Erik Trautman, an entrepreneur with Wall Street experience and founder of Viking Education, established the NEAR Protocol. His co-founders include Illia Polosukhin, with over ten years of industry experience, including three at Google, and Alexander Skidanov, a computer scientist who worked at Microsoft and later joined memSQL as the director of engineering. NEAR Protocol boasts an accomplished team, including gold medalists and winners of the International Collegiate Programming Contest (ICPC), with expertise in building real-world sharded systems at scale—a key focus of the protocol for enhancing blockchain scalability.
NEAR Protocol’s Innovative Approach
NEAR Protocol is a layer-one blockchain functioning as a community-run cloud computing platform. It addresses limitations in other blockchains, such as slow transaction speeds, low throughput, and poor interoperability. This design creates an optimal environment for Decentralized Applications (DApps), offering a user-friendly platform. Some of the top DApps projects of the NEAR protocol ecosystem include Mintbase, Satori, Sweat Economy (Sweatcoin), Aurora, and Ref Finance.
For example, NEAR utilizes human-readable account names instead of the cryptographic wallet addresses seen in Ethereum. NEAR introduces unique solutions to scaling problems and employs its consensus mechanism, “Doomslug.”
Consensus Mechanism of NEAR Protocol
NEAR Protocol employs a unique proof-of-stake consensus mechanism known as Doomslug. Unlike traditional proof-of-stake, Doomslug finalizes a block after just one round of communication, enabling near-instant confirmation. Validators take turns producing blocks rather than competing directly based on their stake, enhancing efficiency and speed.
The NEAR Foundation is committed to maintaining the protocol, funding the ecosystem, and overseeing governance. NEAR has established a bridge to Ethereum, facilitating the transfer of ERC-20 tokens from Ethereum to NEAR.
NEAR Protocol operates on a Proof-of-Stake mechanism called Thresholded Proof-of-Stake (TPoS). TPoS aims to increase decentralization, security, and fair rewards by involving many participants, known as witnesses. Witnesses are selected in intervals of 1 day, divided into 1440 block slots per minute, with 1024 witnesses per block.
To participate in network maintenance, users can submit a transaction indicating the amount they want to stake, with the staked assets locked for at least three days. Witness proposals are collected every 24 hours, and seats are allocated to those staking at least the specified amount. NEAR Protocol uses inflationary block rewards and transaction fees to incentivize witnesses, and the inflation rate is determined as a percentage of the total digital assets.
TPoS offers several advantages. Firstly, it reduces the likelihood of forking, as network participants quickly identify any split. Secondly, there’s no need to pool stake or computational resources, as rewards are directly proportional to stake. Lastly, the security is enhanced, making attacks challenging since the attacker would need private keys representing two-thirds of the total stake over the past two days.
Distinctive Features of the NEAR Ecosystem
Within the NEAR ecosystem, a set of defining characteristics serves as the linchpin for ensuring the overarching success of the entire protocol.
- Carbon-Neutral Blockchain
NEAR Protocol has achieved a notable milestone by being certified as a carbon-neutral blockchain. In a collaborative effort with the South Pole, NEAR comprehensively assessed its carbon footprint. This assessment considered factors such as the NEAR Foundation’s carbon footprint, the Core Collective, and all validators.
The NEAR Protocol generates 174 tons of CO2 annually, making it over 200,000 times more carbon-efficient than its Bitcoin counterpart. This achievement is primarily attributed to the implementation of PoS, a more eco-friendly consensus mechanism.
- Human-Readable Accounts, Fast & Simple
NEAR sets itself apart by ensuring rapid transactions, averaging just around one second per transaction. Adding a user-friendly touch, NEAR account IDs are human-readable, replacing complex public key hashes. Users can register named accounts (e.g., stakin.near), offering simplicity and ease of recall. Furthermore, named accounts can create sub-accounts, fostering an organized and intuitive user experience.
- Exclusive Grants Program
The NEAR network has grown significantly since its launch, especially during the bullish market of 2021, with a surge in new wallet addresses and developer activity. Current metrics reveal over 700 projects, 125 DAOs, 550,000 members, and 4,000 developers in the NEAR ecosystem. Additionally, there are 865 nodes supporting the network, 20 million wallets, and 250 million transactions that occurred in 2022. Despite challenges faced by the cryptocurrency market in 2022, NEAR maintained consistent developer engagement, indicating resilience and sustained activity within the ecosystem.
- Stake & Earn
In the decentralized ecosystem of NEAR, participants, namely Validators and Delegators, collaborate to ensure the network’s security and functionality. Validators take the lead in producing blocks, earning rewards for their service. Delegators, on the other hand, stake their tokens, contributing to the network’s progress. Both parties receive rewards at the end of each epoch (~12 hours), and unlike many other tokens, NEAR allows Delegators to stake any amount of tokens with no minimum requirement.
NEAR Protocol Tokenomics
As of this time, the market cap of the NEAR protocol is $1,014,432,968, with a circulating supply of 987,179,551 NEAR. The total allocation of NEAR amounts to 1 billion tokens, distributed as follows:
- 17.2% for Community Grants
- 11.4% for Operation Grants
- 10% for Foundation Endowment
- 11.7% for Early Ecosystem
- 14% for Core Contributors
- 17.6% for Backers
- 6.1% for Small Backers
- 12% for Community Sale
NEAR Protocol started its main network on April 22, 2020, making 1 billion NEAR tokens right at the beginning. Every year, they create 5% more tokens to help the network, giving 90% of that to validators (4.5% of the total) and 10% to the protocol treasury (0.5% of the total).
When people make transactions, 30% of the fees go back to contracts involved in the transaction, like a kind of reward. The other 70% of the fees are removed from the system. People use the NEAR token for:
- Paying fees for processing transactions and saving data.
- Supporting the network by staking NEAR tokens to run validator nodes.
- Taking part in voting to decide how the network’s resources should be used.
A Glance at Near Metrics
With a value of just below $1 billion, NEAR Protocol is ranked 42nd on CoinMarketCap and has been somewhat overlooked in blockchain media. A blockchain analytics platform, Artemis, reveals a steady growth in daily active addresses and transaction counts until September 2023.
The number of daily addresses increased from 30-40,000 to nearly 1 million on September 5, settling around 700,000 thereafter. Concurrently, transactions surged from 400-500,000 to 3.17 million on September 5, with the reasons behind this rapid growth remaining uncertain. This noteworthy increase occurred amid challenging market conditions.
Near’s protocol total locked value (TLV) is not doing well. As of now, it’s about $37.15 million, which is way less than the highest amount it had in May last year when it was around $440 million more.
The Way Forward: Concluding Thoughts on Near
Like any blockchain system nowadays, it’s uncertain what lies ahead for the Near Protocol. One thing is sure, though – the journey is still ongoing.
Lately, Near has shown a significant increase in activity, noticeable in the number of addresses and transactions. This is particularly noteworthy given the challenging circumstances in which this growth is happening. It’s evident that the Near team is putting in a lot of effort. Their blog about Near Protocol is a treasure trove of insights, updates, and announcements, surpassing many other cryptocurrency projects out there.
As we step into the last quarter of 2023, the next 6-12 months will be revealing. We’ll see if Near Protocol can sustain its impressive performance and attract more interest and liquidity to its DeFi ecosystem. It’s a crucial period that will shed light on the future path of Near.