NEAR Protocol: What is it and how does it work?

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9 min read

To talk about “cryptos” nowadays is to talk about a topic that is practically installed in the mainstream of our society. It is difficult to find people who, far from being experts, have never heard a word about this subject of “cryptos”.

This broad exposure, beyond the essential work of communicators and communicators, lies in the enormous amount of programming development that lies behind this world.

Today I will give place to NEAR Protocol, a project focused on giving tools to these revered actors of our ecosystem, the developers, to facilitate their task and continue to attract new users to this constantly evolving world.

What is NEAR Protocol?

To begin to understand this ambitious project, it is necessary to understand that it consists of three parts, which I will list below:

  1. On the one hand, we have the NEAR blockchain, with a good level of decentralization, a proof of stake consensus and written in a widely used programming language such as Web Assembly.
  2. On the other hand, we have NEAR Platform, from which developers can simply create secure, scalable and easy-to-use decentralized applications. Applications can be created from scratch or one can use the open-source components provided by the protocol.
  3. And last but not least, there is the native cryptocurrency of the NEAR blockchain, which bears the same name. Its usefulness is fundamental as in any proof of stake chain.

Through these three main components, NEAR Protocol presents itself as a large platform, based on blockchain technology, which is governed by its own community.

The NEAR Protocol blockchain

NEAR Protocol, a decentralized blockchain that achieves consensus through proof of stake. However, the creators of the network Alexander Skidanov, a former Microsoft employee, and Illia Polosukhin, with a background at Google and TensorFlow, did not replicate these well-known models without adding features that make the NEAR blockchain distinctive. So, without further ado, let’s take this project apart to understand how NEAR works!

Structure

In pursuit of maximum scalability, so important in the ecosystem, NEAR leaves off the table the need for each node participating in the network to run the entire blockchain locally in order to participate in it. This avoids problems arising from possible network congestion, a situation that arises when the number of transactions performed exceeds the processing potential of the network.
You may ask, but how do they achieve this? 

And the answer, once again, is sharding, specifically called “Doomslug“. Through this, now famous, data handling technique NEAR is able to process transactions in parallel, reaching a total of 1,000 per second. This methodology allows it to raise the scalability limit to a direct relation with the number of nodes participating in the network.

What sharding, in blockchain terms, proposes is to divide the data storage into different sub-chains, therefore the validators in the network will be randomly assigned to one of these “shards” or sub-chains, allowing multiple simultaneous validations.

 

Consensus

Now that we know the structure of the blockchain, we can understand how it achieves consensus through a mechanism called “Nightshade”.

According to the specifications of this exclusive development of the NEAR team, each validator in the network processes the transactions that correspond to it according to the shard in which it operates. These transactions are sent to the metachain, the main blockchain of the protocol, where the rest of the validators assigned to the shard from which the transactions were sent, must “approve” the transaction to make it irreversible.

The most important thing about this validation process is that it does not stop the production of new blocks, which are made up of transactions from different shards.

Once validated, each of these transactions are included in a new block that is added to the NEAR blockchain, with each node being notified instantly.

NEAR cryptocurrency 

The NEAR blockchain has its native currency, also called NEAR, which fulfills the usual functions of a native crypto in a blockchain with the consensus of proof of stake. What are these functions and their tokenomics, I explain below.


Utility

The main functions of this currency are:

    • To be the means of payment for transactions on the network, which have an extremely low cost.
    • They are given as incentives in programs that invite developers to contribute to the network (more information in the last section).
    • To provide security to the blockchain that gave it life, and this is achieved through the daily work of the network’s validators.

To become a validator of the NEAR network it is necessary to stake or deposit as a guarantee the necessary amount of NEAR tokens to be among the first 100 validators of the list that is made, exclusively, for each shard or sub-chain of the network.

Of course, those users who are not able to run a node and become validators of the NEAR network, have the possibility to delegate their tokens to the validator of their choice, hoping to obtain a reward that is estimated according to the percentage of contribution. 

For each new block that is produced in the network, a certain amount of NEAR tokens is created. 10% of these new tokens are automatically derived to the NEAR Foundation’s treasury, for the purpose of promotion and development of the network. While the remaining 90% is paid back to the network validator. It is on this last percentage that the reward that the “staker” or NEAR delegator will obtain is calculated according to the amount provided.


NEAR and its numbers

While NEAR’s mainnet or mainchain was released on October 13, 2020, the team previously held a famous ICO, in two rounds of funding, conducted in July 2019 and May 2020 in which its proceeds exceeded $35 million.

Today, it is possible to acquire the token on any of the most popular exchanges.

In reference to the NEAR numbers, we have a working capital of 465,914,595 out of a total supply of 1,000,000,000,000.

It is important to know that NEAR issuance is adjusted based on currency inflation and that a mechanism was established whereby most of the fees paid for each transaction are “burned“, which helps to maintain control over the total amount in circulation.

As of today, NEAR is in 44th position according to its market value which is observed at US $4,123,168,885. Just a few weeks ago, on September 9, it reached its historical maximum price of about US$11.84, while its historical minimum was US$0.526762 recorded on November 4 last year.

 

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NEAR Protocol and its platform

If you have managed to read this far, you will be aware of one of NEAR’s most important contributions to the ecosystem in general, which is undoubtedly its platform supported by its community.

It is a platform managed by a committed community that provides pre-conceived tools so that any developer can quickly get actively involved and create their own application on the network. Some of its noteworthy initiatives are:

    • An important library with code examples to replicate in a simple and didactic way.
    • A system that guarantees developers of applications on the network 30% of the fees generated by transactions of their applications.
    • The possibility of writing Smart Contracts in familiar languages such as Rust, WASM, AssemblyScript.
    • The development of hackathons in order to bring programmers and funders together or directly fund them through the NEAR Foundation’s treasury, with the goal of evolving as an ecosystem.

Final considerations

Undoubtedly, the future of this blockchain and its community is extremely promising. 

Scalable, low-cost systems with ample growth prospects will undoubtedly be welcome in the near future of our ecosystem.

As I always emphasize, interoperability between networks will be of vital importance in the medium term, and with the arrival of the “Aurora” bridge, which will connect NEAR protocol with Ethereum, this network will take a step forward that will provide great benefits for all.