Reduce Inflation for NEAR Protocol

[HOT_DAO]

Context: NEAR’s Current Inflation and Drawbacks

Voting link: https://vote.linearprotocol.org/

NEAR’s token economics currently rely on a fixed 5% annual inflation rate on the total token supply. This rate was set at mainnet launch with the expectation that high network usage (and fee burns) would bring net inflation down to ~2-3%. In reality, fee burns have been minimal (only ~0.1% of supply burned over the past year), so nearly the full 5% inflation is hitting the supply. This translates to over 60 million new NEAR tokens minted each year, significantly expanding the supply. Such excess inflation dilutes existing holders and gradually devalues the NEAR token price.

Key issues with the status quo include:

• Excessive Net Inflation: With low fees burned, net inflation remains ~4.9% (out of 5%), far above the intended 2-3% range. This adds tens of millions of NEAR to circulation yearly, outpacing network growth.

• Token Dilution: Continual 5% supply growth (vs. only 0.1% burned) means holders’ proportional ownership is diluted over time, potentially putting downward pressure on the token’s value.

• Uncompetitive Tokenomics: Other proof-of-stake chains (e.g. Polkadot, Solana, Aptos) have recently recognized similar issues and proposed inflation reductions. NEAR risks lagging behind if we don’t adjust our inflation model to align with industry best practices.

In summary, the current 5% fixed inflation is too high relative to usage, causing unnecessary token supply growth and dilution. The NEAR community needs a more sustainable inflation model that curbs inflation while still rewarding stakers and securing the network.

Proposed Inflation Change

Proposal Summary: Change NEAR’s maximum inflation from 5% to 2.5%

Rationale: With ~0.1% of total supply burnt in transaction fees every year, 2.5% maximum inflation would result in an actual inflation of 2.4%, which is much healthier than the 4.9% we have today and make the economics of the protocol more sustainable. In addition, the current ~9% staking yield makes it unattractive for token holders to use NEAR Defi.

Maintaining a fixed maximum inflation rate makes it easy for the community to understand how tokenomics works and adjustment can be done on a regular basis through voting when the House of Stake is properly set up.

Inflation Impact: Inflation will be reduced to roughly 2.4%. Staking yield will be reduced to 4.5% assuming 50% of the total supply is staked. If some stakers decide to withdraw their stake due to lower yield, the staking yield will increase accordingly. There will be a much stronger incentive for NEAR token holders to put $NEAR into Defi.

Urgency and Path to Execution

Why Now? Reducing NEAR’s inflation is an urgent priority. Every additional month of the status quo means millions of new NEAR entering circulation, which is not only dilutive but also unnecessary given the low fee burn. High inflation without high usage is unsustainable. Furthermore, with multiple other networks already taking action to lower inflation, it’s crucial for NEAR to move quickly or risk having a less attractive token economy for investors and users. This proposal addresses a core economic concern and aligns NEAR with a healthier, leaner inflation level sooner rather than later.

Governance Process: To enact this change, the proposal will proceed through NEAR’s governance framework, albeit with some adaptations given current limitations:

• Community-Driven Initiative: This idea originates from community and ecosystem discussions about improving NEAR’s economics. We encourage well-known ecosystem participants (major validators, projects, or investors) to sponsor and champion the proposal when it goes up for a vote, demonstrating broad support.

• Validator Vote: Because NEAR’s on-chain governance (e.g. the House of Stake framework) is still in development and won’t be fully operational for ~6 months, we will use an interim voting mechanism for this decision. We have worked with the Linear team to implement a special smart contract for delegated voting by validators . In practice, each validator (and by extension their delegators) can cast a vote on the proposal through this contract, weighted by stake. There will be a simple web frontend provided to track votes and validators will vote through near-cli . This method leverages our validator community’s consensus as the decision-making process, until formal governance is available. After the House of Stake is properly set up, it will conduct review and voting for changes to the maximum inflation on a regular basis.

• Timeline: The targeted timeline is as follows (subject to community feedback):

1. Discussion & On-Chain Vote Setup (This Week): Open community discussion on this forum post. Simultaneously, deploy the validator voting smart contract and answer questions related to voting.

2. Validator Voting Period (July 2025): Conduct a formal validator vote (until the end of July) on adopting the new inflation model. This would be well before the House of Stake launch, to not delay the benefits of inflation reduction.

3. Result & Implementation: If the vote passes with the required majority, core developers will include the new inflation logic in the next protocol upgrade release. The change could be activated in the network by late Q3 2025, assuming a smooth voting process and technical rollout. (If the proposal is rejected, the community can discuss further refinements or alternatives.)

Throughout this process, we will also be raising awareness and educating the community. Expect announcements, AMAs, and documentation explaining the proposal’s details. Validator and community buy-in is crucial, so we want to ensure everyone understands why this change is beneficial for NEAR’s future.

Conclusion and Call to Action

In conclusion, adopting a change to the inflation model is a critical upgrade to NEAR’s economics. It will substantially reduce inflation (from the current effective ~5% down to ~2.5%) while preserving strong staking incentives and network security.

Such a change puts NEAR in line with other leading blockchains that are optimizing their tokenomics, and it showcases our community’s proactiveness in responding to economic realities. Lower inflation and controlled token issuance will enhance confidence in NEAR, benefiting all stakeholders by reducing unnecessary dilution and potentially supporting a more robust token value.

Call to Action: We urge all NEAR community members, validators, and token holders to support this proposal. Engage in the discussion, ask questions, and help us fine-tune the details. Your feedback is valuable to ensure we get this right. If you agree that NEAR’s inflation should be reduced, please voice your support.

With consensus, we aim to move to the formal validator vote soon. Let’s work together to implement this improvement to NEAR’s economics, strengthening the network’s viability and competitiveness for years to come.

Thank you for your consideration, and we look forward to your input on this proposal.

[LiNEAR]

Together with HOT DAO, we’re proposing one of the most important changes to $NEAR tokenomics yet: Reduce max inflation from 5% → 2.5%

LiNEAR is proud to co-lead this proposal — and to provide the voting site that supports it.

Voting Link: https://vote.linearprotocol.org/

Why it matters?
Lower inflation = less dilution
Less dilution = stronger $NEAR

This lays the groundwork for a healthier, deflationary future.

High inflation was a bootstrapping tool.
NEAR has outgrown it.
Now it runs 8 shards.
Now it powers Intents and AI Agents.
Now it’s ready to evolve — toward real usage, real burn, real value.

This also unlocks better incentives:
Staking will move to a duration-based model
APY can range from 4.5% to 11% , depending on how long you commit.

Long-term stakers win.This isn’t just economics — it’s narrative.
From subsidized inflation
→ to real demand
→ to AI-powered deflation We’re ready to build in this new phase.

[NEAR_MAXi]

Oppose the Abrupt Inflation Cut — It Risks a Token Death Spiral

The proposal to sharply cut NEAR emissions is reckless and risks triggering a destructive cycle of unstaking, selling, and collapsing price — with no offsetting demand.

Why This Is Dangerous:

• Some stakers at the margin may only hold for the high APY — take that away, and they sell.
• NEAR has thin order books — even a small % unstaking can nuke the price.
• There are still no strong token sinks, and DeFi demand is not deep enough.
• Validator and delegation economics are not ready for a sharp cut.

This Is How Death Spirals Start:

1. Stakers exit to chase yield elsewhere
2. Selling accelerates into thin markets
3. Token price collapses
4. Confidence erodes — and it feeds on itself

Learn From Others:

• Polygon cut emissions early — and the token bled for years with no support
• Solana thrived despite high emissions — thanks to demand and user growth
• Ethereum went ultra-low emissions — but ETH still underperformed in the bear market

Emission cuts don’t automatically lead to price strength. Without demand, they backfire.

A Better Path:

• Delay any drastic cuts until real token sinks and use cases exist
• Build conviction-based models like long-term vaults, but do not force them
• Focus on increasing organic demand and DeFi integration
• Avoid ideological or rushed changes — protect the network and its participants

Let’s not make NEAR another case study in how to destroy your own token.
Vote no — and build first.

[Bowen]

There has been much discussion recently about the pros or cons of an inflation reduction proposal for the NEAR Ecosystem (currently set at 5%). My goal is to clarify exactly what the goal behind this proposal is, and to also dispel myths about how we think about the future of NEAR.

When we began working on NEAR more than 5 years ago we did not have a complete understanding of the costs associated with sharding. To our surprise and excitement, sharding has been successfully implemented (now with 8 shards live) for an extremely low cost. This also created a problem: NEAR is too efficient, and as a result not enough NEAR gets burned in transaction fees to justify a 5% inflation rate.

The inflation reduction proposal’s goal is to make NEAR a more scarce asset that has a lowered total supply. Many core partners and backers have expressed interest in this proposal, as it would mean future growth in the NEAR Ecosystem on the AI or NEAR Intents front, could truly act as long-term deflationary drivers on token supply.

In other words, successfully scaling up volume and transactions on NEAR Intents or through deploying hundreds of thousands of NEAR agents would both function as long-term drivers of recurring token sinks that actually impact the amount of NEAR available on the market. This pathway seems to be more likely to happen in the future than the status quo inflation design.

At 2.5% inflation the NEAR ecosystem tightens its issuance of NEAR, is still able to reward validators and stakers with a competitive APY, and retains a small percentage (0.25%) for ecosystem treasury support annually.

There are a couple of important caveats I would like to remind everyone of, in regards to any inflation reduction:

First and foremost, a core and equally important component of this proposal has to do with making sure that in spite of inflation reduction, there still remain sound incentives for validators and stakers to hold and earn $NEAR. The NEAR Foundation and partners are currently working to create better long-term incentives for validators and stakers, increase validator count, increase the total amount of $NEAR staked, and align incentives for increasing the overall number of validators on the NEAR network.

As part of these incentives, we understand the need for stakers and long-term $NEAR holders to continue to have sustainable incentives for staking their $NEAR. While a full proposal is expected soon, the idea is to correlate the amount of time $NEAR is staked with an APY boost. $NEAR holders will be in full control to decide on the APY that they would like to earn, based on their staking duration commitment.

Second, once the House of Stake is fully set up, they will have the capacity to conduct regular reviews of the impacts of any inflation reduction and vote to change it if necessary. This gives everyone in the NEAR Ecosystem the capacity to iterate our approach to inflation management over time.

Third and most importantly, inflation reduction will limit daily issuance of NEAR such that existing NEAR holders are positioned to benefit from downstream deflationary pressures (discussed above), and overall scarcity of the $NEAR token is truly designed to increase over time.

Our planning around inflation reduction has been based on significant amounts of discussion, modeling of different scenarios, and looking at what has worked in other ecosystems across crypto. I look forward to hearing any thoughts about this proposal from members of the community and our ecosystem partners!

[frol]

I agree with @NEAR_MAXi in the assessment that it is more likely to backfire. Given that other ecosystems lowered their inflation rates, NEAR ecosystem should have leveraged that if the APY is higher, and yet I don’t see the effect on NEAR.

If there are other incentives that would prevent holders (delegators, not validators) from selling, they should be presented together with the proposal for cutting the inflation rate.

I can see how lowering the inflation can also be leveraged to urge holders to come to NEAR while APY is still high, and implement the protocol to lower the inflation gradually instead of with a cliff. Yet, the success is conditional on the hype generated around it.

[Q8i]

If inflation decreases, I would be willing to buy and hold more NEAR for the long term, as this would represent an active and positive community, developers who are willing to listen to feedback, and healthier tokenomics.

[Amos]

Reducing inflation for PoS chains in general has proven to improve token prices in recent examples. This is a smart move as NEAR current price has reached historical low for secondary holding. Any sell pressure here can be easily absorbed and likely proven to be the wrong move.

TO Near-Maxi,

1. Polygon’s different. Their change is mostly around the token itself and the burning mechanism. Their underperformance is due to major protocol like Aave leaving, and dying narrative of ETH L2.
2. Solana’s emission and staking rewards a lot lower than NEAR’s current rate.
3. Huh, ETH performs pretty well?

[Cooper]

HOT has done an amazing job outlining their proposal. Great work.

I am a long term, large investor and staker in $near.

This proposal has my full support, so long as it retains most/all high quality validators. I do believe that acting with urgency is important (vs. delaying in service of House of Stake), and that granting validators the authority to vote is the right mechanism near term.

I imagine everyone would agree that, at the end of the day, NEAR’s success will be primarily based on the quality of its tech and ability to solve for real world use cases. I doubt many NEAR stakers own the token for short term yield purposes; I would assume, given staking strength and history, that most stakers are long term projects and investors who care more about the long term ecosystem than yield APY. And to the points made, it seems that long term ecosystem members (like myself) who stake for a long time and/or participate in the House of Stake will be rewarded with additional APY over time, but to me that would simply be an added bonus vs. the crux of my decision making on this topic. Said another way, it’s not worth waiting on this vote simply to have clarity of how much the APY will be or how it’s earned–the amount will comparatively be inconsequential to the bigger picture here.

I applaud the NEAR ecosystem for having the courage and wisdom to put forth this proposal. It shows that NEAR is maturing and considering full ecosystem health in addition to its incredible tech.

Again, in summary, assuming most high quality validators support this proposal, I also support it.

[Meta_Pool]

We as Meta Pool DAO are of the opinion that a healthy, informed debate around staking emissions is not just welcome, it’s necessary to ensure the NEAR ecosystem evolves responsibly and remains robust. Meta Pool has been supporting network health and validators in collaboration with NF over the last years and will continue to do so.

In anticipation of the vote to reduce inflation being passed, we and other ecosystem participants are developing comprehensive support structures. This is to ensure validators maintain profits and reward delegators for their loyalty as well as minimize the impact in the transition period leading into a community-governed era with House of Stake.

In response to the proposal made by HOT DAO to reduce the staking rewards emissions, we are proposing a new Validator and Staker Incentive Program featuring three complementary mechanisms, designed to support the diverse realities of the validator community.

Delegator APY Boost Program: Enables delegators to lock their tokens for a period between one to six months, and receive attractive boosted APY. Validators will receive a part of the boosted APY proportional to the locked stake delegated to them.

Community Validators: To ensure participation in the network remains attractive to community validators, there will be a program offering infrastructure cost subsidies for a transitory period. Also, to support the proposed emissions reduction, we’re introducing a low cost entry point to being a validator at ca. $30 p/m keeping security high whilst supporting NEAR’s validators!

Other Validators: It is planned to make a monthly purchase pool of discounted NEAR available to strong performing validators!

We will be working with NF and releasing details soon! Let’s keep building together and we’re looking forward to your active feedback to shape this proposal together!

[foxreymann]

I’m against.

Why?

• Reducing validator incentives by 50% will make my validator unprofitable. I’m sure this is not only my case. There will be less validator and less stakers.
• Solana, XRP, Cardano, all have inflation higher than 5% and their price action is much better than $NEAR. Hence I don’t believe in a strong correlation between inflation and price action.

[luzmargaritas]

It is a good alternative to the initial proposal as it considers three support mechanisms for validators.
The NEAR community is invited to provide their comments to form a final proposal.

[garikbesson]

This is a very serious proposal with the potential of a huge impact on the whole ecosystem, and I have some reasons to worry about it.

1. The proposal should have mentioned all the potential drawbacks and risks of such a big decision, and explained why they are unlikely. People should see the whole picture, and not just the proposal’s selling points.

2. The proposal claims this is an urgent priority, but why wasn’t it an urgent priority, let’s say 6 or 8 months ago? The token price was growing, and it could be a better moment to implement reducing inflation, it could support the growing trend, or the growing trend could mitigate potential fireback.

3. Why should we implement the inflation reducing right now and not wait till a new growing trend?

4. I personally don’t think reducing inflation will affect DeFi on NEAR because, actually, there is no DeFi, unfortunately. We had Ref Finance and Borrow Finance, which are merged recently into Rhea Finance and that’s it. And Rhea Finance covers all ecosystem needs in DeFi. And we almost have no popular FTs on the ecosystem. Big TVLs and big APYs appears from demand and growth of the ecosystem, from new projects. How will reducing inflation attract those builders and users?

5. Validators complain about insufficient support from NF in the current market conditions since Stake Wars III. We have very few incoming new stakers, even with high APY relative to other networks. Small validators struggle to survive with the current inflation. If we reduce the inflation, they will be forced to leave or increase their commissions. But if they increase their commission, delegators will likely move their assets to those big validators who manage to keep their 1% because of the huge staked amount. In other words, small validators don’t have any new stakers now and likely won’t have them with reduced inflation, and also there is a risk of losing those who stake with them right now. So it’s basically a risk to lose a lot of validators. I don’t think those 3 incentive programs suggested by MetaPool are enough to deal with such consequences.

6. We already have too many tokens in circulation and too few ways to use them. Have any additional measures been considered regarding this?

UPDATE: Why does the main voting page only show “YEA” votes and not “NAY” votes? This is manipulation which creates the appearance of a unanimous vote.

[Officialmacc]

I fully support the proposal to reduce inflation for the NEAR Token. Lowering the inflation rate can help enhance the long-term sustainability and value of the NEAR token by reducing excessive token supply growth. This move is likely to increase investor confidence, encourage holding rather than selling, and improve the overall health of the ecosystem. It reflects a mature and responsible approach to economic policy within the protocol, aligning with the goals of maintaining a stable, secure, and scalable platform for developers and users alike.

[DDeAlmeida]

The main purpose of this timing is to set inflation with Partner from NF to vote for YES before HoS start.

Because if HoS ask, this will never passed.

[fiatisabubble]

I’m somewhat disappointed with the lack of formal deliberation on this topic (on the forum) before proceeding to a vote, however if HoS was to launch today, protocol changes would be outside of its scope.

Over time all governance decisions will be carried out within the HoS framework.

As a staker to your validator, I’d like to know how you intend to vote for this proposal

[lvl93ab]

Why not adjust NEAR’s annual inflation rate dynamically according to the percentage of total supply that is staked. This approach aims to balance the interests of both stakers and non-staking holders

Proposed Structure:

% of Total Supply Staked Inflation Rate

60% or more. 5% (maximum)
50–59%. 4%
40–49% 3%
30–39% 2.5%
Below 30% 2% (minimum)

Key Benefits:

Aligns staking rewards with actual participation levels.

Protects token holders from excessive dilution during periods of low network engagement.

Encourages healthy staking behavior while preserving long-term token value.

This model promotes a more balanced and adaptive token economy by linking inflation directly to network usage.

[Meta_Pool]

Attention community, we’ve published more details about our proposal. We kindly ask you to share your feedback with us:

Empowering the Ecosystem: New Incentives and Tools for Validators and Delegators

Meta Pool DAO has been instrumental in decentralizing the NEAR ecosystem since its early days. Following the proposal made by HOT DAO, we are prepared to scale our commitment to the ones powering NEAR’s decentralized future: validators and delegators. If the proposal is accepted, we — in collaboration with various ecosystem participants, will launch a new incentive program and tools built to empower validators and delegators of all sizes to unlock yield strategies, boost long-term rewards, and …

[NEAR_MAXi]

A case study:

Cosmos cut emissions in 2023 from ~20% to ~10%.

Staking yield dropped from ~18% to ~12–14%

The goal was to strengthen tokenomics and support price

ATOM price before the cuts: ~$10–12

ATOM price now (June 2025): $3.91

Emissions slashed.
Yield halved.
Token still dumped ~65%.

[Yessin]

Vote YES for the NEAR Halving!

Halvings have historically been a powerful catalyst in crypto — have a look at Bitcoin! Every four years, the community eagerly anticipates the halving event, expecting a reduction in miner rewards to reduce sell pressure and ultimately drive prices higher. The same positive dynamic can benefit NEAR.

Some argue against the halving with the misconception:
“Lower staking rewards will make people sell.”
But this logic doesn’t hold up. Here’s why:

1. Price Appreciation > Yield Cuts
The main reason to hold NEAR isn’t just the staking yield — it’s the total expected return:
Price appreciation + staking yield – taxes
In many jurisdictions, staking yield is taxed at a higher rate than capital gains. For many holders, lower inflation and less taxable income are actually a benefit.

2. Not Everyone Stakes
For non-stakers, staking rewards act as inflation — their NEAR gets diluted. Reducing staking rewards means less inflation, preserving value for all holders.

3. Demand Might Increase
A halving signals stronger tokenomics and long-term alignment. Just like with Bitcoin, this can attract more buyers. Lower issuance, same demand — or rising demand — leads to price appreciation.

4. NEAR ≠ Dividend Stock
Staking rewards aren’t like dividends in fiat. They’re issued in NEAR itself — like a company printing more shares to give to insiders. That’s dilution. Reducing rewards is like reducing dilution — a positive for price per token.

5. Cosmos ≠ Counterargument
Citing Cosmos (ATOM) as a counter-example misses the point. Most tokens declined in that period. ATOM’s drop wasn’t due to inflation cuts — it was part of a broader market trend. Bitcoin, on the other hand, rallied after its halving. Context matters.

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This is a rare opportunity for NEAR to strengthen its economic model.
Less inflation, stronger value, more sustainable growth.

Let’s vote YES to align incentives, reduce dilution, and reinforce NEAR’s long-term potential.

If you ask me about the halving, my answer is YESS IN !