Last week, HOT and LiNEAR Protocol put forward an inflation reduction proposal to reduce NEAR’s inflation by 50% (from 5% to 2.5%). This community proposal is currently live and will require 2/3 of the stake to vote Yes in order to pass.
Given inflation has implications on token sustainability, incentives, and long-term economics, we have compiled a list of FAQs as a central resource for the NEAR community to better understand what this proposed change could mean, and how it could affect you.
There are three ways you can participate:
- Learn more about the proposal or comment here.
- Validators can vote on the proposal directly at https://vote.linearprotocol.org/
- Share your opinion on incentive programs for validators and delegators proposed by Meta Pool here.
NEAR Inflation Reduction FAQ:
General FAQs:
Question 1: What does inflation reduction mean?
Question 2: When will inflation reduction be implemented?
Question 3: How does the current proposal pass or fail?
Question 4: Is there still allocation to an ecosystem treasury as in the original inflation?
Question 5: What does this mean for me? (e.g. validator, delegator, token holder)
Question 6: What should I expect my staking rewards to be?
Question 7: Why is inflation reduction being proposed?
Question 8: What is the validator and staking incentive program?
Question 9: What activities drive $NEAR token burn?
Question 10: Who has currently expressed support for the NEAR inflation reduction proposal to 2.5%?
Question 11: What does inflation reduction mean for NEAR supply hitting the market?
Validator Program FAQ:
Question 12: What is the Validator Incentive Program?
Question 13: Is this program replacing current validators?
Question 14: How are validators selected to receive support?
Question 15: Does this program give unfair advantages to new validators?
Question 16: What happens if a supported validator underperforms or becomes inactive?
Question 17: Can I participate in more than one mechanism?
Question 18: Is there a risk of centralization if many validators depend on Meta Pool?
Question 19: How do I know if I’m eligible for any of these programs?
Question 20: What is the role of the NEAR Foundation in this program?
Question 21: What if I disagree with the program’s approach?
Question 21: How can I run my validator at a lower cost?
Question 22: What is the current seat price for running a validator node on NEAR?
Staking FAQ:
Question 23: What happens to my existing stake if the proposal is approved?
Question 24: Are there other opportunities to access additional yield?
Question 1: What does inflation reduction mean?
The inflation reduction proposal, as put forward by HOT, suggests that the net issuance of NEAR tokens as block rewards to validators and stakers will be halved from a 5% yearly inflation rate, to a 2.5% yearly inflation rate. This means that half as much NEAR will be created daily, limiting increase in total supply and making the $NEAR token more scarce.
Question 2: When will inflation reduction be implemented?
The current proposal requires a 66.67% approval rate from NEAR validators in order to pass. 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.
Question 3: How does the current proposal pass or fail?
The current proposal requires ⅔ (66.67%) of staked NEAR to vote ‘Yes’ on the proposal. Validators always have the option to change their vote after it has been cast. As a delegator, you can switch your stake to another validator who you align with. This will update the vote tally with the new weight of the validator stake. The proposal fails, if less than 66.67% of validators approve the proposal within the allotted time. You can follow the progress of the proposal here.
Question 4: Is there still allocation to an ecosystem treasury as in the original inflation?
Yes, the ecosystem treasury allocation was always designed as 10% of the inflation rate, and that will remain the case regardless of how inflation changes going forward. That means if the inflation rate changes to 2.5% the ecosystem treasury allocation will be 0.25% per year of the 2.5% inflation rate.
Question 5: What does this mean for me? (e.g. validator, delegator, token holder)
Validators: As a validator, you have the opportunity to shape NEAR's future by participating in the inflation reduction vote. In the event the vote passes you will simply need to update your node to run the latest protocol upgrade with the inflation reduction included within it. Furthermore, if the proposal is accepted, you can participate in the proposed ‘boosted’ rewards program, a powerful tool to attract new delegators while delivering premium returns based on lockup duration.
Delegators: If you are a delegator currently staking your $NEAR to a validator, your $NEAR will remain staked throughout any future protocol upgrades that might affect the inflation rate. If the proposal is accepted and you would like to participate as a delegator in the proposed ‘boosted’ rewards program, you will:
(a) need to unstake from your current validator (if they are not participating),
(b) stake with a participating validator, and
(c) establish a lock up for your $NEAR between one and six months (information on specific steps to follow).
Question 6: What should I expect my staking rewards to be?
The new staking rewards are expected to range from 4 - 4.5% per annum on average. Once the vote passes, there will also be additional programs proposed by MetaPool and Linear that can increase rewards by up to 50% (adding 2-2.25% to the base 4 - 4.5% annually) for a limited time. These programs represent attractive opportunities for validators to attract delegators while expanding earning potential beyond traditional staking.
Question 7: Why is inflation reduction being proposed?
Because sharding is extremely efficient, only a very small amount of NEAR is burned in every transaction. As a result the expected deflationary burn pressure from transaction fees is much lower than previously expected. Inflation reduction would mean that NEAR can save value presently and over the long term, by reducing the total amount of NEAR in issuance.
As NEAR grows over time, and more users wish to use or hold NEAR, the amount of NEAR available will remain limited due to a significantly lowered inflation rate. Furthermore, as NEAR Intents continues to grow in daily volume, and agents on NEAR continue to evolve and execute an increasing number of autonomous transactions, it is expected that with a reduced inflation rate, the net burn pressure on $NEAR token will go up over time.
Question 8: What is the validator and staker incentive program?
This program introduces powerful tools for validators to attract delegators while unlocking enhanced earning opportunities. Validators can offer premium lockup-based rewards (1-6 months) while accessing growth incentives tailored to their stake size. The program is designed to both 1) increase the number of validators on the network, and 2) enhance rewards for delegators and validators by locking up $NEAR tokens.
The ambition of the proposal by Metapool and soon Linear is that stakers will have the opportunity to ‘boost’ their base level staking rewards based on the amount of time they lock up their $NEAR token for, on a range between 1 month and 6 months. Small and large validators will both have specific incentives and opportunities for growing their stake on the network and optimizing their general economic positioning over time. See question 12 and 19 for more details on program details and eligibility.
Question 9: What activities drive $NEAR token burn?
Currently transactions executed on the NEAR blockchain burn the remainder of the $NEAR transaction fee (after a small part of it is returned to the owner of the smart contract). Because sharding is extremely efficient, only a very small amount of NEAR is burned in every transaction.
Going forward there are a number of opportunities to increase burns via turning on fees on NEAR intents and increasing the number of autonomous shade agents on NEAR to burn more $NEAR tokens. Long term, the goal is to increase usage of the NEAR network such that more $NEAR tokens are burned, and thus become more scarce over time.
Question 10: Who has currently expressed support for the NEAR inflation reduction proposal to 2.5%?
To date, a number of prominent backers of NEAR have expressed strong support for this decision as it is positioned to strengthen the tokenomics of the $NEAR token and increase the scarcity of $NEAR available in the future. An overview of a few of these backers can be found here:
- Avichal Garg (Electric Capital): https://x.com/avichal/status/1937567732972781948
- Haseeb Quereshi (Dragonfly): https://x.com/hosseeb/status/1937565426642190628
- Gauntlet: https://x.com/gauntlet_xyz/status/1937564617565454776
- Navin (FRAX cofounder): https://x.com/NavV96/status/1937573005837893683
- Justin Bons (Cyber Capital): https://x.com/Justin_Bons/status/1937948202558169147
- Zaki Manian: https://x.com/zmanian/status/1938325938405839225
Question 11: What would inflation reduction imply for NEAR supply?
By halving the amount of emissions distributed from 5% to 2.5%, the annual supply increase in $NEAR token would be reduced. As a result, the supply of newly issued $NEAR tokens will become more scarce, which may in turn reduce sell pressure arising from rewards generated by validators and stakers. Halving emissions may accelerate NEAR’s pathway to becoming net deflationary in the future, further driving the $NEAR token’s scarcity.
Validator Program FAQ:
Question 12: What is the Validator and Staker Incentive Program?
The three-part program empowers validators to attract more delegators while accessing exclusive earning opportunities: enhanced lockup rewards (1-6 months), growth incentives for smaller validators, and discount opportunities for larger validators. It is a three fold incentive scheme to:
1) incentivize new validators to join the NEAR network,
2) reward existing validators of all sizes, and
3) for stakers to lock their NEAR for varying durations of time (ranging from 1 month to 6 months) for a boosted APY.
The goal of the validator incentive program is to further decentralize the NEAR network, by increasing the total number of validators and total amount of $NEAR staked. The ‘rewards boost’ applies to both small and large validators: Small validators earn additional rewards as they scale the amount of stake to their node, while large validators can tap into a discount pool to unlock additional NEAR stake at up to a 25% discount.
Question 13: Is this program replacing current validators?
No. Existing validators remain a fundamental part of the NEAR ecosystem, this program expands opportunities for all validators. Existing validators gain new tools to attract delegators and grow their stake, while the network welcomes additional validators.
Question 14: How are validators selected to receive support?
All validators in the active set can participate in the ‘boosted’ reward mechanisms outlined in the validator and staker incentive program. However, some mechanisms have limitations based on validator performance and fee levels or based on overall program volume demand. More details on the specifics of these limitations can be found here.
Question 15: Does this program give unfair advantages to new validators?
No - the goal of the program is to increase the total number of validators on NEAR, and as such there is a priority on incentivizing new validators. The program creates opportunities for all validators. While new validators receive entry support to overcome initial barriers (costs, visibility, tooling), existing validators access the same incentive mechanisms and have established advantages in experience and delegator relationships.
Question 16: What happens if a supported validator underperforms or becomes inactive?
The program includes mechanisms to reassign incentives to a different validator, if a validator fails to meet the minimum activity requirements. The priority is first and foremost the sustainability and security of the NEAR network. This ensures that the whole ecosystem can benefit from high-quality validator performance.
Question 17: Can I participate in more than one mechanism?
Locking NEAR and earning boosted rewards is available to all validators and stakers. However, a validator cannot participate in both the small and large validator reward mechanisms at the same time, as these are defined based on stake size. Thus, the total stake size of the validator will be the final metric used to determine the ‘boosted rewards’ programs a specific validator can participate in.
Question 18: Is there a risk of centralization if many validators depend on Meta Pool?
Meta Pool and Linear operate as coordination layers, not as central authorities. Contracts are public, and all delegation is non-custodial. The goal is to increase decentralization, not replace it.
Question 19: How do I know if I’m eligible for any of these programs?
Each mechanism has its own eligibility criteria, which will help you determine which mechanism your validator can participate in. For all mechanisms, validators have to enroll in the program prior to the program start in order to be eligible for rewards. Further eligibility requirements are specific validator size and activity:
Boosted APY with Lockup: The validator must be part of the active validator set at the start of the program. If a validator becomes inactive, the incentive will be reallocated. Participation will be limited based on pool capacity — early engagement is key.
Small Validator Eligibility: The total stake of the validator at the start of the program must be between the minimum seat price and 150,000 NEAR. The validator must not be enrolled in other Meta Pool or NEAR Foundation programs. The validator must have a monthly uptime above 97%.
Large Validator Eligibility: The validator must have over 150,000 NEAR in total stake. NEAR purchased through this program will be subject to a 12-month lock-up and can be added to the validator. Validators looking to tap into the rewards pool are subject to a satisfactory KYC/KYB process.
Question 20: What is the role of the NEAR Foundation in this program?
The NEAR tokens required for the implementation of each mechanism (lockup mechanism, small validators incentives, and large validators incentives) will be provided by the NEAR Foundation. Meta Pool DAO and Linear collaborate on the design, coordination, and execution of these programs. These entities all work together to ensure the delegations support decentralization and network health while representing the interests of the ecosystem.
Question 21: What if I disagree with the program’s approach or have specific feedback?
All programs can be discussed through Meta Pool DAO’s governance channels. This is an open space, and we are always willing to improve based on constructive feedback. To provide feedback please use the Meta Pool forum post.
Question 21: How can I run my validator at a lower cost?
In collaboration with Openmesh, MetaPool has developed Node Studio — an intuitive platform designed to help anyone run a NEAR node easily and affordably. Node Studio is designed to provide lower infrastructure and monitoring costs for validators whether they’re existing or new. Node Studio simplifies the cost of running a node for just $30 USD per month.
Learn more at: https://nodestudio.metapool.app
Question 22: What is the current seat price for running a validator node on NEAR?
The seat price to run a validator node on NEAR Protocol is currently around 9,200 NEAR. The seat price may vary as the seat price is determined by the total amount of $NEAR tokens staked by other validators.
Staking FAQ:
Question 23: What happens to my existing stake if the proposal is approved?
Your existing stake will remain delegated to the validator you have chosen, and the rewards will continue to be distributed every epoch to your wallet. However the amount of rewards distributed will vary based on the total amount of $NEAR staked, the validator fee, and the new inflation rate (2.5%). Additionally, further staking rewards are also available via MetaPool and Linear ‘reward boost programs’ in proportion to the lockup period of your stake.
Question 24: Are there other opportunities to access additional yield?
To participate in the ‘reward boost’ program for incentivizing new validators, delegators will have to unstake from their current validator (if they are not participating) and then re-stake with a new validator who is eligible for boosted rewards and then lockup their tokens for a specific period between one to six months. Before re-staking into the rewards program, be sure to confirm the validator and the reward APY.
You can also enhance your NEAR earnings by liquid staking and deploying those tokens into yield-generating opportunities like lending pools on rhea.finance, improving the total APY of the NEAR tokens.
