NEAR Protocol Proposes Sovereign Fund to Reduce Token Inflation

NEAR Protocol has proposed a 'sovereign fund' concept aimed at reducing the burden of token inflation. This concept involves managing the protocol's treasury and revenues to secure funding for security and public goods. Ilya Polosukin, co-founder, explained that this structure would allocate a portion of the operational profits held in NEAR Protocol tokens towards network security and public goods. Currently, this proposal is in the suggestion stage and is not a finalized protocol change. The NEAR Foundation is working on an upgrade to reduce the maximum inflation from 5% to 2.5%, which will take effect only if 80% of block-producing validators adopt it. After the upgrade, the staking reward rate is expected to be around 4.75%. Polosukin noted that the existing premise that validators would be large token holders and reinvestors in the ecosystem has changed. The sovereign fund differentiates itself from previous inflation reduction proposals by not only reducing validator rewards but also establishing a financial management system at the protocol level. Debates surrounding governance authority continue, and to implement the sovereign fund, the methods for managing and operating treasury assets and the revenue structure need to be clarified.