A new proposal from Hot Protocol, a decentralized group operating on a close protocol, calls for a significant reduction in token inflation rates for AI Crypto projects.
On June 24, the decentralized organization submitted a plan to reduce annual inflation rates for close relatives from 5% to 2.5%. The proposal aims to enhance the long-term sustainability of cryptographic projects tokens and reorganize incentives across the network.
According to the proposal, the current 5% inflation rate will be responsible and undermine Near’s competitiveness by “causing growth and dilution of unnecessary token supply.”
Hot Protocol explained that myopia inflation was designed on the assumption that charges from high transaction volumes offset a large portion of supply growth when charges burn. However, in reality, only 0.1% of the token supply has been burned over the past year.
As a result, full inflation rates outweigh actual network growth and user activity, continuing to inflate more than 60 million circular supply nearly yearly.
To counter this, the new proposal suggests reducing staking yields from 9% to 4.5%, which could make the proximity-based Defi offering more competitive.
This could potentially leave some validators, but also open up space for new demand generation features, including revenue from transaction fees from intent-based models.
The DAO emphasized the importance of the proposal, saying:
“Reducing near inflation is an urgent priority, meaning millions of new invasion cycles with every additional month as it is, meaning that the dilution is not only low, but unnecessary.
Community Support
The proposal has attracted strong support from the nearest ecosystem as many industry players have expressed support.
Iliaporoskin, co-founder of Near Protocol, approved the plan and said it is approaching a better position as a potential reservoir of value in an environment focused on emerging AI.
He also highlighted the need to reduce reliance on staking as the main source of yield, a dynamic that has limited defi innovation in the vicinity.
Avichal Garg, co-founder of Electric Capital, reiterated the same view.
“(I am) a huge fan of this ecosystem. We have long-term holders through the future of crypto (IS) future, reduced emissions, switching fees to drive revenues to token holders, and more revenue.”
Meanwhile, the proposal is currently receiving validator votes and requires that a majority of the majority pass. At the time of reporting, the required 66.67% threshold is 13.36%.
If approved, implementation is expected by the third quarter of 2025, with smooth technical deployment and final community verification being held.
