The cryptocurrency industry is still in an active growth stage and is far from full adoption — currently there are still obstacles that hinder mass adoption, from a difficult user experience, the complexities of blockchain, and other things that are not easily understood by every ordinary user. For example, if someone wants to use a decentralized application based on Ethereum, they need at least a basic understanding of smart contracts and blockchain and to have enough funds (given the rapid growth of commissions in the network lately). The NEAR Protocol project, which has grabbed quite a noticeable share of the crypto market players’ attention, should solve all these problems.
What is NEAR?
NEAR is based on the Delegated Proof-of-Stake (DPoS) consensus algorithm, which is now one of the alternatives to Proof-of-Work (PoW) and Proof-of-Stake (PoS) algorithms. As of now, the platform can process over 1000 transactions per second benchmarked on a single shard for token transfers (contract ops are slower). MainNet is currently single-sharded. In 2021 the NEAR team is planning to release a sharded MainNet with 8 shards which will bring the project closer to 10,000 TPS threshold. NEAR network has 1000x times lower transaction fees when compared to Ethereum. Developers earn 30% of transaction fees, which represents a new and exciting monetization vector for them. In this context, the project has a significant advantage.
Essentially, the NEAR blockchain platform is an infrastructure layer, conceptually similar to many other similar platforms, such as the well-known Ethereum. Developers deploy decentralized applications with other operational activities on the platform, such as creating an account or executing a transaction managed by the network nodes.
How does NEAR Protocol blockchain work?
NEAR Protocol implements sharding, but its approach here is slightly different from similar blockchain solutions such as Polkadot. Within the NEAR platform, all shards are treated as part of the same blockchain. This is all thanks to a mechanism called Nightshade. With Nightshade, only a snapshot of the current state of each shard is added to the blockchain. Each shard is supported by its own set of validator nodes, which broadcast the state of its shard every time a block is created. In other words, the operation of shards can be thought of as an intersection. The intersection itself is a NEAR blockchain, and each road is a segment. Moreover, shards on NEAR can run in parallel because the transactions do not overlap. This greatly improves the efficiency of the platform as a whole.
Another important component of NEAR Protocol is a mechanism called Doomslug. It allows validator nodes to take turns generating blocks. This happens every “epoch” and lasts for 12 hours. At the same time, it takes about a second to generate each new block. The block reward is provided through inflation, which is currently at about 5% per year. 90% of each block reward goes to pools of validators and delegates, and the remaining 10% goes to NEAR, which is currently managed by the NEAR Foundation.
If you are new to the blockchain and cryptocurrencies learn more about NEAR Protocol core principles here: https://near.org/blog/the-beginners-guide-to-the-near-blockchain.
The NEAR Protocol ecosystem uses its own NEAR token. It is designed to be staked by validators and blockchain delegators. The block reward results in 5% annual inflation; however, NEAR tokens are burned to pay commissions. As mentioned above, NEAR transaction fees are incredibly low, and with sufficient network activity, the NEAR token turns into a deflationary asset. Annual inflation converts to 0 if the network processes more than a billion transactions per day and can even become negative if more than 2 billion transactions are processed on a daily basis.
If you want to become a NEAR Protocol validator, you will need to stake NEAR tokens. The exact amount depends on how many tokens are contributed by other validators in the shard. All of this also determines your share of block rewards, which are paid out each epoch (12 hours).
Each shard in NEAR contains 100 seats, and you must have at least one seat to be a validator. The cost of each seat is determined by the total NEAR stake amount (for example, take the total amount in this shard and divide it by 100, that would be the cost of the seat). Validators and delegates can opt-out of staking at any time. This principle is intended to encourage validator nodes to protect new or “smaller” shards where the entry barrier is lower. If you don’t have the capital to buy enough NEAR tokens to get a seat, you can convince delegates to trust you with their tokens. Delegates use staking pools to do this and get a portion of the block reward from validators. Learn more about NEAR Protocol economics here: https://near.org/blog/near-protocol-economics.
NEAR Protocol ecosystem projects
In more than two years of its existence, NEAR Protocol has managed to get a lot of attention both inside and outside of the cryptocurrency industry. The NEAR ecosystem has experienced rapid growth during this time, and many other interesting projects have joined it. Let’s take a look at the most notable elements of the ecosystem.
Flux creates the simplest protocol for developers launching markets literally on everything (any asset, commodity, real-world event, or anything else that can be imagined). Part of that mission is to create an innovative, simple and adaptable open source application for open markets. The Flux open source application is built on top of the NEAR Wallet. NEAR Wallet is a non-custodial wallet in the form of a browser extension that supports account names for addresses, providing a more convenient and familiar interface for web2 users.
Mintbase is an Amazon-like marketplace. It allows any user, including those with no technical expertise, to create their own unique digital assets and distribute them through their smart contract.
The problem is that after a surge in the popularity of decentralized finance, the Ethereum blockchain has become very expensive to use. Sometimes the average fees for interacting with smart contracts reach double digits. These shortcomings forced the Mintbase team to look for an alternative platform and find NEAR Protocol.
MoonPay is a company that creates a payment infrastructure for cryptocurrencies. The platform’s team aims to provide a seamless conversion process between fiat currencies and cryptocurrencies using all major payment methods, including debit and credit cards, local bank transfers, Apple Pay, Google Pay, and Samsung Pay.
MoonPay operates in more than 160 countries and is trusted by more than 250 leading wallets, websites, and apps.
Ontology’s blockchain was created to meet the needs of enterprise customers, that is, those who demand privacy and do not want to “share their data’’ in a private blockchain. Ontology operates on a Blockchain-as-a-Service (BaaS) model.
Ontology strives to provide enterprise customers with an easy way to benefit from blockchain’s decentralized and distributed nature. This includes identity management, smart contracts, decentralized data exchange, and the ability to create their own digital assets and applications that can be hosted on Ontology’s dApp platform.
TrustToken is a platform created in early 2018 to spread the adoption of tokenized assets. The project’s first stablecoin and a flagship token is TrueUSD (TUSD), which is an asset backed by the U.S. dollar, meaning it maintains a 1:1 ratio with the currency.
Recently, the NEAR Protocol team started working with the creators of TUSD to integrate the stablecoin into their platform. This collaboration will allow TUSD users to transfer coins with much lower fees and confirmation time. TUSD should become a cornerstone in the development of the NEAR ecosystem, which will find wide application in NFT, blockchain games, predictive markets and so on.
NEAR Protocol is one of the most promising blockchain projects. It solves the same infrastructure problems as Ethereum 2.0 and Polkadot, such as securing decentralization while increasing bandwidth through sharding.
However, NEAR Protocol is made with a more “friendly” attitude towards developers and ordinary users. In this respect, it represents a serious competitor to the second-largest cryptocurrency in terms of market capitalization. With solid financial backing, NEAR Protocol only needs to ensure that the project itself sells well enough to gain recognition in the established competition. If it can excel in that, there is a good chance to outperform the rivals. Find out more about NEAR token price predictions here: https://medium.com/near-ecosystem/near-price-predictions-5a2240f80a3c.