NEAR Protocol Community Passes Governance Proposal to Lower Inflation Rate to 1.6%

In late 2026, the crypto market continues to mature. Layer-1 networks that once competed mainly on speed and developer tools now face harder questions about long-term token economics. How much new supply is really needed to keep a chain secure once it has real usage and a solid validator set? NEAR Protocol is confronting that question head-on.

As of late October 2026, the community members are voting on the governance proposal HSP-029. The proposal involves a gradual reduction of the maximum annual issuance rate of NEAR from 2.5% to 1.6%. The voting window was initiated around October 19-21 and will end on November 2, 2026. Once approved by the House of Stake, the validators will have to make an upgrade to the protocol and then there will be a 90-day grace period before any reduction starts.

By the end of this article, you will understand exactly what the proposal changes, why it is being considered now, how it affects different kinds of holders, what the trade-offs look like for network security and staking yields, and where the discussion stands.

On a proof-of-stake blockchain like NEAR, tokens are issued each epoch, most of which go to validators and delegators. Token issuance is necessary for two reasons: first, to pay for security, and second, to incentivize locking tokens rather than selling them. Everyone who holds the token pays for that security, because new supply dilutes existing ownership.

NEAR’s current maximum annual issuance sits at 2.5%. This percentage is actually reduced from an earlier one. At the end of 2025, the blockchain reduced its maximum from 5% to 2.5% when the validators agreed to the change with over 68% support. About 90% of the new coins are distributed to stakers, while 10% is allocated to the protocol treasury. The actual issuance rate is slightly lower than the maximum rate due to the burning of fees.

At a total supply of around 1.31 billion NEAR in late October 2026, the 2.5% rate still adds tens of millions of new tokens each year. Supporters of HSP-029 argue that the network no longer needs that much new supply. The validator set is oversubscribed, staking participation has stayed near 45–46% even after the previous cut, and the chain has grown past its early bootstrap phase. They say continued high issuance mainly transfers value from the majority of holders who do not stake to those who do, while creating ongoing sell pressure.

The proposal, authored by Sal Ternullo of SVRN, is deliberately simple. It changes only one parameter: the maximum annual issuance rate. That rate would decline in a straight line from 2.5% to 1.6% over 24 months, roughly 3.75 basis points per month, applied each epoch. The 90/10 split between stakers and the treasury stays exactly the same. No new spending program, no administrator, no oracle, and no change to how fees are handled.

There will be a 90-day grace period following the approval by House of Stake to allow for wallet, exchange, custodian, and staking platform modifications. Once that grace period expires, only then will there be a gradual decrease. Even still, it is a protocol parameter, which means that there will need to be a network upgrade adopted by validators.

Modeling in the proposal, based on a September 22, 2026 snapshot when the staking ratio was 42.71%, shows several clear numbers. Over the first two years the network would issue about 11.8 million fewer NEAR than under the current policy. Over six years the difference grows to roughly 66.1 million tokens, or about 4.36% less total supply. Gross staking yield is projected to fall from around 5.27% to about 3.37% if the staking ratio stays constant. More recent network data put actual staking closer to 45–46% and yields nearer 4.8–5%, so the final numbers will depend on participation at the time.

The proposal explicitly references Solana’s SGP-0002, which passed in August 2026 with just over 67% stake weight and accelerated that network’s disinflation schedule. NEAR’s authors note that their plan delivers a deeper relative supply reduction while leaving a higher residual yield for stakers.

Impact on Non-Stakers

For NEAR holders who do not stake their tokens, the proposed reduction could reduce dilution relative to the current issuance policy. Fewer newly issued tokens would mean that an existing holding represents a slightly larger share of the total supply than it would under the current policy, assuming the holder's balance remains unchanged. Non-stakers would not directly receive protocol staking rewards, so they would not lose those rewards as issuance declines. However, the proposal does not guarantee an increase in NEAR's market price or purchasing power.

From a practical perspective, this category holds more than half of the entire supply but earns nothing out of the minted tokens. When the upper annual limit slowly goes from 2.5% to 1.6%, then the daily amount of minted tokens becomes smaller. In the course of two years, the number of minted tokens will be lower, and after six years, the difference is going to become bigger. For non-stakers, their relative share of ownership remains higher without taking any further steps. The benefit arrives automatically through slower supply growth. This is one of the clearer, more immediate effects highlighted in the modeling.

Impact on Stakers

For people who do stake, the picture is more mixed. They will receive fewer new tokens each year. A holder staking 1,000 NEAR would end up with roughly 20 fewer tokens after two years compared with staying at 2.5% forever, according to the proposal’s own math.That shortfall can be offset if the reduced supply supports a higher token price or if some stake leaves the network and raises the yield for those who remain. The authors calculate that a relatively small price increase would make a staking holder whole.

The trade-off is clear. However, stakers will still get the same 90% proportion of what is distributed, although the total amount of this pool will keep decreasing over the course of the 24-month ramp. The gross yield is expected to fall gradually from the current rate that fluctuates around 5.3% down to the level around 3.4%, provided the amount of staking will stay approximately the same. 

Some stakers will find the reduced reward not worth it anymore, considering that there will be other alternatives available. If the amount of staked funds will become unlocked due to that, the yield for other stakers will automatically increase due to the unchanged amount of issuance spread among less tokens. Individual results will still depend on each person’s cost basis, tax situation, and how long they plan to stay staked.

Market Reactions and Scarcity Narratives

Low future inflation levels are generally considered good news for the scarcity story but only to a certain degree, as long as the transition is smooth and predictable. On the other hand, low staking rewards may decrease the opportunity cost of trading or migrating. There was no significant reduction in the share of people who staked their tokens with the transition from 5% to 2.5% in 2025; the ratio remained close to 46%. It remains to be seen if that is still the case with 1.6%.

Both traders and more medium-term investors have been tracking the schedule of minting as consistent minting can lead to gradual selling pressures. Having a scheduled issuance process over 24 months allows the market to prepare itself rather than experience a shock. The price reaction has been quite subdued so far, which is natural for the fact that the policy shift is yet to be voted on and will take several months to be completely phased out. The levels of liquidity in the market and overall sentiment will matter more than the headline rate. Both outcomes remain possible; the proposal simply changes the supply side of the equation in a measured way.

Changes in Daily Token Issuance

Daily issuance would fall from roughly 89,500 new tokens under the current policy to about 57,300 at the target rate. That reduction removes a steady source of potential sell pressure over time.

At present the network adds tens of thousands of new tokens every day. A portion of those tokens eventually reaches the market when stakers claim rewards or when treasury allocations are used. Cutting the daily figure by more than a third over two years reduces that flow. The effect compounds: fewer tokens issued today mean fewer tokens that can be sold tomorrow.

Combined with existing fee burns and any revenue-driven buybacks, the net supply path becomes tighter. The change does not eliminate issuance, nor does it create a fixed supply. It simply slows the rate at which new tokens appear, giving the existing stock a larger relative weight in the overall market.

Supporters point to several practical benefits. First, the change is minimal and reversible in spirit: it is a single, transparent parameter adjustment on a published schedule. Second, it reduces the ongoing transfer from non-stakers to stakers without creating new governance complexity. Third, it lowers the amount of newly issued tokens that may be sold to cover taxes in many jurisdictions an effect the proposal estimates in the millions of dollars per year.

The gradual 24-month ramp and 90-day grace period give the ecosystem time to adjust. Validators, liquid staking providers, and exchanges can update terms and risk disclosures without sudden shocks. The proposal also argues that the current issuance level exceeds what is required for security given the size and competitiveness of the validator set. With hundreds of active validators and a long queue of candidates, the security budget can be trimmed without immediate risk to decentralization, in this view.

Comparisons to Solana’s recent decision and to broader market trends toward tighter tokenomics add weight for those who favor the change. Networks that demonstrate discipline on supply are often viewed more favorably by long-term holders and institutions.

Not everyone is convinced. The most consistent concern is the impact on smaller validators. Many operators run with very little of their own capital and rely heavily on commission income from delegated stake. A 36% reduction in the issuance rate translates into lower commission revenue. Modeling in community discussions suggests some smaller pools could lose economic self-sufficiency at the target rate, at least under current ownership patterns. Whether that leads to further consolidation of the validator set is an open risk.

Lower yields could also encourage some capital to unstake if alternative returns look more attractive. The staking ratio has been resilient so far, but past performance is not a guarantee. Security ultimately depends on the total value of stake and the distribution of that stake across independent operators. A material decline in either metric would be a genuine cost.

Another issue critics have pointed out is that the plan does not involve any complete roadmap for transition to a fixed-supply or no-issuance structure. Although reducing the amount to 1.6% is an achievement in itself, there are still some queries left unanswered regarding how things will proceed further and how the network will manage security rewards in case of zero issuance. There is also some ambiguity in terms of validator economics and number of validators.

Finally, House of Stake approval is only the first step. Validators must still adopt the upgrade. And that would mean that, despite approval of the proposition by a large margin, the implementation process could take longer than the voting period itself.

HSP-029 is a concrete test of how mature proof-of-stake networks manage the tension between security incentives and long-term holder value. The numbers are clear: fewer new tokens over time, lower staking yields, a slower pace of dilution for everyone, and a measured impact on validator economics. The process itself House of Stake vote followed by independent validator adoption keeps decision-making distributed.

Through to the end of October 2026, the voting process is still ongoing. The result of the voting and the validator’s reaction to it will be what determines whether the goal of achieving 1.6% is achieved. Regardless of the result, however, the debate has ensured that the community looks at their tokenomics in a deeper way.

Those readers who own or have staked NEAR need to look at the whole proposal published on the House of Stake platform as well as the associated forum thread and see how the validator they have selected plans to vote for the upgrade in case it passes. Such decisions relating to tokenomics generally do not result in any immediate changes in the price, but they set the stage for the supply environment in the future cycles.

For those keeping an eye on the more general layer-1 narrative, the NEAR vote will be part of a wider discussion around other chains. The common thread is simply, after adoption and implementation of the security model, how much further issuance is really needed, and by whom? The answer NEAR’s community gives in the coming weeks will be one data point in that larger conversation.

Has the proposal already passed?

No. As of late October 2026 it is in the voting phase on House of Stake and is scheduled to close on November 2. Even if it passes, validators must still adopt a protocol upgrade.

When would the lower inflation rate actually start?

After House of Stake approval, there is a 90-day grace period, then a linear reduction over the following 24 months. The first small reduction would therefore occur several months after a successful vote and upgrade adoption.

How much will staking yields fall?

The proposal’s model, using a 42.71% staking ratio, projects a drop from roughly 5.27% to about 3.37% once the target rate is reached. Actual yields will depend on the staking ratio at the time.

Does the 90/10 split between stakers and treasury change?

No. That ratio stays the same. Only the overall size of the issuance pie shrinks.

How many fewer tokens will be issued?

About 11.8 million fewer over two years and roughly 66.1 million fewer over six years compared with keeping the 2.5% rate, according to the proposal’s calculations.

Will this make NEAR deflationary?

Not by itself. Issuance continues, just at a lower rate. Net supply change still depends on fee burns and other factors.

What happens to small validators?

Some operators that rely heavily on commission income may face tighter economics. Community discussion has focused on whether the long tail of the validator set remains viable.

Where can I read the full proposal and current vote tally?

The primary sources are the NEAR governance forum thread for HSP-029 and the House of Stake proposal page. Both contain the detailed modeling, risk discussion, and live voting information.

Disclaimer: This article is for informational and educational purposes only. It does not constitute financial, investment, or legal advice. Cryptocurrency investments carry significant risk and high volatility. Always conduct your own research (DYOR) and consult a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results.