NEAR Protocol Approves Proposal To Reduce Annual Token Issuance To 1.6%

The proposal, known as HSP-029, received overwhelming support from NEAR's House of Stake governance body on November 2. If fully implemented, the changes will be introduced progressively over 24 months, reducing the number of new NEAR tokens entering circulation while maintaining the existing distribution arrangements for staking rewards and the protocol treasury.

The decision represents another significant adjustment to NEAR's tokenomics following an earlier reduction in its annual issuance ceiling from 5% to 2.5% in October 2025. However, the latest proposal must still undergo additional governance and technical procedures before the revised issuance schedule becomes binding.

NEAR Targets Lower Inflation And Reduced Token Dilution

Under HSP-029, NEAR's maximum annual issuance rate will decrease gradually from 2.5% to 1.6%, with reductions applied during each network epoch over a two-year period. The adjustment equates to approximately 3.75 basis points per month, creating a predictable schedule intended to allow validators, token holders and other network participants to prepare for the changes.

The proposal maintains the existing allocation of newly issued tokens, with 90% distributed to staking participants and the remaining 10% directed towards the protocol treasury. Rather than changing how rewards are distributed, the amendment focuses exclusively on reducing the maximum amount of NEAR that can be issued annually.

According to the governance proposal, the network has largely completed its initial development and expansion phase, reducing the need for higher token issuance to encourage participation. NEAR's active validator set is already oversubscribed, suggesting that the existing incentive structure has attracted sufficient interest from participants responsible for securing the blockchain.

The proposal also highlights the effects of token issuance on holders who do not participate in staking. Approximately 57% of NEAR's circulating supply is currently unstaked, meaning those holders experience dilution as newly created tokens are distributed to validators and other staking participants.

Reducing issuance is intended to limit that effect while decreasing the potential selling pressure associated with newly distributed rewards. However, the changes will also reduce the amount of cryptocurrency earned through staking, creating a trade-off between lower supply growth and smaller validator incentives.

Proposal Could Prevent 66 Million NEAR From Entering Circulation

The approved changes are projected to have a substantial effect on NEAR's long-term token supply. Estimates included in HSP-029 suggest that approximately 11.8 million fewer NEAR tokens would be issued during the first two years compared with maintaining the existing 2.5% ceiling.

Over six years, the cumulative reduction is expected to reach approximately 66.1 million NEAR, leaving the total token supply around 4.36% lower than it would otherwise have been under the previous issuance arrangements.

Daily token creation is projected to decline from approximately 89,500 NEAR to 57,300 NEAR once the revised issuance ceiling has been fully implemented. The gradual reduction is designed to avoid an immediate disruption to staking incentives while establishing a more restrictive supply schedule.

The proposal also forecasts a decline in gross staking yields from approximately 5.268% to 3.372%, assuming the proportion of tokens participating in staking remains consistent with September 2026 levels. Actual yields could differ depending on future changes in staking participation and network conditions.

NEAR described the decision as an example of community-led economic governance, with token holders voting on a core network parameter before its implementation through a published schedule. In a statement on X, the project said the changes would deliver "lower long-term issuance and a supply schedule anyone can verify."

Security Council Review And Validator Upgrade Still Required

Although HSP-029 has passed the House of Stake ballot, the revised token issuance ceiling will not take effect immediately. The proposal must first undergo review by the House of Stake Security Council, which is responsible for examining the outcome before formal ratification.

Once that stage is completed, a mandatory 90-day grace period will provide additional time for network participants to prepare for the changes. Validators must subsequently adopt a protocol upgrade implementing the revised issuance schedule before the adjustment becomes binding across the blockchain.

The requirement for validator participation ensures that changes to NEAR's economic parameters are introduced through the network's established governance and software upgrade procedures. Until those steps are completed, the current maximum annual issuance rate of 2.5% remains in place.

The latest proposal builds on NEAR's October 2025 decision to halve its original 5% issuance ceiling, reflecting a continued shift towards lower inflation as the blockchain ecosystem develops. While reduced token creation could limit dilution and long-term selling pressure, the impact on NEAR's market performance will also depend on demand, staking participation and wider cryptocurrency market conditions.

If ratified and successfully implemented, HSP-029 will establish a further two-year adjustment to NEAR's token supply, with the maximum annual issuance rate eventually reaching 1.6% while preserving the existing distribution structure for staking participants and the protocol treasury.