--- hsp: 002 title: Validator Support Program description: Quarterly support payments to maintain validator decentralization post-inflation reduction author: Meta Pool, LiNEAR, HOT contributor: Gauntlet discussions-to: https://gov.near.org/t/hsp-002-validator-support-program/41687 status: Final type: Decision category: Economic Governance created: 2025-10-10 --- ## **Context & Alignment** * This proposal (HSP-002) emerges from the collaborative Request for Comment (RFC) process led by Meta Pool, Linear, Hot, and Gauntlet, which introduced draft proposals HSP-002 and HSP-003 for open community discussion. The RFC stage is designed to gather feedback from validators, token holders, and other stakeholders before formal submission to the House of Stake (HoS), ensuring that any initiative reflects collective insight and ecosystem alignment. * The planned reduction of NEAR Protocol’s inflation rate from 5% to 2.5% represents a major economic shift that strengthens long-term sustainability but may challenge the viability of smaller validators. This proposal responds to that transition by providing temporary, targeted support to maintain validator diversity and prevent stake concentration. * Aligned with the House of Stake’s constitutional principles of decentralization, transparency, and sustainability, the proposal reinforces NEAR’s core values of openness and resilience. It introduces a short-term governance mechanism - funded through the HoS Foundation Treasury - to stabilize the validator ecosystem during the adjustment period, without modifying protocol-level parameters or introducing permanent subsidies. ## **Abstract** This proposal establishes an initial one-quarter validator support program to maintain network decentralization following the planned NEAR protocol inflation reduction from 5% to 2.5%. The program provides 150 NEAR per quarter to the 100 smallest validators who maintain 97% uptime. This proposal covers only Q4 2025; continuation beyond the first quarter will require a subsequent proposal. The proposal depends on the inflation reduction being implemented but does not itself implement that change. ## **Situation** NEAR Protocol will undergo an inflation reduction from 5% to 2.5%, decreasing validator rewards by approximately 50%. This change is being implemented at the protocol level outside of the House of Stake proposal process. However, the economic implications for validators require a governance response to maintain network decentralization. While larger professional validators can likely absorb this reduction, smaller and independent validators may find it challenging to maintain economically viable operations at the lower reward levels. Research conducted by Meta Pool indicates that typical NEAR validator hardware costs under USD $700 per year. At the reduced inflation rate, some smaller validators may find their operations unprofitable, potentially leading to validator consolidation and reduced network decentralization. Network decentralization is essential for NEAR’s security, resilience, and credibility. A diverse validator set protects against single points of failure, geographic concentration, and governance capture. If smaller validators exit due to economic constraints, the network risks becoming more centralized around a few large, professional operators. This proposal addresses this risk by providing targeted support to smaller validators during the transition to the new economic model, ensuring they can continue contributing to network security and decentralization. ## **Mission** **Objectives:** * Maintain or increase validator decentralization during the first quarter following inflation reduction * Ensure smaller validators can continue economically viable operations during the transition period * Support network security through a diverse validator set * Gather data on program effectiveness to inform potential continuation proposals * Cover operational costs for qualifying validators **Outcomes (First Quarter Only):** * 100 smallest validators receive adequate support to maintain operations in Q4 * No significant reduction in validator count or geographic diversity during transition period * Stable network security metrics (uptime, participation rates) * Data collection and evaluation to inform follow-on proposals * Demonstration that inflation reduction can coexist with strong decentralization **Note:** This proposal covers only the initial quarter following inflation reduction. Any continuation of the validator support program beyond Q4 will require a new proposal based on the outcomes and learnings from this pilot period. ## **Approach** The validator support program operates for one quarter (Q4 2025) with retrospective payment based on performance. This structure incentivizes consistent uptime while providing immediate support during the critical transition period following inflation reduction. ### **Q4 Program Structure (This Proposal)** **One-Time Payment:** 150 NEAR per qualifying validator, distributed at the end of Q4 2025. **Eligibility Criteria:** 1. **Stake Size:** Bottom 100 validators by staked amount at the start of Q4 2. **Performance:** Maintain average 97% uptime throughout the 3-month period 3. **Exclusions:** Validators receiving incentives from other NEAR Foundation, Linear Protocol, or Meta Pool programs are ineligible to avoid double-subsidization **Assessment Process:** 1. Snapshot taken at start of Q4 to identify the 100 smallest validators by stake 2. Uptime monitored continuously throughout the quarter 3. Final evaluation at end of Q4 determines which validators met 97% uptime threshold 4. Payments distributed to qualifying validators within 14 days of quarter end ### **Future Quarters (For Reference Only)** The sections below outline how a continued program might operate to provide context for long-term planning. However, quarters beyond Q4 are NOT included in this proposal and will require separate governance approval. **Potential Ongoing Structure:** * Quarterly payment cycles with same eligibility criteria * Regular reassessment of payment amounts, validator counts, and thresholds * Adaptations based on changing network conditions and NEAR price **Potential Annual Budget:** Approximately 100,000 NEAR if program continues for full year with similar parameters (see Budget section for detailed breakdown). ### **Rationale** **150 NEAR per quarter** (600 NEAR annually) provides \~$1,800 USD per year at current prices, substantially covering the hardware costs identified by Meta Pool research. This amount ensures validators remain profitable even with 50% reduced staking rewards. **Bottom 100 validators** targets those most at risk from reduced rewards while maintaining manageable program size and cost. **97% uptime requirement** ensures the program supports reliable validators who contribute meaningfully to network security, not just those running minimal infrastructure. **Quarterly assessment** allows the program to adapt to changing conditions without requiring new governance proposals for minor adjustments. ### **Risks and Limitations** **Sybil Risk:** Large validators could theoretically split their stake into multiple small validators to game the program. However, the 97% uptime requirement and operational overhead make this less attractive than legitimate operation. The program will monitor for suspicious patterns. **Validator Dependence:** Validators may become dependent on the subsidy rather than building sustainable business models. The Q4 pilot with required follow-on proposal provides a natural decision point to assess whether continued support is necessary or whether the ecosystem has adapted to the new reward structure. **Geographic Diversity Not Addressed:** This program focuses on stake size, not geographic distribution. Future proposals may address geographic decentralization specifically. **Market Price Volatility:** The 150 NEAR payment may become insufficient or excessive as NEAR price changes. The Q4 pilot provides data to inform appropriate payment levels for any continuation proposal. ## **Technical Specification** ### **Payment Calculation** For each quarter: 1. Identify bottom 100 validators by stake at quarter start (snapshot at first epoch of quarter) 2. Monitor uptime for each validator throughout 3-month period 3. Calculate average uptime as: (epochs validated / total epochs in quarter) 4. Validators with ≥97% average uptime qualify for payment 5. Distribute 150 NEAR to each qualifying validator within 14 days of quarter end ### **Exclusion List Management** Validators excluded due to participation in other incentive programs: * NEAR Foundation incentive recipients * Linear Protocol subsidy recipients * Meta Pool support program participants The exclusion list will be maintained publicly and updated at the start of each quarter. Validators may appeal exclusion decisions through a simple process to be defined by program administrators. ### **Uptime Monitoring** Uptime will be calculated using on-chain data from NEAR’s existing validator monitoring infrastructure. No new monitoring systems are required. Uptime percentage = (number of epochs with produced blocks / total epochs in period). ### **Implementation Timeline** This proposal covers Q4 2025 only. The timeline assumes the inflation reduction has been implemented or will be implemented concurrent with this program launch. * **Q4 2025 Start:** Program launches, eligibility snapshot taken * **Q4 2025 End:** Final evaluation, payments distributed * **Post-Q4:** Comprehensive evaluation report published * **Before Q4 End:** Follow-on proposal should be submitted if continuation is desired Any continuation beyond Q4 requires a new House of Stake proposal. ## **Backwards Compatibility** This proposal introduces a new off-chain payment program and does not modify NEAR protocol itself. It has no backwards compatibility implications for the network. **Critical Dependency:** This proposal depends on NEAR’s inflation reduction from 5% to 2.5% being implemented at the protocol level. The inflation reduction is happening outside of the House of Stake governance process, but this validator support program is only economically necessary and justified if that reduction occurs. If the inflation reduction is not implemented, this proposal becomes unnecessary as validators will continue receiving current reward levels. **Timing:** This proposal should be approved and implemented concurrent with or immediately following the inflation reduction to provide uninterrupted support during the transition period. ## **Milestones** | **Milestone** | **Target Date** | **Deliverable** | **Success Criteria** | |----|----|----|----| | **Program Launch** | Q4 2025 Start | Eligibility list published, monitoring active | 100 validators identified | | **Mid-Quarter Check** | Q4 2025 Mid | Informal progress assessment | Tracking systems operational | | **Q4 Evaluation** | Q4 2025 End | Final uptime calculations | Qualifying validators determined | | **Q4 Payment** | Within 14 days of Q4 end | Payments distributed | All qualifying validators receive 150 NEAR | | **Program Report** | Within 30 days of Q4 end | Comprehensive evaluation | Data and recommendations published | | **Follow-on Proposal** | Before Q4 end (if continuation desired) | Q2+ proposal submitted | Community discussion initiated | --- ## **Budget & Resources** ### **Q4 Budget (This Proposal)** | **Item** | **Amount (NEAR)** | **Notes** | |----|----|----| | Q4 Validator Payments | 15,000 | 100 validators × 150 NEAR (assumes all qualify) | | Administration & Monitoring | 2,500 | Data systems, evaluation, reporting | | Contingency | 2,500 | Buffer for unforeseen circumstances | | **TOTAL REQUESTED** | **20,000** | **Q4 2025 only** | **Funding Source:** NEAR House of Stake Foundation Treasury **Cost Notes:** * Actual Q4 costs may be lower if fewer than 100 validators meet the 97% uptime requirement. * If all 100 validators qualify, direct payments total **15,000 NEAR**. * The remaining **5,000 NEAR** covers administrative overhead and contingency. --- ## **Projected Annual Budget (For Reference Only)** *(Not part of this proposal)* | **Item** | **Amount (NEAR)** | **Notes** | |----|----|----| | Q1 Validator Payments | 15,000 | Covered by this proposal | | Q2 Validator Payments | 15,000 | Would require new proposal | | Q3 Validator Payments | 15,000 | Would require new proposal | | Q4 Validator Payments | 15,000 | Would require new proposal | | Administration (Annual) | 10,000 | Data analysis, reporting, community management | | Contingency (Annual) | 30,000 | Buffer for adjustments across full year | | **Projected Annual Total** | **100,000** | Illustrative only | Any support beyond Q4 requires a new governance proposal with updated targets, budgets, and mechanisms based on Q4 results. ### **Reporting** **End of Q4 Report** (within 30 days of quarter end): * Number of eligible validators at Q4 start * Number of qualifying validators (met 97% uptime) * Total payments distributed * Validator count and decentralization metrics * Geographic distribution analysis * Program effectiveness evaluation * Recommendations for potential continuation * Cost-benefit analysis This comprehensive report will inform any follow-on proposals for Q2 and beyond. ## **Team & Accountability** **Responsible:** * NEAR House of Stake Foundation: Program administration, payment distribution, reporting, oversight and approval of program adjustments **Accountable to:** * House of Stake governance * NEAR validator community **Program Administration:** * Validator eligibility determination for Q4 * Uptime monitoring and calculation throughout Q4 * Payment processing at end of Q4 * End-of-quarter comprehensive reporting * Community communication about program status and results **Governance of Continuation:** * This Q4 pilot runs as approved; no mid-quarter adjustments without emergency proposal * At end of Q4, program automatically concludes unless new proposal is approved * Follow-on proposals for Q2+ should be submitted before end of Q4 to allow discussion time * Any continuation proposal should incorporate learnings from Q4 pilot ## **Security Considerations** ### **Economic Security** **Program Sustainability:** The 20,000 NEAR Q4 budget represents approximately 0.002% of NEAR’s total supply, a negligible impact on token economics. At current prices, this is roughly $60,000 for the quarter to support network decentralization during a critical transition period. If the program continues for a full year at similar scale (illustrative 100,000 NEAR annually), it would represent approximately $300,000 annually to support decentralization—still a minimal cost relative to the value of maintaining a diverse validator set. **Validator Economics:** By covering operational costs for smaller validators, the program reduces the risk that validator consolidation could compromise network security. The 97% uptime requirement ensures supported validators actively contribute to network operation. **Budget Risk:** If NEAR price increases significantly, the program may become more expensive in USD terms. Conversely, if price decreases, 150 NEAR may become insufficient. Quarterly reviews allow adjustments. ### **Gaming and Abuse** **Sybil Attacks:** The program’s design makes it economically unattractive for large validators to split their stake, as: * Each “fake” validator requires separate infrastructure and maintenance * 97% uptime across multiple small validators is operationally challenging * The program pays the same 150 NEAR regardless of stake size * Administrative overhead and monitoring will flag suspicious patterns **Uptime Gaming:** Validators cannot easily game the 97% uptime requirement as it’s calculated from on-chain block production data over 3 months. Short-term uptime manipulation would be evident and could result in disqualification. **Exclusion List Gaming:** Clear criteria for other incentive programs will be maintained to prevent validators from appearing to exit other programs to qualify for this one. ### **Decentralization Impact** **Positive:** The program directly supports network decentralization by enabling smaller validators to remain operational despite reduced rewards. **Monitoring Required:** The program should track whether it actually maintains validator diversity or creates perverse incentives. Annual evaluation will assess real decentralization impact. ## **Conflict of Interest Statement:** * The authors declare no conflicts of interest related to this proposal. * [X] I've read and agree with the House of Stake [Conflict of Interest policy] (https://gov.near.org/t/house-of-stake-foundation-conflict-of-interest-policy-v1-0-draft/41561) ## **Copyright** Copyright and related rights waived via [CC0](https://github.com/houseofstake/proposals/blob/main/LICENSE). ## Disclaimer *Gauntlet is currently partnered with the Near Foundation to provide mechanism design and economic analyses. Our scope pertains to incentive design and infrastructure optimization, while other authors of this document drive the other scopes of work.*