BLUF (Bottom Line Up Front)
However this proposal reached us, I'm adequately convinced that NEAR’s inflation reduction is necessary for the protocol’s long-term health.
vitalpoint.pool.near will support the inflation reduction and I, aaron.near, will vote to support HSP-002.
As has been expressed, the current 5 % issuance rate was designed for NEAR’s early years, when the network needed to bootstrap security, validator participation, and liquidity. That phase has passed.
Continuing at that rate now adds supply faster than the ecosystem is absorbing it, diluting holders and distorting incentives. Validators earn well, but the broader network value doesn’t grow at the same pace. Reducing inflation to 2.5 % can restore balance, keeping validator rewards sustainable while reinforcing token value and economic credibility.
Governance and process will continue to evolve, but those refinements only matter if there’s a healthy, enduring protocol to govern.
Running a small (but growing) validator, vitalpoint.pool.near, I certainly share trepidation about seeing a fairly reliable income cut in half, but I'd much rather see it happen now with valid reason to believe it will strengthen the value of NEAR over time, vice watching the protocol die a slow death that ultimately means the foundation on which we build is not rock, but sand.
Rest of the analysis below.
Why the Inflation Reduction Matters
Economic Maturity - The Situation has Changed
Mission analysis includes a step that requires constant evaluation of the environment including threats and opportunities and then adjusting actions based on analysis of old assumptions and positions to confirm or deny an update to future intent and actions. We ask whether the situation has changed and if it has, we adjust. I'd argue that's what has happened here to arrive at this inflation reduction.
The original 5% inflation rate made sense when NEAR was still bootstrapping and incentives were needed to attract validators, secure the network, and distribute tokens. That mission is complete. Maintaining the same rate today expands supply faster than demand, eroding long-term holder value and misallocating capital that could instead fuel network growth.
Reducing inflation to 2.5% marks NEAR’s evolution from growth by issuance to growth by utility.
It aligns the protocol’s economic model with its maturity, ensuring value reflects participation and usage rather than token emissions.
Aligning Incentives
Lower inflation means validator and delegator rewards increasingly depend on real network performance: transaction fees, smart-contract activity, and ecosystem expansion. Sustainable protocols operate by rewarding productivity and contribution over passive extraction.
Building Confidence
Having been banking on/building on NEAR since mainnet in 2020, it pains me when people don't inherently recognize the value, technology, and effort that has gone into making this protocol better every single day. While there are reasons for that that likely require a blog post of their own, the fact remains that a predictable token policy builds trust.
Developers, validators, and partners want to participate in an ecosystem that demonstrates fiscal discipline and governance credibility. The inflation reduction is a signal to the broader community: NEAR is no longer in its early subsidy phase, it’s entering its sustainable era and it says something when those benefitting from high rates of return are willing to risk disruption to that income for an even better future.
Strategic Impact
This is NEAR’s shift from an inflation-funded ecosystem to a self-sustaining economy that is grounded in participation, transparency, and trust. It is strategic messaging.
- Improved token fundamentals: supply growth slows, preserving per-token value and reducing dilution.
- Maintained validator diversity: smaller operators stay online through the adjustment, safeguarding decentralization.
- Strengthened governance credibility: shows that NEAR can evolve through data-driven, time-bounded policy (assuming we use this to identify lessons and act on what is learned).
Maybe I'm a Fool? (but I don't think so...)
It is unfathomable to me that the same people who have spent years building and refining NEAR - people like Bowen Wang or the other protocol engineers who have guided NEAR from genesis would recommend a change that undermines the very system they’ve dedicated their lives to.
We shouldn't idolize anyone, but we also shouldn't assume bad faith. Power does corrupt, but I don't see that here. We're quick to praise when block speeds are cut in half, chain capacity increases shard by shard, chain abstraction starts uniting disparate ecosystems, but then want to criticize and stall when something less popular, but necessary, comes along.
Trust doesn't mean blind allegiance; it means acknowledging earned credibility. The same people who architected NEAR's consensus, sharding, and runtime mechanics understand what sustainable economics look like. I believe we need to hold in high regard any advocacy they make for aligning inflation with protocol health and growth. That experience and expertise matters.
Wars are supposed to be fought to achieve a better peace on the other side. This isn't war, but the premise is the same - the only intent I see here is a better future for NEAR and those who use it.
How HSP-002 Fits into the Transition
Reducing inflation also reduces staking rewards. For large validators, that’s an adjustment - likely painful, but something they can whether. For smaller operators, it could threaten viability and if they drop out of the active set, centralization increases.
HSP-002 (Validator Support Program) aims to mitigate that risk. It provides a 150 NEAR reward to each of the 100 smallest validators (by stake) maintaining ≥ 97 % uptime during Q4 2025, for a total cost of roughly 20 000 NEAR.
As outlined, this is not a permanent subsidy and is designed to maintain network security and diversity through the first quarter of the inflation transition. While inflation reduction seeks to strengthen token fundamentals, HSP-002 attempts to mitigate some of the associated risks. It's not forever and metrics will shape any further adjustments that need to be made. It's agile, iterative development, and is quite frankly, the only way to deal with uncertainty. When we take positions with absolutes and allow no further information in to influence future decisions, we will find ourselves in dire straits.
And, again, I think we would all do well to acknowledge, regardless of personal like/dislike and bias, that it's a proposal generated in collaboration by people/products that have actually built sustainable businesses, products, and communities on NEAR. They have vested interest in its survivability and ultimately benefit when it thrives.
Addressing the Concerns
Process and Perception
It’s true: there's a whole backstory leading to this in-process validator vote for inflation reduction and validator support. How this arrived can certainly be considered top-down, centralized decision-making and understandably frustrates some.
Not debating that there are governance issues. You can go to the very active Telegram group if you want to get involved in that, but I think it's a distraction here. The more pressing issue is that the inflation reduction takes place.
I don't think how this is being decided sets precedent for how governance will evolve in future. Governance initiatives including House of Stake will evolve, transparency will improve, and even this insane process of posting a proposal in one place, storing in another, and discussing elsewhere will undoubtedly improve.
In short, governance is messy and evolves/emerges in communities as norms, standards and culture becomes tangible, it's not implemented wholesale from the start.
Sybil and Gaming Risk
Some critics note that a flat 150 NEAR reward could be exploited by splitting stake across many “small” validators. While theoretically possible, it doesn't seem economically attractive and surely one will notice the sudden appearance of these new validators. In a positive light, I guess that in itself is increased decentralization (depending on one's definition), but I doubt the metrics and monitoring of this behavior will miss any manipulation. And, if/when manipulation appears, the data will justify stronger criteria in any successor program (ownership checks, identity verification, or geographic weighting for example).
Sure, there's a risk here, but the residual (ongoing) risk is low and immediate impact is low-medium at worst. Bureaucracies spring up/gain momentum when processes and procedures are enacted to achieve zero risk - would suggest that's not what we want to see happen here if NEAR is going to continue to be an innovative, forward-leaning technology stack.
Decision
vitalpoint.pool.near will support the inflation reduction and aaron.near will vote for HSP-002 as written (one-quarter pilot).
The inflation reduction is not cosmetic; it’s structural and necessary. HSP-002 helps mitigate some of the identified risks associated with transition, specifically aimed at preventing an erosion of decentralization in the process.
On governance - before we can govern well, we have to have something worth governing.
Part of good governance isn’t blind agreement. It's the courage to speak when something’s wrong and the judgment to recognize when it isn’t. This isn’t one of those times. I'm confident that the people who built NEAR and those building on NEAR know what’s at stake, and their judgment merits trust. This change and risk mitigation proposal acts in NEAR’s best interests, steering it toward stability, not risk.
If you consider this analysis and perspective worthy and in line with your values/beliefs - consider delegating voting power to aaron.near. I'd be happy to represent your interests in governance going forward.
