- The Near development team wants to make the token rarer.
- Validators will vote on the next upgrade.
- Near’s token is down 90% from its peak.
Developers behind Near, a $2.8 billion blockchain, are proposing an upgrade that will reduce on-chain inflation by 50% despite pushback from the project’s community.
A governance vote held this summer to halve Near’s symbolic annual inflation to 2.5% failed because it failed to reach the required quorum.
Rather than abandon the idea, Near’s developers changed course: the blockchain will automatically trigger the halving once 80% of validators upgrade to a new version.
Critics of the project, like Chorus One, a staking service provider, say it sets a “dangerous precedent” that “undermines the integrity” of the blockchain, since a governance vote on the issue failed. Chorus One said the move means Near developers can unilaterally enforce decisions not agreed upon by blockchain participants.
The validator’s revenue from token rewards would decrease unless the price of Near reaches a level that compensates for the halving. Near’s token is down almost 90% from its 2022 high of $20.
Inflation control
Inflation is how blockchains like Near, which use a proof-of-stake consensus mechanism, create new tokens.
Validators earn these newly created tokens as a reward for processing transactions and securing the chain.
Since validators put tokens on-chain to fulfill their role, token inflation is akin to paying interest on those tokens.
But these newly minted tokens increase the total circulating supply of coins, which could lead to a long-term decline in their value.
The proposed reduction was presented as a way to tighten Near’s token supply and improve its value to investors.
Other blockchains, including Solana, Polkadot and Celestia, have also attempted to limit the inflation of their tokens. Polkadot capped its token supply at 2.1 billion coins, and in March, Solana stakeholders rejected a plan to reduce emissions.
Consensus by code
Supporters of the move like Louis Thomazeau, investment partner at L1D, and Evgeny Kuzyakov, co-founder of infrastructure provider Near Fast Near, say the voting data tells a different story.
Although the vote fell short of quorum, over 90% of participating validators supported reducing Near’s token inflation.
“(Ten times) more stakeholders voted in favor of the proposal than against,” Thomazeau posted on X. “With ten more votes, it’s pretty clear what the community wants.”
The Near blockchain upgrade will begin on October 28 and last for three weeks.
Validators can signal their support by upgrading to the new software.
Those who are against this decision can transfer their stakes to the pools that voted against the governance proposal this summer.
Validators like Chorus One and Everstake did not support the proposal, according to voting details.
By swapping a binary vote on governance for a rolling referendum, Near’s inflation reduction now relies on the beliefs of validators.
Osato Avan-Nomayo is our DeFi correspondent based in Nigeria. It covers DeFi and technology. Do you have any advice? Please contact him at osato@dlnews.com.
