The technical side of blockchains can be difficult to understand, but the NEAR Protocol ensures that users don’t have to. As Kriptokoin.com, what is the NEAR Protocol (NEAR)?
- NEAR Protocol is a Layer 1 network that implements sharg to scale processing throughput.
- The network tries to be accessibility and user-friendly by abstracting the technical aspect of Blockchains.
- NEAR is working on interoperability with existing Tier 1 networks via the Ethereum compatible Aurora Network.
NEAR Protocol is a scalable, Proof-of-Stake network focused on user availability. NEAR’s innovative sharg technology, unique transaction fee mechanism, and increased interoperability with other networks are helping the protocol grow rapidly.
What is NEAR Protocol (NEAR)?
NEAR Protocol is a fragmented Layer 1 Blockchain using Proof-of-Stake. Launched in April 2020, the network is the brainchild of former Google engineer Illia Polosukhin and Microsoft developer Alexander Skidanov. Although NEAR is a blockchain network in its current iteration, it began life as a machine learning (in ordinary people’s terms, teaching machines to code) project that explored program synthesis. Polosukhin and Skidanov’s research eventually led them to programmable smart contracts and crypto payment technology in early 2018.
The couple switched gears by August, outpacing program synthesis to create the full-time NEAR Protocol. Like many other Layer 1 Blockchains, NEAR’s technology aims to tackle the “Blockchain Trilemma”, the premise that it is difficult to create a scalable, decentralized and secure Blockchain without sacrificing any aspect.
NEAR Protocol’s approach to solving the Blockchain Trilemma is to implement a horizontal scaling feature called sharding. It works by dividing a blockchain node network into smaller segments known as shargs. Each piece consists of its own data and can be used to process transactions in concert with other pieces, increasing the overall throughput of the network. It claims that, thanks to its Shard technology, it can process up to 100,000 transactions per second, somewhat surpassing other competing smart contract platforms.
While Sharg is not NEAR Protocol specific (Ethereum plans to implement sharg upon completion of Ethereum 2.0), amik built on the concept by re-developing sharg. In NEAR, instead of the shard count being static, the network will regularly adjust the supported number based on user demand. By amicably adjusting the number of parts used, NEAR can reduce the average cost of network usage while maintaining high throughput potential.
What are the key features of NEAR Protocol?
The series of transaction fees in the NEAR Protocol can compete with other Proof-of-Stake networks as they are very low compared to Blockchains like Bitcoin and Ethereum. As a Proof-of-Stake network, NEAR does not consume large amounts of electricity to validate its network and is rated carbon neutral by the global climate solutions provider South Pole. Staking validators securing the network are paid in NEAR token rewards in proportion to their total stakes, much the same as Solana and Avalanche’s Delegated Proof-of-Stake systems.
The protocol generates new tokens at 5% of the total supply each year, most of which are awarded to validators. Security is protected by hacking, which is a penalty for inactivity, dishonest verifications, or other malicious behavior. However, NEAR differs from other PoS networks in that it does not penalize users who transfer their funds to a validator. If a validator is interrupted, users will only lose potential rewards instead of a portion of their transferred stake.
Additionally, to offset the 5% inflation from validator rewards, NEAR’s tokenomics also includes a fee-burning mechanism similar to Ethereum’s EIP-1559. In NEAR, 70% of all transaction fees are burned, meaning the network becomes disinflationary as usage increases. With an average of 1.5 billion transactions sent per day, the NEAR token will become deflationary and the token supply will decrease by 0.475% per year.
NEAR’s goals and its impact on the market
One of the main focuses of NEAR Protocol is to make the network as accessible and user-friendly as possible . This focus on user accessibility comes from when Polosukhin and Skidanov were working on program synthesis in 2017. In an interview with The Defiant in 2020, Polosukhin said:
“We really wanted to have a machine learning model where a normal person who doesn’t know programming can explain what they want and the computer can write codes for them. This is a very challenging task; works on many people.
With NEAR, the duo stay true to their initial vision of enclosing the complexities of technology. The NEAR whitepaper even states that “applications deployed on the platform should be built seamlessly for end users and seamlessly for developers.”
To achieve this, NEAR has made the wallet creation process much more intuitive and user-friendly than other networks. From the start, users create NEAR accounts with human-readable domain names without having to rely on third-party providers such as the Ethereum Name Service. Additionally, NEAR accounts handle each wallet’s private keys via two-factor authentication, keeping their own surveillance, but making the user experience less complex and more similar to what users are familiar with in Web2 applications.
A few more usability features come into play when interacting with apps in NEAR. A simple subscription interface allows users to manage the apps they allow, and the cost of using the network can be made more predictable by allowing app developers to pay fees on behalf of their users.
Another unique feature of NEAR is that smart contracts running on the network earn 30% of the fees paid for interacting with them. By deciding how these funds are allocated, the owner (or holders) of the contract can help decentralized autonomous organizations run more smoothly. The percentage of salaries allocated is a system-level parameter and can be adjusted by management votes, as is typical in decentralized organizations in the crypto space.
NEAR’s interoperability and project links
As other Layer 1 Blockchains demonstrate, interoperability is key to increasing user adoption. NEAR has increased integration with existing networks through Aurora Network, a protocol that offers compatibility with the Ethereum Virtual Machine. Users can directly bridge funds from NEAR Protocol, Ethereum and several other Tier 1 chains to Aurora using Allbridge or Rainbow Bridge.
While DeFi business on Aurora is still in its infancy, several projects are developing the infrastructure needed to bring more liquidity to the network. Trisolaris, Aurora’s main decentralized exchange, has raised a total of $412 million in kilidollars and supports the trading of many native Ethereum DeFi tokens such as Aave, Balancer, Compound and Sushi.
Additionally, a recent partnership between NEAR and Terra means users can now link Terra tokens like LUNA and UST to Aurora, creating more trading and yield farming opportunities across the network. Blockchain infrastructure projects like The Graph and MATH Wallet have also started making their way into Aurora, allowing more complex protocols to be built in the future.
Another project working to improve NEAR’s interoperability with other Blockchains is Octopus Network. It aims to create an interoperable network of app-specific blockchains, called appchains, that will be validated by Octopus Network smart contracts hosted on NEAR.
Octopus Network works in some ways similar to Polkadot and its parachain ecosystem. Octopus smart contracts create a relay over the NEAR Protocol, which validates all application chains created on the network. The network also consists of a network of validator nodes where application chains pay to secure their applications. However, on Octopus, pre-loading app chains is much cheaper than purchasing Polkadot’s parachain auctions. When the winners of Polkadot’s first parachain auctions received over $1 billion in DOT via kidollarse loans to secure their parachain slodollars, Octopus Network’s OCT token kicked off a chain-of-application cost of close to $2 million.
So will NEAR Protocol (NEAR) be successful?
Octopus Network is also designed to be compatible with other NEAR-based tokens and Inter-Blockchain Communication protocol, offering much more cross-chain possibilities with other Blockchains running on IBC compatibility such as Cosmos.
Because the NEAR network currently hosts only a few apps, some have labeled it a “ghost chain”. However, the recent growth of other alternative Tier 1 networks such as Solana, Avalanche, and Terra has shown that the market believes in a multi-chain future. The question is whether NEAR will succeed in establishing its own thriving DeFi ecosystem like the rising stars of 2021.
Solana and Avalanche saw rapid growth in 2021, in part because they offer generous rewards to attract builders to their networks, and NEAR has a similar strategy. In October, NEAR announced an $800 million fund to encourage developers to develop NEAR and its auxiliary networks Aurora and Octopus. When newly funded projects launch, the real test of whether NEAR Protocol can attract more liquidity and create network effects will begin.
Result: What is NEAR Protocol (NEAR)?
What is NEAR Protocol (NEAR) in this article? We sought an answer with you. This article has been written for informative purposes only. Therefore, no reference can be made to any of your investment decisions! Do not invest in NEAR Protocol and other cryptocurrencies without doing your own detailed research!