What is NEAR Protocol (NEAR)?

NEAR Protocol is a scalable Layer-1 blockchain that aims to be as user-friendly as possible.

With the goal of achieving mainstream adoption, NEAR prioritizes accessibility and interoperability with other networks.

According to its whitepaper, “applications deployed to the platform should be seamless to use for end users and seamless to create for developers.”

NEAR also aims to tackle the Blockchain Trilemma of being scalable, decentralized, and secure.

Compared to Bitcoin and Ethereum, NEAR transaction fees are very low, just like other PoS networks.

It does not consume large amounts of electricity for validation and has been rated carbon neutral by the global climate solutions provider, South Pole.

What is the NEAR Protocol?

NEAR Protocol is a layer-1 blockchain that operates as a community-driven cloud computing platform.

Think of it as an open-source alternative to tech giants like Google, Apple, or Microsoft, but built on the principles of blockchain technology.

In 2023, NEAR introduced the Blockchain Operating System (BOS), further simplifying the Web3 experience. BOS removes complexities and provides a user-friendly environment for both developers and everyday users.

NEAR Protocol aims to make building and using decentralized applications (dApps) as easy as using traditional web applications.

It achieves this by offering a fast and scalable infrastructure that can handle a large number of transactions quickly and efficiently.

This is a significant advantage over some other blockchains that struggle with slow transaction speeds and high fees.

As a Proof-of-Stake (PoS) blockchain, NEAR Protocol is also designed to be more energy efficient than older blockchains like Bitcoin.

It provides a robust ecosystem of developer tools and is compatible with other blockchains, making it a versatile platform for a wide range of applications.

What is the NEAR token?

The native token of the platform is the NEAR token and serves multiple purposes:

Transaction Fees: NEAR tokens are used to pay for processing transactions on the network.
Storage: NEAR is used to pay for storing data on the blockchain.
Staking: Users can stake their NEAR tokens to participate in network consensus as transaction validators and earn rewards.
Running Validator Nodes: NEAR is used to run validator nodes on the network, contributing to its security and decentralization.
Governance: NEAR token holders can participate in protocol governance, influencing the future development of the NEAR Protocol.

NEAR Protocol generates new tokens at a rate of 5% of the total supply every year, a majority of which are given as rewards to validators.

Similar to Solana’s and Avalanche’s delegated PoS systems, staking validators who secure the network are paid in NEAR tokens proportional to their overall stake.

To offset the 5% inflation from token generation, NEAR also employs a fee burn mechanism in that 70% of all transaction fees are burned.

This means that the network becomes more disinflationary as usage increases.

Network security is maintained through slashing, which is a penalty system applied to a validator’s stake for inactivity, dishonest validations, and other malicious behavior.

Unlike other PoS networks, NEAR does not punish users who delegate their funds to a validator. If a validator gets slashed, users only stand to lose potential rewards instead of a portion of their delegated stake.

How does NEAR work?

The NEAR protocol’s approach to solving the Blockchain Trilemma involves a process called sharding.

This is a horizontal scaling feature that splits a single dataset across multiple databases.

In doing so, it allows for parallel processing and a more balanced distribution of the network based on the computational resources available.

Each partition or shard consists of its own data and can process transactions in unison with other shards, which then increases the overall network throughput.

Thanks to sharding, NEAR claims it can process up to 100,000 transactions per second.

While sharding is not unique to NEAR Protocol, the platform has built on this concept by introducing a dynamic re-sharding feature called Nightshade.

Unlike sharding on other platforms that have a static amount of shards, NEAR Protocol will regularly adjust this number based on user demand.

This enables NEAR to reduce the average cost of using the network while maintaining the potential for high throughput.

Nightshade would also be able to create and merge shards as required by the computational needs of the network at any given time, and it would have no cap on the total number of shards. Theoretically, this could let NEAR’s transaction throughput scale higher than Ethereum.

Another important aspect is the “Doomslug” consensus mechanism.

Doomslug ensures that transactions are processed quickly and efficiently by allowing validators to take turns producing and validating blocks in a predictable way. This prevents network congestion and ensures that transactions are finalized quickly.

NEAR Protocol also features a unique account model. Unlike complex alphanumeric addresses used in some blockchains, NEAR allows users to have human-readable account names, making it much easier to use and remember.

Central to its goal of achieving mainstream adoption, NEAR has boosted interoperability with existing networks through Aurora.

Aurora offers compatibility with the Ethereum Virtual Machine (EVM), which makes it fully interoperable with Ethereum and its different wallets and tools.

Aurora enables developers to deploy existing Ethereum-based applications on NEAR without significant modifications, facilitating a seamless transition and expanding the reach of Ethereum dApps.

This makes NEAR a familiar environment for Ethereum developers to work in while at the same time offering better scalability and much lower transaction costs.

In fact, while the base fee is denominated and paid in ETH, gas is currently subsidized (a.k.a. free) on Aurora.

Key Features of NEAR Protocol

NEAR Protocol offers a range of features:

Scalability: Thanks to Nightshade sharding, NEAR Protocol can handle a massive number of transactions per second, ensuring smooth operation even with a large number of users and applications.
Low Fees: Transaction fees on NEAR are incredibly low, making it cost-effective for both users and developers.
Developer-Friendly: NEAR provides a welcoming environment for developers with a comprehensive suite of tools and resources. It supports familiar programming languages like JavaScript and Rust, making it easier for developers to build and deploy dApps.
User-Friendly: NEAR prioritizes user experience by offering features like human-readable account names and an intuitive interface. This makes it easier for people to interact with the NEAR blockchain and its applications.
Interoperability: NEAR is designed to work seamlessly with other blockchains. The Rainbow Bridge, for example, enables interoperability with Ethereum, allowing developers to easily deploy and interact with Ethereum-based applications on the NEAR network.

Use Cases of NEAR Protocol

The versatility of NEAR Protocol makes it suitable for a wide range of applications:

Decentralized Finance (DeFi): NEAR can be used to build DeFi applications such as decentralized exchanges (DEXs), lending platforms, and stablecoins. For example, Flux is a DeFi platform built on NEAR that allows users to access financial services in a decentralized manner.
Non-Fungible Tokens (NFTs): NEAR supports the creation and trading of NFTs, which can represent digital art, collectibles, in-game items, and more. Mintbase is a prominent example of an NFT marketplace built on NEAR.
Gaming: NEAR provides a platform for developing decentralized games where players have true ownership of their in-game assets.
Decentralized Autonomous Organizations (DAOs): NEAR can be used to create and manage DAOs, which are community-governed organizations that operate with transparency and democratic principles.

Advantages of Using NEAR Protocol

NEAR Protocol offers several advantages that make it an attractive platform for developers and users:

High Scalability: NEAR can process over 100,000 transactions per second due to its Nightshade sharding and Doomslug consensus mechanism. This makes it one of the most scalable blockchain platforms available.
Low Transaction Costs: Transaction fees on NEAR are extremely low, often fractions of a cent.
Fast Transaction Finality: Transactions on NEAR are finalized in approximately one second, ensuring quick and efficient processing.
Developer-Friendly Environment: NEAR offers a developer-friendly environment similar to the web, enabling them to build and deploy dApps easily, regardless of their programming language.
Modular Components: NEAR Protocol provides developers with pre-built, modular components that can be easily integrated into their applications. This simplifies the development process and allows developers to focus on the unique aspects of their projects.
User-Friendly Experience: NEAR emphasizes user experience and security through features like human-readable account names, making it more accessible to a wider audience.

Disadvantages of Using NEAR Protocol

While NEAR Protocol offers many advantages, it’s important to be aware of some potential drawbacks:

Relatively New Platform: As a relatively new platform, NEAR Protocol may have a smaller ecosystem and community compared to more established blockchains like Ethereum. This could mean fewer available dApps and a smaller pool of developers.
Competition: NEAR Protocol faces competition from other blockchain platforms that offer similar features and functionalities. This competition could impact its growth and adoption.
Security Concerns: While NEAR Protocol has a robust security model, all blockchain networks are susceptible to potential vulnerabilities or attacks.
Technical Complexity and Integration: Integrating NEAR Protocol into existing systems can be technically challenging, and users may require some technical expertise to fully utilize its features.
Prioritization of Scalability and Decentralization: Similar to Solana, NEAR Protocol prioritizes scalability and decentralization over security as a trade-off in the blockchain trilemma. This means that security might be a slightly lower priority compared to other blockchains.

Team Background

Launched in April 2020, NEAR is the brainchild of former Google engineer Illia Polosukhin and Microsoft developer Alexander Skidanov.

NEAR has a highly skilled team of experienced developers, including several International Collegiate Programming Contest (ICPC) gold medalists and winners.

Prior to co-founding NEAR, Illia Polosukhin managed a team of deep learning and natural language understanding researchers as an Engineering Manager at Google Research.

He also previously worked at Salford Systems as a Software Engineer where he developed new tools for big data predictive analytics.

Two-time ICPC medalist, Alexander Skidanov started his professional career with Microsoft in 2009, then he joined memSQL in 2011 as an Architect and Director of Engineering.

He has also worked with OpenAI as a research engineer consultant.

Core maintenance, governance, and ecosystem funding of the NEAR Protocol are led by the NEAR Foundation, a non-profit organization based in Switzerland.

The NEAR Foundation, a non-profit organization, was established in 2019 to support the growth of the NEAR ecosystem and the development of the protocol.

Skidanov, with his background as director of engineering at MemSQL, and Polosukhin, a former Google employee and significant contributor to TensorFlow, brought their extensive experience in technology and blockchain development to the project.

NEAR Inc., which is based in the U.S., focuses on R&D to propose iterations to the reference codebase of the NEAR blockchain.

Notable Investors: Coinbase Ventures, Alameda Research, Dragonfly Capital, Pantera Capital, Three Arrows Capital

Token Metrics:

As of January 2025, here are the updated token metrics for NEAR Protocol (NEAR):

Holder Addresses:
- Approximately 21 million on the NEAR network.
- Approximately 31,000 on Binance Smart Chain.
Liquid Supply: 841 million NEAR.
Circulating Supply: 812 million NEAR.
Maximum Supply: 1.1 billion NEAR.
Inflation Rate: 20.51%.

Notable Projects:

NEAR Protocol has fostered projects across various sectors. Here are some notable initiatives:

Decentralized Finance (DeFi):

Ref Finance: A multi-purpose DeFi platform offering services like a decentralized exchange (DEX), lending protocols, and yield farming.
Aurora: An Ethereum Virtual Machine (EVM) built on NEAR, enabling developers to run Ethereum-compatible applications with high throughput and low transaction costs.
Burrow: A decentralized, non-custodial interest rate market protocol that allows users to supply and borrow assets to earn interest and unlock liquidity.
Meta Pool: A liquid staking solution for NEAR and wNEAR token holders, enhancing liquidity and staking rewards.

Cross-Chain Solutions:

Rainbow Bridge: Facilitates seamless transfer of assets between NEAR and Ethereum, enhancing interoperability within the blockchain ecosystem.
Octopus Network: A cross-chain network that allows developers to launch and run application-specific blockchains, known as appchains, providing flexible and cost-effective security.

Non-Fungible Tokens (NFTs) and Marketplaces:

Paras: A curated NFT marketplace focusing on digital art and collectibles, emphasizing quality and thematic collections.
Mintbase: A platform that allows users to create and sell NFTs without technical complexities, supporting various digital assets.

Gaming and Metaverse:

NearZombies: An educational project offering an interactive learning process about the NEAR protocol through gamified experiences.
Metamon: A Sci-Fi and Fantasy-themed game where players explore new worlds and life forms, integrating blockchain elements.

Infrastructure and Tools:

Roketo: A streaming money protocol on NEAR, enabling real-time payments and token vesting solutions.
Dapplooker: Provides analytics and visualization tools for NEAR-based decentralized applications, aiding developers in understanding smart contract data.

Environmental Initiatives:

Open Forest Protocol: Addresses limitations in global nature-based climate solutions by leveraging blockchain technology for environmental impact tracking.

Comparison with Other Blockchain Platforms

NEAR Protocol vs. Ethereum

Feature	NEAR Protocol	Ethereum
Consensus Mechanism	Proof of Stake (Doomslug)	Proof of Work (transitioning to Proof of Stake)
Scalability Solution	Nightshade Sharding	Layer-2 solutions (rollups, sidechains)
Transaction Speed	High	Moderate
Transaction Fees	Very Low	High
Developer Experience	User-friendly tools and SDKs	Mature ecosystem but can be complex
Account Model	Human-readable account names	Complex alphanumeric addresses

NEAR Protocol offers several advantages over Ethereum, particularly in terms of scalability and cost-effectiveness.

NEAR’s Nightshade sharding allows it to process transactions much faster and with lower fees than Ethereum.

Additionally, NEAR’s focus on user experience, with features like human-readable account names, makes it more accessible to a wider audience.

However, Ethereum has a more established ecosystem and a larger developer community, giving it an advantage in terms of dApp availability and overall maturity.

NEAR Protocol vs. Solana

Both NEAR Protocol and Solana are considered high-performance blockchains with a focus on scalability and speed. However, they differ in their approach to achieving these goals.

Consensus Mechanism: NEAR Protocol uses the Doomslug consensus mechanism, while Solana utilizes a unique Proof of History (PoH) mechanism.
Scalability Solution: NEAR relies on Nightshade sharding, while Solana employs a combination of PoH and other optimization techniques.
Transaction Speed: Both offer fast transaction speeds, but Solana generally has a slight edge in terms of raw transaction speed.
Transaction Fees: Solana typically has lower transaction fees compared to NEAR.
Developer Experience: NEAR is often considered more developer-friendly due to its support for familiar programming languages and its focus on providing easy-to-use tools.

The choice between NEAR and Solana depends on the specific needs and priorities of the user or developer.

NEAR’s focus on developer experience and user-friendliness makes it a strong contender, while Solana’s raw speed and low fees are attractive for certain use cases.

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