinvest in productive assets. These generate yield, a percentage of which can be used for public services. A similar concept is university endowments, for which the yield is used to fund university initiatives while preserving the principal.
This sovereign wealth fund approach enables the growth of the funding base over time while protecting against the cyclical nature of commodities, while generating enough surplus to provide services to citizens after an initial bootstrapping phase. I think that’s where NEAR is today, and it’s why I want to evolve our economics in this direction and experiment with how best to direct revenue.
Reducing Inflation
Every L1 today funds security through inflation. Even Bitcoin, the “fixed supply” asset, still has inflationary rewards (although the rate is declining over time). On Proof-of-Stake systems, inflationary rewards serve two functions: incentivizing enough stake to participate in the delegation, and paying validators who run nodes and provide a service to the network. When a protocol inflates at 5%, non-staking holders effectively lose 5% of their share of the network every year. Most L1s accept this as the price of security.
We’ve already observed, in NEAR and other ecosystems, that as the number of nodes grows, there is a need to incentivize the long tail out of band as their percentage relative to overall stake is small. Last year we established an initial program to pay smaller-stake validators a fixed USD value. Predictable payouts are a much better incentive for smaller validators.
Given these learnings as well as the growth of real revenue on NEAR, I want to explore new economic models. I see the sovereign fund approach as a good potential fit to better align security with the long-term sustainability of token economics, in parallel with reducing inflation.
In the long term, if this experiment works, the NEAR Sovereign Fund may be able to cover the full cost of network security and public goods and create an opportunity for NEAR to become a fixed supply asset.
The Sovereign Fund Vision
The NEAR ecosystem today has revenue generated from a transactional business which is cyclical in nature, as crypto has now gone through enough cycles to understand. NEAR also has other business lines including subscriptions and per-inference token payments. The NEAR ecosystem could divert this revenue to pay for security and other public goods directly, but that would not be a sufficiently future-proof system in the case of volatility or long bear markets.
A different option for revenue that people ask me about, and which other ecosystems have tried, is burning tokens. This is a useful mechanism to remove additional supply, but it’s really just a way to offset inflation in the short term. Inflation will always compound and revenue won’t always grow as fast to offset it. On the other hand, if inflation is turned off, burning leaves the ecosystem without future funding. Here’s a simple mental model: let’s say 1% of the total supply has been generated by revenue. If that 1% were simply burned, then everyone in the ecosystem got 1% wealthier in theory, but the effect is negligible given the overall volatility of that asset. If we instead took that supply and put it to work into a lending protocol, generating, say, 5% from market makers and traders, that 1% stays productive inside the ecosystem and keeps generating additional funding while also keeping up demand for the asset.
Using the ecosystem’s revenue to buy $NEAR, and then using some part of the yield to fund ecosystem public goods, is a much more long-term-aligned approach. While sovereign funds generally hold a liquid fiat asset, in the NEAR model, the fund would hold $NEAR and generate yield by utilizing the underlying token in a range of ways. While yield comes with some risk, the goal here is to mitigate and diversify that risk, as examples of the sovereign fund model have proven out over time – the sovereign fund of Singapore is 45 years old and Norway’s is 36.
The NEAR Sovereign Fund can start slowly with existing treasury funds––the current protocol treasury of approximately 30M in $NEAR–– as its starting base. After an initial phase to confirm that the approach is working, NEAR can direct revenue and incrementally redirect more emissions to the fund, reducing effective inflation while still providing rewards to core validators and stakers.
Token holders who want to participate in the Sovereign Fund can do so through existing House of Stake delegation mechanisms. In parallel, as the Sovereign Fund is starting to operate, House of Stake would also expand the NEAR Validator Support Program to gradually onboard more validators into the new rewards structure.
Over time, if this proves to be successful, NEAR could move towards a fixed supply of $NEAR, gradually reducing total inflation over time and transitioning all validator rewards to the new model. I think this will make NEAR economics stronger over time, sustainably fund public goods and core needs of the ecosystem, and strengthen the treasury for the longer term against changing market conditions.
The Treasury Proposal
This is the first phase I’m proposing now, to kick off the fund and begin the experiment. This would roll out gradually in milestones to ensure smooth transitions and proven progress.
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Establish NEAR Sovereign Fund:a treasury managed under governance-set parameters and designed to generate $NEAR-denominated yield
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Protocol revenue (scope set through governance) would flow into the NEAR Sovereign Fund in the form of $NEAR
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A percentage of yield would be used to pay for public goods: the Validator Support Program, MPC providers, and other services
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House of Stake delegates can participate through existing delegation mechanisms and share in the yield, as has been proven with past delegate reward programs
Next Steps
Please leave comments and ideas below over the next two weeks. I intend to discuss with as many stakeholders as possible to gauge support for the idea and explore possible next steps to establish the Fund, if people are supportive.