Introduction
The NEAR Protocol is a revolutionary blockchain-based platform that is designed to provide a highly scalable, secure, and user-friendly infrastructure for decentralized applications (dApps). It enables users to quickly and easily build, store, and manage applications and digital assets on a distributed ledger. Additionally, the NEAR Protocol enables users to securely and quickly exchange digital assets and transact with each other, with fees far lower than those of traditional financial networks. The NEAR Protocol also makes use of a unique consensus mechanism called Nightshade, which allows for fast, secure, and low-cost transactions and helps to protect user privacy. With its combination of scalability, security, and user-friendliness, the NEAR Protocol is setting a new standard for blockchain and cryptocurrency technology.
09/12/2022
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- NEAR Protocol is an open source, high throughput smart contract platform for building decentralized applications.
- One of the main features of the NEAR network is sharding, that is, the ability to divide the blockchain into separate segments. The corresponding update was introduced in the fall of 2021.
- The native cryptocurrency of the project is traded under the ticker NEAR. Its main functions are online transactions and staking. NEAR holders can delegate their coins to validators.
- Several hundred protocols and decentralized applications operate in the NEAR ecosystem. The largest of them are Aurora, Ref Finance and Burrow.
Who created the NEAR Protocol
NEAR Protocol was created by programmers Alexander Skidanov and Ilya Polosukhin. Work on the project began at the end of 2018. Subsequently, developers from leading IT companies, including Facebook, Google and Niantic, joined the NEAR team. Two members of the team have won the World Programming Championship twice.
During the ICO NEAR, which took place in August 2020 on the platform CoinListsold 120 million NEAR coins (12% of the initial supply of 1 billion tokens) at a price of $0.3.
The remaining tokens from the initial supply will be distributed as follows:
- 17% for grants and community programs;
- 14% to the NEAR team;
- 17.6% of the tokens were sold during seven closed rounds of raising funds for $35 million;
- 11.7% – to finance the implementation of ecosystem development initiatives;
- 10% for NEAR Foundationwhich delegates its stake to validators in the NEAR network.
Tokens of all the above categories were blocked for a period of three months to five years.
The launch of the NEAR Protocol mainnet took place on October 13, 2020.
History of the development of the NEAR ecosystem
In the spring of 2021, developers launched one of the most important components of the NEAR ecosystem – a cross-chain bridge rainbow bridgewhich provides interoperability with Ethereum and allows you to transfer crypto assets of the ERC-20 standard to the NEAR Protocol and vice versa.
Shortly thereafter, a second-layer solution called Aurora was introduced, which allows the execution of Ethereum Virtual Machine (EVM) smart contracts on the NEAR Protocol network.
Starting from 2021, every autumn a conference takes place in Portugal NEARCONdedicated to the ecosystem. In October 2021, it announced the creation of a fund in the amount of $800 million to finance developers and projects on the NEAR Protocol blockchain.
In the spring of 2022, the NEAR team managed to raise investments in the amount of $350 million from several venture capital funds, including Tiger Global, FTX Ventures, Dragonfly Capital and others. Shortly thereafter, ConsenSys announced a partnership between NEAR and infrastructure solutions provider Infura.
In the summer of 2022, BitGo, one of the largest providers of custodial services for institutional investors, became a NEAR partner.
In mid-September 2022, the NEAR Foundation announced the launch of a $100 million fund to develop the Web3 direction.
How the NEAR protocol works
The NEAR protocol is based on the Proof-of-Stake consensus algorithm and uses sharding technology to optimize performance – dividing the blockchain into small segments (shards) that can perform operations in parallel. Unlike other cryptocurrencies such as Polkadot, all shards in NEAR are treated as part of the same blockchain.
The integrity of the blockchain is provided by the mechanism nightshade, thanks to which only a snapshot of the current state of each shard is added to the block in the NEAR Protocol. Each shard maintains its own set of validator nodes that relay the state of their shard whenever a block is produced. The Nightshade update was activated in NEAR Protocol in November 2021.
You can imagine this mechanism as the intersection of many roads. The intersection is the NEAR blockchain, each road is a shard. Shards are able to work in parallel, since the transactions performed on them do not overlap. This model greatly improves system performance.
Another important component of NEAR is a mechanism called Doomslug, which allows validator nodes to take turns creating blocks, which happens every epoch of 12 hours. A new block is created approximately every second.
The source of reward for creating blocks is the emission of new NEAR coins. 90% of the block reward goes to validators and delegated staking pools. 10% goes to NEAR Treasury.
Cryptocurrency NEAR and stablecoin USN
NEAR is the native cryptocurrency of the NEAR Protocol blockchain. It is used for all transactions on the network, as well as for staking by validator nodes and delegators. Although the source of rewards for validators and delegators is the issuance of new coins, some are burned to pay the network commission.
The NEAR cryptocurrency is required to pay network fees. At the same time, 30% of the fees are automatically sent to the developers of the used smart contract, the remaining 70% – to the validators. In addition, NEAR has the option of “free” transfers: when it is activated, the contract operator pays for the transaction.
The maximum emission of the NEAR cryptocurrency is 1 billion coins. According to CoinMarketCap at the beginning of September 2022, there are already more than 781 million NEAR in circulation. In terms of total capitalization, NEAR is in the top 30 cryptocurrencies.
At the end of April 2022, the USN stablecoin was released on the NEAR network. Initially, its price was provided by arbitrage operations and a reserve fund from NEAR and USDT. The launch of USN coincided with unfavorable market conditions, in particular the collapse of Project Terra (LUNA).
In the summer of 2022, DAO Decentral Bank, which is responsible for managing the project, presented second version of the USN. Under the new system, the price of a stablecoin is fully backed by USDT reserves. On Decentral Bank website you can buy or sell any amount of USN for USDT. The swap fee is 0.01%.
NEAR Cryptocurrency Staking
To manage a validator node in NEAR, you need to send the NEAR cryptocurrency to the staking smart contract. In addition, you will need equipment that protocol requirements.
The specific stake size depends on the number of coins held by other validators in a particular shard. This metric also determines the share of block rewards that pay out each epoch (12 hours).
Each shard in NEAR contains 100 seats. To function as a validator, you must have at least one “seat”. The value of each “place” is determined by the total number of NEAR tokens locked in the shard’s staking contract. Validators who break the rules risk losing part of their stake.
This model is intended to incentivize validating nodes to run new or smaller shards that have a lower entry threshold. If the user does not have enough funds to buy NEAR cryptocurrency in an amount sufficient to purchase a “seat”, he can try to persuade the delegators to transfer funds to him for management through staking pools. For delegating tokens, users receive a portion of the reward for new blocks from the validators they stake on.
According to the site Staking Rewardsin September 2022, the yield of NEAR staking is 5-6% per annum.
Who runs the NEAR Protocol
The key developer and development institution of the project is a non-profit organization registered in Switzerland NEAR Foundation. Among its leaders are well-known representatives of the industry, including NEAR co-founder Ilya Polosukhin.
The NEAR Foundation also manages funds from the project treasury. The NEAR Protocol community can put forward initiatives that can be funded by funds from the treasury. In addition, community members are united in various groups dedicated to certain areas of development. Proposals are published and discussed on the official NEAR forum.
Projects on the NEAR Protocol blockchain
According to the website AwesomeNearin the NEAR ecosystem there are about 800 crypto projects in various areas.
Aurora
Layer 2 protocol using the NEAR blockchain and the Ethereum Virtual Machine. Aurora aims to simplify the migration of decentralized applications on Ethereum to the NEAR ecosystem. The native token of the project is AURORA. The protocol is managed by a DAO called AuroraDAO.
The protocol has already integrated a number of large decentralized applications such as 1inch and Curve. The volume of blocked liquidity (TVL) in Aurora, according to DeFi Llama as of September 2022 – about $175 million, of which a significant part is blocked in the Bastion (BSTN) and Trisolaris (TRI) DeFi protocols. In total, about 200 applications are based on Aurora. In May 2022, the Aurora Plus staking platform launched.
Ref Finance
The largest decentralized exchange on the NEAR blockchain. Uses the mechanism of automatic market making. Ref Finance operates liquidity pools, as well as the so-called stable pools (Sauce) for stable crypto assets. The protocol has a program of increased rewards for staking the native REF token. The TVL of the project as of September 2022 is about $234 million.
Burrow
Burrow Cash — a platform for decentralized lending, in which you can issue synthetic assets secured by the NEAR cryptocurrency, locked in staking, and other assets (for example, LINEAR and USN). As a reward for activity, the protocol awards native BRRR tokens. The total volume of deposits, according to the official website of Burrow, is approximately $75 million, loans – $12.9 million.
Other projects
During 2021-2022 NEAR partners are:
- blockchain browser Brave;
- infrastructure provider for Calimero private shards;
- Octopus multi-chain network.
- platform for Web3 startups Pagoda and others.
- In September 2022, Tether released the USDT stablecoin on the NEAR network.
One of the main directions for decentralized applications based on the NEAR Protocol is DAO. The creation of decentralized organizations is greatly facilitated by the platform AstroDAOwhich requires no programming skills to use.
Several GameFi projects have been launched on the NEAR network, such as Armored Kingdom, Niche, Endless, and SWEAT. In addition, there are NFT startups in the ecosystem: Seatlab, Mintbase, Stack Sports, and others.
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Conclusion
The NEAR Protocol is a powerful platform for blockchain technology and cryptocurrency that has the potential to revolutionize the way we use the internet. Its decentralized architecture and consensus mechanism make it secure and reliable, while its smart contracts and staking system provide users with a great degree of control over their funds. With its low fees and fast transaction times, it is an appealing option for developers, businesses, and individuals. By leveraging the power of blockchain technology, the NEAR Protocol can help create a more secure and efficient digital economy.
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