NEAR Protocol Reduces Token Inflation Despite Governance Dispute

NEAR Protocol reduced its annual token inflation from 5% to 2.4% in a network upgrade on October 30, despite failing to secure necessary community governance support.

The move sparked controversy among validators, questioning governance integrity and potentially impacting staking yields and long-term tokenomics within the NEAR ecosystem.

NEAR Inflation Cut Proceeds Despite Community Opposition

On October 30, NEAR Protocol implemented a network upgrade that reduced the annual inflation rate of its tokens from 5% to 2.5%. The change is expected to decrease the number of newly minted tokens by approximately 60 million each year. However, the original governance vote failed to secure the required support, receiving just 45.06%. Despite this, the NEAR core team moved forward with the upgrade, drawing criticism from several validators.

Key validators, including Chorus One, argued that proceeding with the upgrade disregarded the voting outcome, which undermines the protocol’s governance structure. Such actions, according to Chorus One, set a “hefty precedent” for future governance processes. The NEAR Foundation, however, described the cut as necessary and a “principles-driven” approach to maintain token sustainability.

Market observers are mixed; while some investors like DWF Labs see the cut as beneficial, potential legal and procedural concerns loom. The core team maintains that their actions complied with prior procedural norms, attempting to reshape NEAR’s long-term token distribution and staking frameworks with insights from Holder Research.

“The governance method used is standard procedure since the mainnet launch.” — Illia Polosukhin, Co-founder, NEAR Protocol

Price Stability Concerns and Strategic Implications

Did you know? NEAR’s recent inflation rate change is reminiscent of Ethereum’s post-merge adjustments, reflecting broader industry shifts towards lower inflation frameworks as blockchain ecosystems mature.

According to CoinMarketCap, the current price of NEAR is $2.11, with a market cap of approximately $2.70 billion. The 24-hour trading volume decreased by 9.24% to $202.32 million. Over the past 24 hours, NEAR’s price has declined by 5.3%. In the last 30 days, the price has fallen by 20.66%.

Insights from the Coincu research team highlight that the inflation cut could affect financial models, potentially sparking changes in staking dynamics and holding strategies. Regulatory concerns over governance practices may arrive if similar initiatives bypass community consent, illustrating the growing tension between innovation and traditional governance protocols.