NEAR Protocol (NEAR): project overview and 2022 perspectives

NEAR Protocol is relatively young, but at the same time, one of the most promising crypto projects, which has already managed to attract hundreds of millions of investments from the largest venture capital firms.

As of March 2022, NEAR entered the top 25 largest cryptocurrencies, with a market capitalisation of over $6.5 billion, according to CoinMarketCap

What is NEAR Protocol

NEAR Protocol is a secure open-source blockchain designed to ensure the fast and easy development of decentralised applications (dApps).

The platform was launched in 2020 by former Google engineer, Ilya Polosukhin, and Microsoft developer, Alexander Skidanov. NEAR Protocol immediately attracted a great deal of attention from the community and large investors and was highly appreciated by Vitalik Buterin. The Ethereum CEO and co-founder admitted that NEAR developers have already managed to implement ideas that are planned to be introduced with Ethereum 2.0.

NEAR is incredibly fast, cheap, and extremely easy to use compared to other blockchains. The project’s creators claim that any developer can launch their first application on the NEAR Protocol blockchain in just five minutes. The platform is also a great option even for those who are almost new to the blockchain because you can access NEAR applications by going through the usual registration process. Also, Near can achieve transaction speeds that are comparable to those of fiat payment systems. The average time to generate a NEAR block is about a second, while transaction fees are 10,000 times cheaper than those on Ethereum.

How the NEAR Protocol blockchain works

NEAR Protocol runs on the Delegated Proof-of-Stake consensus algorithm, as well as uses a sharding approach, which allows the network to increase its capacity and efficiency.

In November 2021, the NEAR team released the innovative Simple Nightshade solution, which is the first of several steps toward a fully-sharded blockchain.

After its launch, the blockchain was divided into four data segments called shards. However, all shards still remain a part of a single blockchain, and every shard is still validated by all validators, which significantly distinguishes Simple Nightshade from other sharding solutions such as Polkadot.

At the same time, only a snapshot of each shard’s current state is uploaded to the blockchain via Simple Nightshade. Each segment or shard has its own set of validator nodes that broadcast the status of the shard whenever a block is generated.

Thanks to the Nightshade mechanism, the NEAR Protocol blockchain can process around 100,000 transactions per second (TPS). For comparison: Ethereum’s transaction throughput is limited to about 15 TPS and bitcoin can handle only 5-7 TPS. NEAR’s closest competitor, Solana, boasts a theoretical peak capacity of 65,000 transactions per second.

Despite such high throughput advantages of NEAR Protocol, the project’s team has already developed a mechanism for further sharding rollout to make the network even more scalable. The mechanism includes four phases, which are expected to go live by the end of 2022. The last phase involves the creation of dynamic segmentation, where the network itself will dynamically adjust the number of shards based on network load.

PoS consensus mechanism and network security

NEAR Protocol is not only scalable and easy to maintain but also highly secure. The Delegated Proof-of-Stake algorithm used by the NEAR blockchain helps correctly distribute transactions between validators, thereby reducing hacker attacks to zero. Hacks become unprofitable and difficult to implement.

Responsibilities in the NEAR ecosystem are divided between the following three types of validators:

• chunk producers who collect transactions in their shards;
• block producers who create new blocks; and,
• fishermen who check the accuracy of states in blocks.

Another important component of NEAR Protocol is a mechanism called Doomslug. It allows validator nodes to take turns generating blocks based on the number of NEAR tokens they staked. This happens every “epoch” and lasts for 12 hours.

Usually, most validators receive a reward for contributing to network security in NEAR tokens – the native token of Near Protocol. However, the project team has recently released a new stake farming mechanism that allows validators to earn rewards in several other fungible tokens. Stake farming aims to increase the decentralisation of the network, ​​incentivise its usage, as well as allow validators to attract more delegates.

NEAR tokenomics

The NEAR token can truly be considered the lifeblood of the NEAR Protocol network! In addition to staking, the token is used for paying transaction and data storage fees, as well as to vote for governance proposals.

Network fees depend on the complexity of operations, but unlike many other projects, NEAR Protocol boasts minimal fees. In addition, 70% of all transaction fees are burned, while the other 30% are paid out to smart contract developers. Such a mechanism provides that the NEAR token can become deflationary. However, this requires the network to process a billion transactions per day, while it currently handles only around one million daily.

The initial supply of NEAR is one billion tokens. 12% of the initial supply was sold during the NEAR ICO, which took place in August 2020. ​​Nearly 18% more were sold in seven closed funding rounds.

The remaining coins are allocated to develop the NEAR ecosystem and implement community programs. A large part also goes to the NEAR and NEAR Foundation teams. In addition, 5% of new NEAR tokens are issued each year, of which 90% goes to validators and 10% to the protocol treasury.

The development of the ecosystem and the growth of NEAR price were also positively affected by the deployment of the NEAR token on the Ethereum network, as well as the launch of the NEAR cross-chain solution with Ethereum in April 2021.

The “bridge” allows the movement of ERC-20 tokens and NFTs between the NEAR and the Ethereum networks, as well as interact with smart contracts and dApps on both networks.

NEAR price

In 2020, the average NEAR price was below $2,but in 2021, it grew by 950%, reaching a high of $16.32. Already in January 2022, the coin hit an all-time high, exceeding the $20 mark following the news about the launch of the $800 million ecosystem growth fund.

As of 15th February 2022, there were 653.6 million NEAR tokens in circulation, which represents 65.37% of the total coin supply, according to Cryptorank.

An increasing number of cryptocurrency platforms are listing NEAR. In 2022, the NEAR token was also listed on EXMO.

You can see the current NEAR/USDT rate on the interactive chart.

How to buy NEAR

You can buy NEAR with fiat money or other cryptocurrencies on various crypto exchanges. On the EXMO platform, NEAR is traded in pairs with BTC, USD and USDT:

• NEAR/BTC
• NEAR/USD
• NEAR/USDT

NEAR prospects: predictions for 2022

NEAR Protocol is considered one of the most promising blockchain projects for a good reason. In just one year, the number of daily transactions on the NEAR Protocol network increased by almost thirty times, hitting 100 million total transactions in March 2022, and the total number of addresses on the blockchain grew by a record 86%.

As of early January 2022, NEAR ranked sixth in terms of average daily developer activity on Github over the past 30 days, according to CryptoDiffer.

In January 2022, NEAR Protocol raised $150 in its latest funding round from high-profile industry investors such as Dragonfly Capital and Three Arrows Capital. The NEAR Protocol team has also struck dozens of partnerships with major blockchain projects, including Chainlink, Balancer, Ledger, TrustWallet, Ardana, and many more.

However, the project still remains somewhat undervalued, especially when it comes to the NFT and DeFi industries. But given all the advantages of the blockchain, NEAR is very likely to attract large-scale players in the near future.

Paul Veradittakit, a partner at Pantera Capital, is convinced that NEAR will continue to grow this year. Many are already calling NEAR the next “Ethereum killer”. Well, even if the project does not become the killer of the world’s second-largest cryptocurrency, NEAR Protocol does have a chance to take away a significant part of Ethereum’s market share.