NEAR Co-Founder Proposes Sovereign Wealth Fund to Reduce Reliance on Token Inflation
Key Takeaways
- •The proposed fund would launch with approximately 30 million NEAR tokens, equivalent to roughly $53 million at current market prices.
- •Polosukhin emphasized that the proposal requires approval through NEAR's House of Stake governance system and is not a unilateral decision by the founder.
- •The fund's design is modeled after sovereign wealth funds in Norway and Singapore, which have sustained returns across decades and multiple market cycles.
- •Polosukhin argued that a yield-generating fund is superior to token burning because it preserves principal while providing ongoing funding rather than offering only temporary inflation relief.
- •If yield eventually covers all network security and public goods expenditures, Polosukhin indicated that NEAR could move toward a Bitcoin-style fixed total token supply.
Illia Polosukhin, co-founder of NEAR Protocol, a Layer 1 blockchain built for sharded scalability and developer accessibility, has proposed the creation of a protocol-level sovereign wealth fund that would hold NEAR tokens, generate yield, and allocate a portion of that yield toward network security and other public goods. He shared the proposal on the NEAR governance forum on Monday, inviting community feedback over a two-week period.
A Proposal, Not a Mandate
"This is very much a proposal and not a mandate," Polosukhin wrote. "I believe our ecosystem belongs to all of us and is not truly resilient or decentralized if the founder is calling all the shots."
He emphasized that validators and token holders should weigh in through House of Stake, NEAR's stake-weighted governance system, before any action is taken. Participation by delegates would occur through mechanisms already established within the governance framework.
Context: NEAR's Sixth Year on Mainnet
NEAR is preparing to enter its sixth year of Mainnet operations. Polosukhin characterized the first five years as a bootstrapping phase. Recent milestones he cited include a 50% reduction in inflation during late 2025, a fee mechanism redirecting revenue from NEAR Intents toward token buybacks, and the introduction of fees for AI inference services on the network.
The proposal also arrives amid a broader industry debate over sustainable tokenomics. Ethereum's EIP-1559 upgrade introduced fee burning that can make ETH deflationary during high network activity, while other proof-of-stake networks continue to rely on token emissions to fund validators and ecosystem development. NEAR's approach would attempt to preserve treasury principal while directing yield toward ongoing costs.
According to the forum post, the proposed fund would be capitalized by NEAR's existing protocol treasury along with protocol revenue collected to date and in the future. The fund would hold assets denominated in NEAR and deploy them productively. A share of the revenue would support the Validator Support Program, MPC (multi-party computation) providers, and comparable services. The fund would launch with approximately 30 million NEAR, equivalent to roughly $53 million at current market prices.
Over time, Polosukhin suggested, NEAR could channel an increasing share of token emissions into the fund, thereby reducing effective inflation while continuing to compensate validators and stakers.
Norway and Singapore as Models
Polosukhin drew parallels to sovereign wealth funds and university endowments, which convert one-off or cyclical revenue streams into a durable asset base that generates recurring yield. He specifically cited Norway and Singapore as examples. Singapore's fund is 45 years old, while Norway's is 36 — evidence, he argued, that such structures can endure across market cycles.
Crypto revenue is inherently cyclical, much like oil royalties or land sales, he noted, making a productive fund preferable to direct expenditure on operational costs.
Contrast With Token Burning
Polosukhin drew a clear distinction between the proposed fund and token burning, a mechanism previously discussed within the NEAR community. Burning temporarily offsets inflation, he said, but the effect diminishes with a volatile asset, and once inflation ceases, no residual value remains. By contrast, lending tokens at yield preserves the principal while generating ongoing funding.
In early July, Polosukhin rejected a proposal to burn tokens held by the Near Foundation, describing a one-time burn as "a blunt instrument." He instead pointed toward the possibility of implementing a Bitcoin-style hard cap on NEAR's total supply. The proposed fund supports that trajectory: if yield can eventually fully cover network security and public goods expenditures, he wrote, NEAR "could move towards a fixed supply."
Acknowledging Risk
The Near Foundation co-founder acknowledged that yield-generating strategies carry risk. The plan includes diversification and hedging measures, and any adjustments to inflation would be designed to preserve validator and staking incentives.
NEAR was trading at $1.74, up 1.4% on the day but down 29.6% over the past year, according to CoinGecko data.