NEAR holders are voting on a plan to cut maximum token issuance by 36%, slowing dilution for non-stakers while trimming the commission income the network’s smallest validators depend on.
Key Takeaways
- HSP-029 would lower maximum issuance to 1.6%
- Staking yield could fall to about 3.4%
- Model sees self-sufficient pools falling to 146
- Validators must still adopt the protocol upgrade
Voting on HSP-029 opened on October 20 in the House of Stake, NEAR’s governance system, and the change needs a supermajority to pass.
Votes in the House of Stake are weighted by NEAR locked as veNEAR. The proposal’s author, Sal Ternullo, is CEO of SVRN (OceanPal Inc., Nasdaq: SVRN). The company discloses holding about 55 million NEAR, more than 90% of it staked. By the proposal’s own estimate, the cut would cost SVRN roughly 855,000 NEAR a year in rewards at the target rate.
What the ramp changes, and why now
HSP-029 lowers maximum annual issuance from 2.5% to 1.6% in a straight line over 24 months, about 3.75 basis points a month. A 90-day grace period comes first so wallets, exchanges and staking providers can update their disclosures. The split stays at roughly 90% of new tokens to stakers and 10% to the treasury.
A new governance proposal is up for voting in the House of Stake to cut issuance from 2.5% to 1.6% over 24 months.
Engage with the full proposal and participate below 👇
— NEAR Protocol (@NEARProtocol) October 20, 2026
The 36% figure applies to the rate of new supply; existing tokens are untouched. At 2.5%, NEAR issues about 89,500 new tokens a day. At the target, it would issue about 57,300.
This would be NEAR’s second cut in about a year. Validators approved halving maximum issuance from 5% to 2.5% with 68.41% support, and that change took effect in late October 2025.
HSP-029 replaces a withdrawn alternative. In August, NEAR co-founder Illia Polosukhin withdrew his Sovereign Fund proposal, which would have replaced part of the algorithmic validator rewards with a managed, yield-generating fund. He argued that discretionary allocation brings risks the protocol should not take on. Ternullo pitches HSP-029 as the version with nothing left to decide: one parameter, no fund and no administrator.
His core argument is that issuance transfers value from the 57.3% of supply that is not staked to the holders who stake. He also contends the network pays about $50 million a year more for security than validator economics require.
Approval takes two steps. After a House of Stake vote, validators must still adopt the upgrade through NEAR’s standard process. Ternullo has told delegators who back the cut to ask their validator how it plans to vote, and to move their stake if the answer doesn’t suit them. Validator operator Polkachu has said it will adopt the upgrade.
Issuance is the validators’ paycheck
NEAR burns transaction fees, apart from a share of gas paid to smart-contract developers, as its validator documentation explains. The burn keeps realized issuance at about 2.45%, slightly under the 2.5% cap. It also leaves the reward pool as effectively the only protocol income validators earn. A lower issuance rate means lower pay, while server bills stay the same.
Ternullo argues the network-wide cost to operators is modest. In a follow-up on the forum, he put the infrastructure cost of the full 406-node set at about $1.33 million a year. He estimated that about 85% of the cut falls on the return to staked capital rather than on operator pay. By his calculation, total commissions would cover machine costs as long as NEAR stays above roughly $1.41 at 1.6% issuance, compared with $0.90 at today’s rate. He said the weak point is how that income is distributed across operators.
The smallest pools already miss break-even
The proposal measures that distribution directly. It counts a pool as self-sufficient when commission on its actual stake, plus rewards on the owner’s own balance, covers machine costs. The model sets those costs at $500 a month for a block producer and $200 for a chunk-only validator. On data from September 22 and a $4.30 NEAR price, 170 pools pass that test today and 146 would at 1.6%. At a bear-case price of $2.15, the count falls from 133 to 105.
The bottom of the set holds almost no capital of its own. Among the 163 entry-level pools with 30,000 to 60,000 NEAR at stake, the median operator runs 40,130 delegated NEAR against 19 NEAR of its own. Those operators live on commission.
Commission math for a median entry-level pool
The pool runs 40,130 delegated NEAR at a 5% commission, priced at $4.30, against a chunk-only node cost of $2,400 a year.
At 2.5% issuance (5.27% gross yield): about 106 NEAR a year in commission, or roughly $455.
At 1.6% issuance (3.37% gross yield): about 68 NEAR, or roughly $291.
Covering the node from commission alone would take about 212,000 delegated NEAR today and about 331,000 at the target rate.
Ternullo treats these numbers as evidence that issuance never sustained the long tail, since these pools fall short of their costs even at 2.5%. He notes that the active set grew from 342 to 413 validators through the 2025 halving. In his view, small operators run nodes for yield on their own stake, for ecosystem reasons or as part of a larger business.
One critic answered with Gauntlet’s review of HSP-002, a small-validator reward program launched alongside the 2025 cut. All 32 rewarded validators stayed active, while nine of 29 comparable validators that did not qualify dropped out. The critic acknowledged that the rewarded group also had to meet uptime rules.
Axia, which runs a node through Meta Pool’s Node Studio program, raised a related concern. It asked how many seats depend on such support programs, and how the cut would affect the Nakamoto coefficient, the smallest number of validators that together control enough stake to disrupt the network. The proposal sets no threshold for intervention. Ternullo has said a fast-track proposal could freeze the ramp if the validator set deteriorates.
Holders split by whether they stake
Issuance raises a staker’s share of the network and shrinks a non-staker’s. The cut narrows that gap from both sides.
| Share of total supply after one year | At 2.5% issuance | At 1.6% issuance |
|---|---|---|
| Holder who stakes (gross, before commission) | +2.70% | +1.74% |
| Holder who does not stake | −2.44% | −1.57% |
Coindoo calculation from the proposal’s figures, with 42.71% of supply staked and fee burns excluded.
Non-stakers gain with no offset. The proposal puts the benefit at about $86 of avoided dilution on a $10,000 position at the target rate.
Stakers come out slightly behind unless the price rises, according to the proposal’s own breakeven. A holder staking 1,000 NEAR ends year two with about 20 fewer tokens than under the current rate. To break even, NEAR would need to trade about 1.83% higher, roughly 8 cents at $4.30. The smaller supply accounts for about 0.86 points of that, and the rest depends on the market valuing the network more. For delegators paying a 5% commission, net yield moves from about 5.0% to 3.2%.
Those yields also depend on how many holders keep staking, and Ternullo and one of his critics disagree on what recent data shows. In the two weeks before the proposal’s snapshot, NEAR rallied 86% while about 54.5 million NEAR left staking. The staked share fell from 46.92% to 42.71%, and gross yield rose from 4.80% to 5.27%. Ternullo argues that if yield retained stake, rising yield would have kept it in place. The critic replied that yield rose because stake left, and that a two-week rally says little about long-term staking behavior.
The change also reaches NEAR staking through a US-listed ETF. Bitwise’s NEAR fund stakes its holdings, so lower network rewards pass through to shareholders after fees. Kam Benbrik of Bitwise praised the gradual, single-parameter design on the forum without stating a voting position.
Quarterly reports will show where the 24 pools go
If the House of Stake approves HSP-029 and validators adopt the upgrade, the 90-day grace period starts before the first basis point comes off.
The proposal commits to quarterly reports on realized versus scheduled issuance and on validator-set health. The September 22 baseline is 42.71% of supply staked, 406 active validators and 459 candidates waiting for a seat. Ternullo cites that queue as evidence the set is oversubscribed. The first reports will show whether the 24 pools expected to fall below self-sufficiency shut down, merge or keep running at a loss, and who takes any seats they give up.
This article is provided for informational purposes only and does not constitute financial or investment advice.
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