NEAR co-founder proposes protocol sovereign fund for long-term sustainability

NEAR Protocol co-founder Illia Polosukhin has proposed creating a protocol sovereign fund to improve the long-term sustainability of the network's tokenomics. 

"I propose that we should establish a protocol sovereign fund that uses its proceeds to pay for public goods of the ecosystem, such as security," Polosukhin wrote in the proposal, which was uploaded on the NEAR forum on Monday.

According to the proposal, the fund's treasury would be built from the current and future protocol treasury along with protocol revenue earned to date and going forward. 

The sovereign fund would hold NEAR (NEAR) tokens and generate yield on its holdings. A share of that yield would cover costs for the Validator Support Program, MPC providers, and other services. Delegates of the House of Stake, the protocol's main stake-weighted governance system, would participate through existing mechanisms.

"Using the ecosystem's revenue to buy NEAR, and then using some part of the yield to fund ecosystem public goods, is a much more long-term-aligned approach," Polosukhin said. He contrasted this with simply burning tokens, which he said offers only short-term offsets to inflation and leaves no future funding base if inflation ends.

The protocol treasury is set to launch with roughly 30 million NEAR, worth around $53 million at current prices. Additional revenue and emissions could later be directed into the fund under governance parameters, gradually lowering effective inflation.

"Over time, if this proves to be successful, NEAR could move towards a fixed supply of NEAR, gradually reducing total inflation over time and transitioning all validator rewards to the new model," Polosukhin wrote. "I think this will make NEAR economics stronger over time, sustainably fund public goods and core needs of the ecosystem, and strengthen the treasury for the longer term against changing market conditions."

The concept draws from sovereign wealth funds in places like Norway and Singapore, as well as university endowments, which convert cyclical revenues into productive assets that generate ongoing yield.

"This is very much a proposal and not a mandate," the NEAR co-founder wrote. He invited comments over the next two weeks while discussing the idea with stakeholders.

The price of NEAR is up 3.5% in the past 24 hours to trade at $1.76, according to The Block's price page. However, it is down 29% over the past year.