Key Insights:
- NEAR’s inflation rate drops to 2.4%, cutting annual token issuance by roughly 60 million to reduce dilution and stabilize supply.
- The protocol requires validators controlling 80% of staked tokens to adopt the change for full network activation within 30 days.
- The governance vote failed earlier, but NEAR’s core team proceeded, highlighting validator approval as the ultimate decision mechanism.
NEAR Protocol has implemented a network upgrade that reduces its annual token inflation rate from 5% to approximately 2.4%. The change, activated on October 30, aims to slow the pace of new NEAR token issuance while reshaping validator incentives across the network.
The update lowers the yearly token creation by around 60 million NEAR. It also reduces staking yields from nearly 9% to about 4.5%, assuming half of the circulating supply remains staked. Consequently, token dilution is expected to decline, allowing long-term holders to maintain more of their proportional ownership in the network.
Activation Requires Validator Supermajority
The change depends on NEAR’s standard protocol upgrade process, which mandates approval from validators representing at least 80% of the total staked tokens. Validators have 30 days to adopt the new software for the upgrade to take effect. This approach ensures consensus among the network’s primary stakeholders before any protocol-level adjustment is finalized.
The inflation cut follows an earlier community vote that failed to meet the required approval threshold. During the August 1 on-chain poll, 89 validators representing about 45% of the total votes supported the proposal, falling short of the two-thirds majority needed for ratification. Despite that, the development team included the change in the latest network release, citing validator consensus as the deciding mechanism.
NEAR CTO Clarifies Governance Process
NEAR’s Chief Technology Officer Bowen Wang explained that validator adoption remains the binding layer of governance for protocol upgrades. He emphasized that the network’s consensus rules have always required validator supermajority approval, describing the community vote as a signaling tool rather than a mandatory directive. According to Wang, this governance structure has been part of NEAR’s design since its mainnet launch.
The update introduces a notable shift in NEAR’s economic model, balancing reduced inflation with lower staking returns. Besides improving long-term token sustainability, it also tests the balance between community participation and validator control in decentralized governance.
