The NEAR blockchain has seen its total supply grow by approximately 2.69 million tokens in the 30.62 days leading up to October 22, a period during which a crucial governance proposal, HSP-029, is under consideration. This proposal aims to implement a substantial 36% cut in the token issuance cap, a move designed to decelerate future supply dilution and potentially reshape the token income received by stakers. The implications of this proposed policy shift are multifaceted, affecting the economic incentives for validators, stakers, and the broader NEAR ecosystem.

The observed increase in NEAR’s total supply from 1,306,946,399.1749655 NEAR at block 216701043 on September 22 to 1,309,640,572.7751897 NEAR at block 221111299 on October 22, represents a growth of 2,694,173.6002242 NEAR, or 0.20614%, over a 31-day span. It is important to distinguish this measure of total supply from metrics such as net selling pressure or the liquid supply available for trading. While market purchases can bolster demand and are reflected in the total supply, they do not inherently reduce the number of circulating tokens.

The Genesis of HSP-029: A Response to Economic Realities

HSP-029, formally introduced to NEAR’s House of Stake (HoS) governance system on October 7, represents a significant recalibration of the protocol’s monetary policy. The proposal advocates for a reduction in the maximum annual issuance rate from the current 2.5% to a more conservative 1.6%. This adjustment, if ratified, would mark a significant step in NEAR’s ongoing efforts to manage its tokenomics and ensure long-term sustainability and value accrual for its stakeholders. The proposal outlines a phased approach, incorporating a 90-day grace period following its ratification, followed by a gradual 24-month ramp-up to the target issuance rate. This measured transition aims to mitigate abrupt market reactions and allow participants to adapt to the new economic landscape.

The current protocol configuration, as of October 22, still reflects a maximum annual issuance rate of 2.5% on version 86. This observed setting is above the 1.6% target proposed in HSP-029, underscoring the immediate relevance of the governance discussion. The proposed issuance structure under HSP-029 maintains the established allocation of 90% of newly issued tokens to staking participants and the remaining 10% to the treasury. However, the overall volume of these rewards will be curtailed by the reduced issuance cap.

A Timeline of Issuance Adjustments

The debate surrounding NEAR’s token issuance is not new. This latest proposal, HSP-029, follows a previous significant adjustment in June 2025, where a proposal successfully reduced the annual issuance cap from an initial 5% down to 2.5%. The current proposal, therefore, represents a further tightening of the supply, building upon previous efforts to control inflation. The successful implementation of HSP-029 would necessitate not only a governance vote but also the adoption of a protocol upgrade by the network’s validators. If all steps align with the proposed timetable, the target issuance rate of 1.6% would be fully realized approximately 27 months after the proposal’s ratification.

NEAR’s official tokenomics explanation, published on February 24, details a flexible framework for managing protocol revenue. This framework encompasses various mechanisms, including product revenue, staking, token locking, and redeployment strategies. The concept of "buyback and earn," as defined by the protocol, explicitly states that tokens acquired through these mechanisms remain part of the total supply, rather than being removed from circulation. This distinction is crucial for understanding the net impact on token scarcity and value.

Understanding Supply Dynamics: Beyond Simple Inflation

The NEAR ecosystem distinguishes between various measures of token flow and availability. Purchases of NEAR can contribute to demand and support its market price, but the acquired tokens still count towards the total supply. Staking or locking tokens, conversely, can reduce their immediate availability for trading, impacting liquid circulation. Permanent token burns, a mechanism that irrevocably removes tokens from existence, are the only action that directly reduces total supply. Combining these different actions under a singular "deflationary" label can be misleading, as each has a distinct impact on the token’s economic profile.

NEAR’s revenue dashboard provides a more granular view of fee structures. It separates gross fees generated by the protocol from the net revenue retained after payouts to integration partners, solvers, and decentralized applications (dApps). Gross product fees should not be conflated with direct token purchases. As of October 22, the revenue dashboard indicated that the buybacks.multisignature.near account had received approximately 1,543,672.9 NEAR. At block 221112441, this specific account held around 2,048,151.46 NEAR. Accurately determining the extent of permanent token destruction requires a detailed tracing of the ultimate disposition of these purchased tokens. Subtracting these figures from the observed supply increase during the September-October period would incorrectly conflate different economic mechanisms.

During the measured interval, NEAR’s total supply demonstrably increased. While buyback initiatives can influence market demand and the circulation of liquid tokens, the absolute number of NEAR tokens continued to expand.

Implications for NEAR Stakers: A Shift in Reward Landscape

As of October 22, the NEAR network featured approximately 592.87 million NEAR tokens being staked, representing roughly 45.27% of the total supply of approximately 1,309.67 million NEAR. This participation rate indicates a substantial portion of the network’s economic security is derived from staked assets. The network was supported by 395 active validators, a figure readily verifiable on platforms like NEAR Blocks.

CryptoSlate‘s calculations, based on the proposed 90% issuance allocation to stakers within HSP-029 and maintaining the current participation rate of 45.27%, project a simple annual reward rate of approximately 4.97% under the existing 2.5% issuance cap. However, if the proposal is enacted and the cap is reduced to 1.6%, this rate would decrease to an estimated 3.18%.

Considering a typical 5% pool commission charged by validators, the projected net delegator rates would be around 4.72% at the 2.5% cap and 3.02% at the 1.6% target. These figures represent annualized endpoint conditions before any compounding effects, assuming consistent participation and reward allocation.

The actual Annual Percentage Yield (APY) and income experienced by stakers during the 24-month ramp-up period would be dynamic, influenced by the gradual reduction in the issuance cap, potential shifts in network participation, evolving fee structures, and overall network performance.

A hypothetical illustration of monthly compounding, assuming a starting stake of 1,000 NEAR, consistent 45.27% participation, a 90% issuance allocation to stakers, and a 5% commission, shows a projected balance of approximately 1,111.86 NEAR after 27 months under the unchanged 2.5% cap. If the proposed HSP-029 ramp is implemented, approximating the 90-day grace period as three months and then applying the 24-month linear ramp, the projected balance after the same period would be approximately 1,093.18 NEAR.

To achieve an equivalent terminal value between these two scenarios (unchanged cap versus reduced cap), the token price in the lower-issuance case would need to be approximately 1.71% higher than in the unchanged-cap scenario. This 1.71% differential is a condition for equal terminal value and does not represent a prediction of future price movements, which remain inherently uncertain and subject to market forces. This model provides a framework for understanding the reward trade-offs but excludes variables such as taxes, validator uptime fluctuations, and the impact of token burns.

Operational Considerations: Impact on Validators and Revenue Streams

For validators operating with 100,000 NEAR delegated and charging a 5% commission, the transition to the lower issuance cap would result in a reduction in simple annual commission income from approximately 248.52 NEAR to 159.05 NEAR, before accounting for operational expenses. At an illustrative NEAR price of $5, this translates to monthly commission revenues of about $103.55 and $66.27, respectively. Both figures fall short of a hypothetical $200 monthly operating cost, highlighting the potential financial pressure on some validators.

It is crucial to note that validator economics are highly variable, influenced by factors such as the volume of delegated stake, the amount of self-stake, commission rates, and other revenue streams or operational costs. For holders who choose not to stake, the impact of lower issuance is more direct: reduced ownership dilution without the corresponding reduction in staking rewards.

Sal Ternullo, CEO of SVRN, has publicly stated his significant NEAR holdings, with over 90% of his approximately 55 million NEAR staked. He also has interests in validator infrastructure and a paid MPC node, indicating a diversified involvement in the NEAR ecosystem.

The Path Forward: Governance and Market Dynamics

For NEAR token holders evaluating their next strategic moves, the key indicators will be the outcome of the governance vote on HSP-029, the subsequent adoption of the necessary protocol upgrade by validators, and the adherence to the proposed issuance schedule.

In parallel, the effectiveness of the protocol’s buyback strategy will be assessed by monitoring retained revenue, executed purchases, and the extent of permanent token destruction over defined periods. The issuance decision directly shapes the future reward budget for the network. Ultimately, the degree of deflationary pressure on NEAR will be determined by the balance between token issuance and permanent destruction, while its market price will remain contingent on buyer demand and the broader economic environment.