NEAR co-founders propose setting up sovereign funds to manage treaty assets and curb inflation

NEAR co-founders propose the establishment of sovereign funds to manage agreement assets and curb inflation

Illia Polosukhin, co-founder of NEAR Protocol, proposed the idea of creating a "NEAR Sovereign Fund", a new mechanism to manage agreement assets and revenue. The proposal was disclosed for the first time by relevant media and outlines a framework: the fund will hold NEAR tokens and generate revenue, and some of the proceeds will be used to support cybersecurity and public goods. In the long term, the move aims to reduce token inflation, a key challenge facing many proof-of-stake networks.

Understand NEAR Sovereign Funds

The proposed fund operates in a manner similar to a national sovereign wealth fund, but serves the blockchain ecosystem. Unlike governments that manage oil revenue, the NEAR community will regulate revenue generated by agreements, such as transaction fees and pledge incentives. The fund's main goal is to achieve sustainable returns from these assets and reinvest itself in network health maintenance.

Polosushin's proposal comes at a time when many first-tier blockchains are struggling to balance token economics with long-term sustainability. By setting up a dedicated fund, NEAR aims to decouple online spending from instant token issuance, potentially easing selling pressure and stabilizing token value.

Operating Mechanism and Impact

Under the proposal, the fund not only holds NEAR tokens, but also proactively manages them to generate income. Some of the proceeds will be used for cybersecurity-possibly through a pledge or insurance mechanism-and public goods funding, such as developer grants and infrastructure projects. This approach ensures continuous funding for critical projects without relying entirely on new token issuance, building a more resilient ecosystem.

If implemented, the fund could also serve as a buffer during market downturns and provide financial support for continued operations. This is particularly important given the inherent volatility of the cryptocurrency market, agreement revenue can change dramatically.

Implications for NEAR and the broader crypto market

This proposal is significant for the following reasons: First, it represents a mature approach to protocol governance, moving from simple treasury management to strategic asset allocation. Second, it responds to a common criticism from the Proof-of-Stake Network: High inflation rates can erode the value of token holders in the long term. By using fund income to pay for expenses, NEAR can reduce its dependence on inflation, potentially making its tokens more attractive to long-term investors.

This could set a precedent for the broader crypto industry. Other agreements facing similar inflationary pressures may refer to NEAR's model as a blueprint. However, the success of such funds depends largely on governance, transparency and the ability to generate stable returns in volatile markets.

Conclusion

The NEAR sovereign fund proposal is a forward-looking move that could reshape the way blockchain protocols manage finances. Although still in the proposal stage, it highlights NEAR's commitment to long-term sustainability and willingness to innovate beyond technological upgrades. As the community discusses the details, the crypto world will be watching closely to see whether this becomes a new standard for protocol treasury management.

FAQs

Q1: What is a NEAR sovereign fund?
This is a fund proposed by NEAR Protocol co-founder Ilya Polosushin that will hold and manage the agreement assets and income denominated in NEAR tokens to generate returns. Part of the return will be used to support cybersecurity and public goods, with the long-term goal of reducing token inflation.

Q2: How does the fund reduce token inflation?
By using the return generated by the fund's investment to cover network expenses, the agreement could reduce the need to issue new tokens, thereby reducing inflation. This helps stabilize the token value over time.

Q3: What are the potential risks of the fund?
Risks include poor investment decisions, governance disputes, and market fluctuations that can lead to losses. The success of the fund will depend on sound management and transparent decision-making processes within the NEAR community.