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NEAR
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Strengths and Weaknesses
Strengths
- Sharding – Nightshade allows up to 100 thousand transactions/s
- Cheap gas – despite high network load, transaction fees remain low
- Developer support – 30 % of fees go to smart contract developers
- Block speed – it takes 1-2 seconds to complete one block
- Validator replacement – validators are replaced every 12 hours in order to maintain the network
Weaknesses
- Weak marketing – the NEAR Protocol is not well marketed in the media
- Getting coins back from staking takes a long time – the waiting period for canceling staking (removing your $NEAR coins) is up to 72 hour
Basic Information
The NEAR blockchain is an independent blockchain based on a Proof-of-Stake (PoS) consensus.
It was conceived as a platform for community-based "cloud computing".
Its block generation scheme is called Doomslug, and its proposed sharding is called Nightshade.
A major goal of the NEAR blockchain is to create a platform that is both developer and user-friendly. Due to this, NEAR has incorporated features such as optional account names instead of traditional wallet addresses, e.g. ‘Charlie.near’.
The main unit of payment is $NEAR, in which transaction fees are paid.
Introduction video.
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Functioning of the Chain
NEAR provides cloud infrastructure for dApps and smart contracts. It combines decentralized database functionality with other serverless computing platforms. Together, these features allow developers to create censorship-resistant "back-ends" for applications that handle highly critical data (assets, identity) and open-state type components that work seamlessly together. These application "back-ends" and components are called smart contracts.
The infrastructure of this cloud is made up of a potentially infinite number of nodes. It is operated by individuals and organizations all over the world who contribute their hard disk space and CPU power to these networks. Smart contracts are then incorporated in this cloud.
In a centralized cloud, decisions are made unilaterally by the company that owns the cloud. The NEAR community cloud is decentralized. Hence, updates must be accepted by a sufficient number of network participants. An inclusive governance process balances the efficiency and security of these updates, which are designed by the community.
The node validators (anonymous, potentially dangerous) insert their $NEAR coins into the protocol in order to ensure that the code is executed correctly. Nevertheless, if fraudulent behavior is proven, some of their coins will be confiscated.
Sharding:
The core of the NEAR code is sharding. In the days prior to the popularity of blockchains, sharding was commonly used to optimize the operation of computer networks. As a result of sharding, the blockchain is divided into parts (shards), each of which can handle only a proportion of the total network load.
Through its unique Nightshade solution, introduced in November 2021 under the name Simple Nightshade, NEAR has improved the concept of sharding. As a result, the NEAR blockchain can be scaled infinitely. Due to this change, validators are no longer required to process all incoming transactions, but only those within shards.
Consequently, it is possible to have low transaction fees and fast transactions at the same time. Furthermore, NEAR Nightshade is unique for the following reasons:
- blockchains are distributed as single-state
- the NEAR blockchain accepts transactions from different shards at the same time
- if a block is updated, the downstream shard is updated as well
- when it comes to the physical transfer of information, the NEAR blockchain validators are not required to download all the data from a block for validation, only the relevant pieces of the shards.
Fees:
NEAR is unique in that the gas fee is not used for the payment of validators. Here is a breakdown of the transaction fee:
- 30 % gets the smart contract
- 70 % is burned
In this way, NEAR also facilitates the development of dApps within its ecosystem.
Transaction fees are paid in the $NEAR coin, but they are not counted in it. Due to the low cost of gas converted into $NEAR, the Tgas unit is used. Every block, it is recalculated based on its usage. The price increases if the previous block is more than half full. If it is the opposite the price falls.
Fees are expressed in Tgas (Teragas).
1 Tgas (10¹² gas units) ≈ 1 millisecond of computing“ time. This represents 0.1 milliNEAR (mN).
The maximum number of gas units for a transaction is 300 Tgas.
Tgas – fee-determining unit
mN – miliNEAR
NEAR – price in $NEAR
There is no DAO platform that handles the distribution of the NEAR coin. It is the responsibility of the NEAR Foundation (a non-profit organization based in Geneva) to maintain and manage the protocol and fund the ecosystem. NEAR Foundation's detailed description.
Development History
NEAR was originally a machine learning project. Later, it became a platform for developing blockchain applications. Its founders are Illia Polosukhin and Alexander Skidanov. In the past, Illia Polosukhin worked at Google and Alexander was a principal engineer at MemSQL (now SingleStore). They founded NEAR in 2017. The name is taken from the science fiction novel The Singularity Is Near.
During the turn of 2017 / 2018, they began researching programmable smart contracts and crypto payment platforms. After researching different blockchain protocols, they realized that the current state of the technology was not suitable for their needs. Therefore, they began the process of designing their own blockchain. The company's vision was to provide developers with an easy way to create dApps. For this purpose, they adopted the PoS consensus mechanism. In August 2018, they assembled a team of engineers and formally started developing the NEAR protocol.
NEAR combines a horizontal scaling approach with a novel consensus mechanism. It divides the network into parallel shards and dynamically distributes computation to increase its processing capacity. The network was launched in April 2020.
In September 2020, it began operating as a community and in October of that year, it passed a vote to enable token / coin transfers. The Ethereum and NEAR blockchains were bridged in March 2021 in order to make asset transfers easier. This bridge is called the Rainbow Bridge.
The NEAR Protocol raised 50 million USD during its first four months (prior to its launch). Initially, only Alexander Skidanov and Illia Polosukhin were members of the team. Within a few days of the launch, the team had grown to ten members. The NEAR Protocol team is now known as the NEAR Collective and employs over 80 individuals.
Team
Illia Polosukhin has a master's degree in applied mathematics and computer science. He studied at the Kharkiv Polytechnic Institute of the National Technical University. He joined Salford Systems as a software developer in 2008. In 2014, he joined Google as a technical manager. In June 2017, he became a co-founder of NEAR Protocol.
Alexander Skidanov has a master's degree in computer science. He studied at Izhevsk State Technical University. He started his career as a software developer at Microsoft and then moved to MemSQL (SingleStore) for five years as Senior Software Developer and Director of Engineering. In June 2017, he became a co-founder of NEAR Protocol.
Governance
The NEAR blockchain uses the $NEAR coin as its main coin.
Use cases include:
- payment for transactions
- rewarding validators
Revenue & Tokenomics
The $NEAR coin was launched on October 13, 2020. The total supply is 1 billion coins.
There are currently 831 761 527 $NEAR in circulation. The maximum amount of coins will be reached in December 2025.
In 2020, the initial distribution of $NEAR looked as follows:
17.20 % was allocated to community grants and programs
14.00 % was allocated to lead developers
12.00 % was allocated to community sales
11.70 % was allocated to the early ecosystem
11.40 % was allocated to operating grants
10.00 % was allocated to the Foundation
17.60 % was allocated to investors
6.10 % was allocated to small investors
$NEAR issuance and inflation
It is necessary for the NEAR Protocol to issue coins in order to pay for validators. There are approximately 5 % of the total supply that is fixed every year, of which 90 % goes to the validators who are responsible for managing the network.
Nearly all transaction fees collected on the network are burned. Therefore, the $NEAR issue is actually 5 % minus transaction fees. This means that, as network usage increases, issuance may become negative and $NEAR may become deflationary. Since the yoctoNEAR (yNEAR) is the smallest unit of account for $NEAR, the system can maintain the price differentiation on the exchange even when the total supply is reduced by two to three orders of magnitude.
Expected inflation per day for different volumes of transactions (TX).
The smallest unit of $NEAR is yoctoNEAR (yNEAR) = 10-24 $NEAR
The Uniqueness of the Chain
NEAR focuses on solving two fundamental problems of today's blockchains - usability and scalability.
In order to be user-friendly, a progressive security model for wallet interactions is provided, as well as more opportunities for developers. Those are provided by programmable key management, implemented at the protocol level. As a result, it is easy to implement meta transactions, atomic account transfers, or accounts that have assets that are locked for specific uses, and other programming applications.
NEAR ensures developer usability by configuring the protocol to provide browser-based debugging, familiar programming languages (such as AssemblyScript and Rust), and smart contract rewards.
A scalability is achieved by dividing it into a potentially unlimited number of chains, which operate simultaneously.
At Nearcon 2022, founder Illia Polosukhin declared large-scale adoption of the NEAR blockchain by 2025, and his estimate is 5 billion users. Given that NEAR has 22 million active users today, this is highly ambitious. NEAR was designed for mass adoption and is striving towards that goal with determination.
How the Network is Secured
NEAR blockchain validators are responsible for two main tasks. First, transactions must be validated, executed, and written to the blocks. Second, the validator must supervise other validators and ensure that no invalid blocks are made.
To keep track of other validators, NEAR uses so-called ‘hidden’ validators, referencing a small group of validators for each shard (about 100) that validates each block. The supervision is conducted in parallel outside of the main blockchain. In order to resolve their assignments, validators compute a set of shard IDs from the Verifiable Random Function.
In this way, each validator will know which shards it must validate. To inflict damage and take over the network, an attacker would have to invalidate all of these shards and expose hidden validators.
In addition, the number of hidden validators assigned to a particular block is also determined randomly. In this manner, an attacker is prevented from knowing exactly how many hidden validators he must reveal in order to succeed in his attack. In this way, it is possible to prevent attacks in which the attacker creates invalid blocks and waits for hidden validators to arrive (to reveal which shards they validate).
Due to the nature of validation, any hidden validator can provide proof that a block is invalid, known as "fraud proof".
A selection of hidden validators is made from the total set of stacked nodes once every epoch (once every 12 hours).
Nodes
NEAR blockchain validator:
NEAR validators are responsible for creating blocks and ensuring the security of the network.
As these validators verify all shards, they must meet a number of high requirements:
To become a NEAR validator, you will need sufficient hardware and a minimum of 67 000 $NEAR.
Chunk-Only Validator:
This is a more accessible role that requires less hardware and fewer staked coins. This role will allow NEAR to increase the number of validators on its network, which will lead to more opportunities for earning rewards and ensuring the network's security.
Chunk-Only validators are responsible for producing chunks (parts of a block) within a single shard (section of the network).
Chunk-Only validators only need to validate one shard, which means the nodes can run on hardware with lower requirements:
Validator rewards:
The validators as a group receive a fixed 90 % of approximately 5 % of the total annual supply of $NEAR (the remaining 10 % is allocated to the Treasury log). Validators will, for example, receive approximately 45 000 000 $NEAR in the first year. Validators receive rewards each epoch (every 12 hours), resulting in an average reward of 61 640 $NEAR per epoch.
Based on each validator's contribution to the operation of the blockchain, each validator receives a reward in $NEAR coins. After each epoch, the validators will be evaluated based on their share of confirmed blocks and chunks.
If the validator's activity falls below 90 %, it is deemed offline / unstable, will not receive rewards, and will be removed from the validation process for the upcoming epochs. Those with online activity of 90 % or more will receive rewards that increase linearly over time. 100 % rewards will be given to those with an online activity of 99 % or higher.
Returns for different stake amounts and number of transactions per day on an annual basis.
Delegator:
Delegators are crypto asset holders who are unable or unwilling to run a node (be a validator) themselves. Instead, they secure the network by delegating their assets to a validator (staking). The NEAR Protocol allows delegation through smart contracts.
How to become a delegator:
1.All you need to delegate is a NEAR wallet and $NEAR.
2.Go to wallet.near.org and create an account.
3.Go to the 'Staking' tab and select a validator to delegate your coins.
Here is a simple guide to the staking service.
This page may be used to calculate the rewards of a validator or delegator over a specified period of time.
Road Map
The newly released roadmap is an updated plan for the NEAR protocol that outlines the next two years of development. It consists of two main components: Experience and Core.
- EXPERIENCE section focuses on improving the user and developer experience, such as the use of applications built on top of the NEAR protocol without the need to register an account if we have meta transactions and support for Secp256r1 keys.
- The CORE part focuses on improving the scalability and decentralization of the protocol.
In 2023, the second phase of sharding is planned to be launched, which will expand the network to 100 shards
- Metatransactions: enable transaction fees to be paid to users of NEAR apps, meaning users do not need to hold NEAR coins beforehand
- Zero balance account: new users will be able to create a wallet and account without having NEAR in advance
- Secp256r1 keys: this support will allow iPhone users to create accounts without using the NEAR wallet
- Global storage: enables the use of already deployed smart contracts without having to repeat the payment of storage costs for each new deployment
- Wasm-in-wasm execution: enables native NEAR smart contracts to respond synchronously to each other by dynamically loading and executing another smart contract within the execution of a smart contract. This approach is based on Aurora development
Ecosystem
NEAR is not well known among users due to poor marketing, which is why it does not perform well in terms of TVL in its DeFi world.
The biggest projects on the NEAR blockchain:
- Ref Finance – DEX
- Burrow – Lending
- Meta Pool – Liquidity staking
NEAR DeFi World has 11 projects (Dec, 2022).
NEAR provides grants to newly emerging projects, for which a fraction of the coins from the first distribution in 2020 are reserved.
NEAR also has a second layer (L2). It is Aurora blockchain, which is designed to allow Ethereum developers to run their dApps on the NEAR blockchain.
Aurora is both an EVM and a cross-chain bridge that enables developers to seamlessly connect Ethereum smart contracts and assets.
With the Aurora chain, developers can take advantage of NEAR's low fees and high speed with applications based on Ethereum.
In April 2022, NEAR Protocol launched its own stablecoin, $USN.
It was a native stablecoin of NEAR, soft-pegged to the USD and backed by a reserve fund that included $NEAR and initially also $USDT. The $USN was managed by the Decentral Bank DAO (DCB).
Unfortunately, the peg of $USN to USD has been lost due to market uncertainty in October 2022. As $UST once did on the TerraClassic blockchain. The DCB was able to resolve this situation without any loss to users. They stopped issuing new $USN and requested 40 million USD from the NEAR Foundation to redeem all $USN in circulation. DCB apologized to the NEAR community for the situation.
Community
Overall, the NEAR community is small compared to other communities, but it is quite active on Discord. Many members of the core team are always available online, answering your questions as quickly as they can and working to resolve them. Despite its size, the NEAR blockchain is not hindered by the size of the community. There are a number of young, talented individuals involved in the project who are willing to break boundaries and push forward. Regardless of the market situation, this is what the NEAR chain is doing.
The YouTube channel is well-designed and clearly presented and contains introductory videos on the NEAR ecosystem. It is regularly updated with videos that provide the latest news.
Supported Wallets
Ledger Nano X – one of the most popular hardware wallets (HW) on the market. Your cryptocurrencies are more secure when you pair HW with your software wallet (SW).
NEAR Wallet – NEAR blockchain's official SW wallet
Analyst Opinion
There are claims that the NEAR Protocol will kill the Ethereum blockchain. On paper, the Ethereum chain is similar to the NEAR chain after Ethereum switched to PoS, however in practice the two chains are very different. While NEAR's sharding has been almost solved, Ethereum is pushing hard to implement it. The Nightshade concept is very exciting, and we look forward to seeing how it works in practice. If NEAR remains nimble and inexpensive despite heavy loads, it will be good news that their proposed system is working (theory on paper does not always equate to reality). My favorite aspect of the NEAR Protocol is its user-friendly interface. As an example, naming an address in such a way that you do not have to remember long sets of numbers and letters is an advantage that will allow wider adoption. My major concern is the low level of awareness of the NEAR blockchain within the crypto community. A smart young mind like Illia and Alexander has a clear understanding of how their protocol should function. Unfortunately, they are not gifted in the area of marketing, and all members of the NEAR Foundation are aware of this. Let's hope they fix this for the next Bull Run. Generally, the NEAR Protocol is very easy to use and fast. I wonder why more people don't know about it. Ultimately, if you have a good product, people will talk about it.
The DCB and their $USN which was discontinued by the developers after the market evaluation without any loss on the users’ side is proof that the NEAR ecosystem has responsible developers working on the expansion and usefulness of the entire platform.
Ondřej Tittl
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