TL;DR
- The annual inflation of the NEAR token is cut from 5% to approximately 2.4%.
- The update was implemented despite the community vote failing to reach the required 66.67% threshold.
- The price of NEAR reacted with an 8% drop following the announcement, in line with a bearish market.
The crypto ecosystem has its eye on NEAR Protocol, which this Monday, October 30, confirmed the implementation of a crucial network update known as the “halving.” The fundamental change from this update is that NEAR Protocol reduces inflation of its native token drastically, moving from an annual rate of 5% to approximately 2.4%.
The development team justified the measure as necessary to curb the token’s high dilution. Until now, nearly 60 million new NEAR tokens were being created annually, a figure that far exceeded the network’s fee burns, generating constant selling pressure on the asset. With this update, the aim is to realign the protocol’s economic incentives.
The market’s reaction to the announcement was immediate and negative, framed by a general downturn in the crypto sector. The price of NEAR fell almost 8% during the day, sliding to $2.10 at the time of this writing.
Impact on Staking and the Shadow of the Failed Vote
Beyond token issuance, the update redefines profitability for those securing the network. Staking yields (participation) will suffer a significant cut, falling from an APY (Annual Percentage Yield) of nearly 9% to a new estimated rate of 4.5%.
This calculation assumes that the current proportion of half the total supply participating in staking is maintained. This adjustment seeks to balance the rewards with the new reality of lower issuance.
However, the decision to implement the “halving” has generated debate in the community. The update was executed despite the original governance proposal, which sought to ensure that NEAR Protocol reduces inflation, failing to achieve the required consensus.
Said vote, which concluded this past August 1, only obtained the support of 89 validators. This represented only 45.06% of the affirmative votes, a figure far from the approval threshold set at 66.67% (two-thirds) for a proposal to be ratified by the community.
Although the proposal technically failed, the NEAR Protocol core team moved forward with the implementation, prioritizing the economic adjustment over the formal vote’s outcome.
