NEAR Protocol Cuts Inflation in Half Despite Failed Community Vote

The upgrade cuts the number of new NEAR tokens created each year by roughly half. This means about 60 million fewer tokens will enter circulation annually. The change also lowers staking rewards from 9% to 4.75% for validators who help secure the network, assuming half of the total supply remains staked.

The Economic Problem NEAR Faced

NEAR Protocol was facing a serious money problem. The network pays validators about $140 million worth of tokens each year to keep the blockchain running. But the protocol only has $162 million in total value locked and has made just $17 million in revenue since launching in 2020. Last month alone, NEAR generated only $259,116 in revenue.

This math doesn’t work long-term. The protocol was spending far more on validator rewards than it was earning from network fees. Additionally, NEAR only burned 0.1% of its token supply last year through transaction fees, which wasn’t enough to offset the new tokens being created.

Community members proposed cutting inflation to make the network more sustainable. The idea was to reduce unnecessary token creation and encourage more activity in NEAR’s decentralized finance ecosystem.

Two Votes, Two Different Results

The controversy started when NEAR held a community vote in August 2025. The proposal to cut inflation received support from 89 validators, representing 45% of participants. However, NEAR’s governance rules required 66.67% approval for the proposal to pass. The vote technically failed.

Despite this outcome, NEAR’s development team included the inflation cut in a protocol upgrade released on GitHub. Starting October 21, validators could signal their support by upgrading to nearcore v2.9.0. This second vote required 80% of validators to approve the change.

Source: @NEARProtocol

By October 28, about 68% of validators had upgraded their nodes to support the inflation cut. The threshold was eventually reached, and the upgrade went live on October 30.

Why Validators Supported Cutting Their Own Pay

Interestingly, validators voted to reduce their own rewards by half. This might seem strange, but many believed it was necessary for NEAR’s long-term survival.

NEAR co-founder Illia Polosukhin explained that the current governance system has been in place since the network launched five years ago. Validators have 30 days to upgrade their software, and changes only happen when 80% of validators agree.

Some major investors backed the change. DWF Labs, which holds 5 million NEAR tokens and has 6 million staked, promised to buy another 10 million NEAR tokens if the inflation cut passed.

The initial community vote actually showed 91% support among validators who could participate. Many validators run by exchanges and investment funds couldn’t vote due to legal compliance issues.

Strong Opposition from Major Validators

Not everyone supported how NEAR handled this situation. Chorus One, a major staking provider managing over $2.3 billion in assets, publicly criticized the decision.

In an X thread posted on October 22, Chorus One said the move “sets a dangerous precedent and undermines the integrity of NEAR.” The company worried that NEAR’s core team could force through changes even when governance votes fail.

Chorus One clarified its main concern wasn’t the inflation cut itself. Instead, they opposed the idea that developers could bypass failed governance votes by including changes in software upgrades.

The staking provider refused to upgrade its nodes and encouraged other validators to carefully review any changes before updating their software.

What This Means for Blockchain Governance

This situation raises important questions about how decentralized networks should make decisions. NEAR used two different voting systems: a community governance vote and a validator upgrade process.

NEAR’s Chief Technology Officer Bowen Wang defended the approach. He explained that the summer community vote was led by HOT DAO and LiNEAR, two community organizations. Because this type of vote happens at the consensus layer, it needs an even higher approval threshold to ensure everyone agrees.

Going forward, NEAR’s new House of Stake governance system will decide on economic parameters. Developers will then write code to implement these decisions.

Some supporters argued that economic survival matters more than strict rule-following. Louis Thomazeau from L1D Fund called the inflation cut “common sense” and said protocols shouldn’t stick to rules so rigidly that they hurt the project.

Others worry about the precedent this sets. If core teams can work around failed governance votes, does decentralized governance actually mean anything?

Market Reaction and Price Impact

Following the announcement, NEAR’s price dropped about 8% to $2.10. However, this decline happened during a broader cryptocurrency market downturn, so it’s unclear how much was specifically related to the inflation news.

The long-term price impact remains uncertain. Lower inflation could reduce selling pressure from new token creation, similar to how Bitcoin’s halvings have historically affected its price. But concerns about governance could shake investor confidence.

The Path Forward

NEAR Protocol now enters a new phase with reduced inflation. The network has been making progress in other areas, including cross-chain transactions through NEAR Intents and artificial intelligence applications.

The inflation cut aims to create a more sustainable economic model where token creation better matches actual network usage. Whether this change strengthens or weakens community trust in NEAR’s governance will become clear in the coming months.

This situation mirrors challenges other blockchain networks have faced. Ethereum dealt with similar governance tensions after the DAO hack in 2016, which led to a controversial hard fork. Finding the right balance between economic necessity and decentralized decision-making remains one of the biggest challenges in cryptocurrency.

NEAR’s case shows that even with clear governance rules, interpretations can differ when multiple voting mechanisms exist. The debate highlights ongoing tensions between maintaining strict decentralization and making practical decisions for network survival.

The Governance Tightrope

NEAR Protocol’s inflation cut succeeded technically but sparked a governance crisis that will shape how blockchain communities view decision-making authority. While the network solved its immediate economic problem, questions about who really controls protocol changes remain unanswered. The crypto industry will be watching closely to see if this approach becomes a model or a cautionary tale.