What Is Near Protocol? All You Need to Know About NEAR

What Is Near Protocol (NEAR)?

The growing interest in decentralized applications has brought to light some scalability problems for many blockchain protocols, which have tried to run for cover in different ways, even without having found a proper solution. And Near Protocol (NEAR) is an open-source platform that accelerates the development of decentralized applications.

The Near Protocol has been explicitly designed to solve the usability and scalability problems by focusing on developer and user-friendliness, with the aspiration to become the reference point for the creation of highly performing dApps.

NEAR Protocol was founded by Erik Trautman, Alexander Skidanov, and Illia Polosukhin. The project began to take shape in 2017/2018, when Polosukhin and Skidanov started to explore the field of machine learning and automating programs. Since then, they have worked on developing a platform that can offer developers an easy path to build decentralized applications that can scale to mass usage. Finally, the Near Protocol network was launched in April 2020, and became community-operated in September 2020.

As with the Ethereum Virtual Machine (EVM), NEAR is designed to host decentralized applications (dApps). One of its main features is to incorporate human-readable account names, unlike the cryptographic wallet addresses. In addition, it has the ability for new users to interact with smart contracts without a requirement to have a wallet. All of this should entice developers and users to help build one of the most usable and scalable smart contract platforms ever, capable of supporting an entire Web. The team behind Near Protocol has repeatedly been saying that it wants to solve the problem of scalability by building a particularly efficient mechanism for data processing, which would be able to guarantee a very high number of transactions per second.

One of the most efficient layer 1 protocols in the ecosystem

A layer-1 network stands for blockchain-based. Binance Smart Chain (BNB), Ethereum (ETH), Bitcoin (BTC), and Solana are all layer-1 protocols. We refer to them as layer-1 because these are the main networks within their ecosystem. When layer-1 networks started facing scalability challenges due to increased demand, they often faced increased gas prices and transaction costs. To solve this problem, they had to rely on the so-called ‘layer-2’, which is basically a secondary framework where blockchain transactions and processes can take place independently of the layer-1 (main chain).

Near protocol aims to solve the scalability challenge directly in its native protocol, without having to depend on some ‘external’ layer-2. The NEAR network has implemented a new approach to randomness in ensuring the security, communication, and dissemination of information, which is designed to allow unpredictability and unbias until at least 2/3 of bad actors.

How Does NEAR Protocol Work? Nightshade and Sharding

While other blockchains have adopted solutions built on layer 2 to try to solve the scalability problem, Near has decided to build an entirely new blockchain with different architecture.

The core of the operation of the NEAR protocol is the implementation of sharding, called Nightshade: this particular function allows the validator nodes to handle only a fraction of the network’s transactions, as the work of processing transactions is splitted across many validator nodes. As a result, nodes can process and validate transactions in parallel across multiple shards, making them work faster and thus, increasing the total scalability of the network. Participating nodes are only responsible for maintaining smaller sections of the chain, so it can be said that the network responsibility is ‘diversified’, which should make the whole network very secure.

To achieve consensus among the nodes in the network, Near uses an election mechanism called the Thresholded Proof of Stake (TPoS) to select validators. TPoS is similar to an auction, where any account can submit a special transaction that indicates how many tokens one wants to stake, in order to be considered for participation. Hence, validators are chosen every epoch (approximately every 12 hours), so that those who have larger stakes have more influence in the consensus process.

Near Protocol Features: Rainbow Bridge and Aurora

An important feature included in the Near Protocol operation is definitely the Rainbow Bridge: this application allows participants to easily transfer any Ethereum tokens back and forth between Ethereum and NEAR. When switching from one chain to another, the native tokens are blocked by a smart contract, and subsequently released into the receiving chain in the form of new tokens. The opposite process is also possible, by burning the token of the receiving chain and releasing it back into the sending chain. This function is very important, as it lets developers take advantage of the higher transmission speed and lower fees on the NEAR Protocol, compared to those of Ethereum.

Compatibility with the Ethereum ecosystem is also made possible thanks to Near Protocol’s layer-2 solution called Aurora. This application allows developers to launch their Ethereum decentralized applications on NEAR’s network. Simply put, Aurora is an Ethereum Virtual Machine (EVM) implemented as a smart contract on NEAR Protocol, as it was built using Ethereum’s coding technology. This makes it easier for developers to get started on NEAR without having to rewrite their DApps or learn how to work with new development tools. Aurora is capable of reaching transaction confirmation in as little as 2 seconds. This means that DeFi applications over NEAR Protocol are hundreds of times cheaper than using networks like Ethereum. The computation fees of the smart contracts must pay a ‘Gas’ using the NEAR token.

What Is the NEAR Token?

NEAR is the native token of the NEAR protocol. It is an ERC-20 token with a max supply of 1 billion. NEAR is primarily used to pay transaction fees, as collateral for storing data on the blockchain, and to reward several stakeholders and validators for their services, such as keeping the blockchain secure and participating in governance activities. A portion of the transaction fees that smart contracts generate are given to developers, while the remainder is burned. This mechanism increases the scarcity of the NEAR token, which would make it a deflationary token whose value would be encouraged to increase over time. In addition, the Near Foundation established a protocol treasury, which receives 10% of epoch rewards, for the purpose to continue sponsoring protocol and ecosystem development. For many users, this choice is quite debatable, as it goes against the principles of decentralization.

Near Protocol Ecosystem

Near Protocol already has an expansive DApp ecosystem, due to its easy interoperability with other chains and its simplicity of use. Below are some of the most popular projects currently built on NEAR.

• Ref Finance: A community-led, multi-purpose DeFi platform. It includes a decentralized exchange (DEX), where users can access various features, such as liquidity providing, yield farming, and staking.
• Burrow: A decentralized, non-custodial, pool-based interest rates platform that enables users to supply assets to earn interest, and to borrow against them to unlock liquidity. Due to its characteristics, it is similar to the famous Aave protocol.
• Mintbase: A global platform that allows anyone to create NFTs without worrying about technical complexities. The platform also supports split revenues and royalties and only charges a 2.5% commission on each sale.

Is Near Protocol a Good Investment?

Near Protocol is truly demonstrating efficiency and scalability, and the number of unique accounts on its network is constantly growing (at the moment, there are over 16 million accounts). In addition, the project has managed to raise significant investments from venture capitalists over time (more than $ 500M), including Circle, Alameda Research, and FTX. These funds should be sufficient to help the team continue the development of the ecosystem, and to survive any eventual ‘crypto winter’ if needed. The goal of Near Protocol is to ‘win over’ Ethereum users and to become a point of reference for dApps developers, as well as for anyone who wants to deal with a protocol that is user-friendly, scalable, and not expensive to use. The future certainly looks bright. However, with the crypto sector, as volatile and uncertain as it is, a lot remains to be seen in terms of whether the NEAR technology holds up when demand grows and whether crypto becomes mainstream as a sector. Anyhow, everyone should do their own research before investing their money in a project.

How to Own NEAR?

One way to own NEAR is to go through a centralized crypto exchange, so the first step is to create a Gate.io account and complete the KYC process. Once you have added funds to your account, check out the steps to buy NEAR on the spot or derivatives market.

News on NEAR Protocol

On August 22nd, 2022, there was an important event regarding the NEAR project: Aurora Lab blocked two potential cross-bridge hacks perpetrated against Rainbow Bridge. According to Alex Shevchenko, CEO of Aurora Labs, the hackers have presented a falsified NEAR block to the Rainbow Bridge contract and submitted the required 5 ETH safe deposit. Unfortunately for them, the Rainbow Bridge validator reduced the threat in just 31 seconds, causing them to lose $ 8,000. On the other hand, this is excellent news for the entire crypto ecosystem, as it demonstrates that not all hackers can run away with millions in their exploit attempts. The security measures of blockchain protocols are being strengthened every year, and in the future it will be increasingly difficult to carry out substantial attacks.

Useful References

For the latest updates about the Near Protocol, you can visit:

• The official website
• Twitter
• Discord
• GitHub
• Telegram
• Reddit

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