Bottom Line Up Front (BLUF)
Vote: ABSTAIN
Governance is never just about the proposal, it’s about what kind of culture we’re building over time. When we decide how to fund, reward, or reform participation, we’re defining what it means to belong in this ecosystem.
The inflation reduction (HSP-001) and small-validator support (HSP-002) are targeted reforms that strengthen NEAR’s long-term sustainability and decentralization. HSP-003, the veNEAR Holder Rewards Program, is conceptually aligned with that vision but mechanically flawed.
Its intent is to bootstrap deeper, time-locked participation in the House of Stake but the current design risks entrenching existing power hierarchies, tilting influence toward liquid-staking providers, and blurring the line between incentive and inducement. Instead of nurturing the kind of governance people join out of belief and shared purpose, it could drift toward transactional participation motivated by short-term yield rather than long-term commitment.
Unless amended for neutrality, anti-capture safeguards, and measurable KPIs, the prudent vote is ABSTAIN. Supportive of the goal, not the current mechanism.
The Package and the Pivot
HSP-003 is part of a three-part reform package that includes the inflation reduction and small-validator support (HSP-002). Those earlier pieces make sense as they’re structural, targeted, and grounded in economic necessity.
The inflation cut in particular is essential: NEAR can’t issue 5% new supply forever. It was the right model when we were bootstrapping a validator set and early liquidity, but that phase is over. The network has matured. Now the task is sustainability by lowering inflation to 2.5% to balance security with long-term value preservation.
HSP-003 enters the picture as a complement: while the inflation cut tightens the economics, this program aims to energize governance by rewarding those who lock their NEAR as veNEAR, giving them voting power in the House of Stake.
In principle, that’s a sensible alignment -> rewarding commitment and long-term thinking.
But good intentions don’t automatically equal good design.
What HSP-003 Actually Does?
For three months, the program would distribute 280,682 NEAR to holders of veNEAR. That's NEAR that’s been time-locked for governance participation. The goal is to migrate about 60 million NEAR into veNEAR, giving those participants roughly a 4.2 – 4.5% yield that is similar to staking returns.
On paper, that looks harmless. The network encourages people to lock tokens, deepens their investment in governance, and rewards them for their role in shaping the future. But when you look closer, a few red flags are visible just beneath the surface.
Why It Makes Sense
Governance apathy is real. Participation in most DAO ecosystems hovers around single-digit percentages so incentivizing early adopters to lock and vote could give NEAR’s House of Stake the active quorum it needs to function credibly.
It also recognizes that time-locking is a cost where participants sacrifice liquidity to gain voice. Rewarding that illiquidity can help align incentives and bootstrap momentum for governance participation.
In that sense, HSP-003’s spirit is sound. It’s not about paying for votes; it’s about acknowledging commitment.
Design Challenges, Not Deal Breakers
Several concerns have been raised, and while they deserve attention, they’re more about design hygiene than existential risk.
Optics and Trust
Some worry that paying people who hold governance tokens looks like vote-buying. That perception matters but it’s also manageable. veNEAR isn’t a casual airdrop; participants lock tokens for a period of time, forgoing liquidity to gain a voice. The reward compensates that illiquidity, not a specific voting outcome.
Clear communication will matter: the message should be “we reward commitment, not compliance.” If transparent, this mechanism enhances legitimacy rather than erodes it.
Provider Access and Neutrality
Today, most veNEAR is minted through LiNEAR or stNEAR, which represent staked NEAR positions. If rewards flow only through those wrappers, it could appear as favoritism toward certain providers. That doesn’t mean those entities gain control as they’re decentralized protocols but it could narrow access to governance participation for direct stakers.
The fix is simple: make sure veNEAR minting is provider-neutral, allowing direct staked NEAR and any LSD that meets transparent standards. That’s not a criticism of current partners. It’s good governance hygiene that ensures fairness and diversity.
Scale and Concentration
The reality of proof-of-stake governance is that capital equals voice. veNEAR doesn’t create plutocracy (it already exists in stake-weighted voting) but it formalizes it. Those who lock more NEAR will always have greater influence and that’s by design, aligning voice with risk.
What matters is the slope of that concentration curve.
If rewards scale linearly, large holders earn proportionally more and power can entrench faster.
But that’s easy to manage through sub-linear or capped reward curves, which still reward big commitments while ensuring smaller participants remain relevant.
Again - this isn’t a flaw, it’s a tunable parameter.
Intrinsic Motivation vs Incentivized Participation
The deeper issue isn’t about mechanics - it’s about motivation.
Incentives are useful to spark engagement, but we're hurting ourselves long-term if we make it the foundation of participation. If governance becomes something people do because it pays, the culture risks turning transactional. Crypto is already full of entitlement, would argue we don't need more. When rewards stop, so does engagement.
The long-term goal should be to build a belief-driven governance culture where people contribute because they care about NEAR’s trajectory and see themselves as stewards of it. I realize that sounds naive and utopian, but we can build that kind of community and culture by taking small actions everyday, through strong leadership, and adherence to principles and values.
Incentives can help us get there, but they should fade as intrinsic motivation takes root. Governance isn’t a yield farm; it’s a shared responsibility.
Why I'm Abstaining
I support the intent of HSP-003 to align incentives for long-term, time-locked participation. I think it's the right direction, but the design needs another iteration to guarantee fairness, neutrality, and clarity of purpose.
Remember that abstaining is simply a signal: the direction is good, the implementation needs refinement.
With minor adjustments that include provider neutrality, sub-linear rewards, clear KPIs, and transparent reporting, I think this program could become a legitimate cornerstone of NEAR’s governance evolution.
But without those, it risks confusion about whether we’re rewarding conviction or simply paying for presence.
If It Moves Forward Anyways (appears it will)
If the current version passes, I’d encourage detailed metrics to inform future direction:
- How many new participants join governance?
- How diverse is the veNEAR holder base?
- Does power concentration rise or stabilize?
- What happens to participation once rewards stop?
The answers to those questions will show whether this program drives sustainable engagement or just temporary activity.
The Vital Point
HSP-003 comes from a good place: people who’ve spent years building NEAR’s economic engine are trying to make governance more inclusive and active. They’re certainly not steering us into trouble and they're trying to set conditions for a more participatory future.
But trust and scrutiny aren’t opposites; they’re partners. We owe it to NEAR’s long-term health to support good ideas and demand sound design.
So for now, I’m abstaining out of principle. We can and should reward engagement, but the ultimate reward is belonging. Let’s make sure we build a community and culture with a governance system that people join because they believe in it, not because it pays.
