When it comes to Layer-1 blockchains, everyone knows the big boys like Ethereum, Solana, and Avalanche. However, not many people know the hidden gem that is NEAR protocol. In this article, part of our Blockchain Protocols series, we’ll provide an introduction to NEAR protocol, discuss what NEAR has done well and not done well thus far, and talk about its future potential.
What is NEAR?
It is often said that NEAR is the final version of Ethereum’s roadmap, just already implemented. When you dig into the protocol, it’s easy to see why.
NEAR is a carbon-neutral, Layer-1, sharded, and proof-of-stake (PoS) blockchain designed for usability and developer friendliness. NEAR’s north star is that simplicity will drive adoption; thus, the blockchain has been designed to be as easy to use as possible.
A key part of usability is transaction speed and cost. Ethereum suffers in this regard, as its poor transaction throughput capability leads to uncomfortable gas fees during periods of network congestion.
NEAR, on the other hand, does not suffer from scalability issues. The key is their Nightshade Sharding mechanism, which splits the blockchain into smaller parts, lessening the load of validators. The result is that transactions are both incredibly fast (~1s per transaction) and cheap (less than 1 cent per transaction), and will always be so regardless of the amount of network activity.
To secure the network, NEAR uses a delegated PoS consensus mechanism. This means that would-be validators can only participate in block creation after staking a minimum amount of NEAR tokens (currently 38,000). This NEAR can come from either themselves or be delegated by other users.
Validators are rewarded with new NEAR tokens when they do their job correctly, which is then shared among all delegates. However, their stake is taken from them if they misbehave, providing a solid deterrent to attacks.
What Has NEAR Done Well?
Besides its sound design, NEAR does one thing better than every other blockchain: developer friendliness. They have made a series of decisions to make NEAR as attractive to developers as possible:
- EVM compatible through Aurora EVM, allowing developers to port their EVM smart contracts directly to NEAR.
- An $800 million development incentive fund that provides grants to developers building on NEAR.
- A 30% share of transaction fees for all smart contracts used in the transaction, providing a sustainable revenue source which incentivizes the development of dApps in the ecosystem.
- NEAR hosts NEAR University and invests heavily into education and bringing in more developers to their ecosystem.
- NEAR lets developers offer users prepaid gas for their first transaction to easily onboard them onto dApps.
The result is that NEAR boasts one of the fastest-growing developer ecosystems in all of crypto:
This vibrant and growing developer ecosystem gives hope that the best days for NEAR are still ahead.
What Has NEAR Not Done Well?
Unfortunately, NEAR has not yet achieved the success expected from a blockchain with its speed, scalability, user-friendliness, and developer ecosystem. Its TVL has mired in the $300 million range, and the price of NEAR is down around $4. There are a few potential explanations for this.
First, NEAR currently doesn’t have a flagship application that draws people in. For example, Ethereum has MakerDAO, Aave, and Uniswap, Binance Smart Chain has PancakeSwap, Arbitrum has GMX, and Solana has a blend of innovative protocols. NEAR, unfortunately, just doesn’t have one at the moment.
Perhaps Ref Finance will become that app, but for now, NEAR is still waiting for its flagship application. Thankfully, with their robust developer ecosystem, this app’s creation is a matter of when, not if.
Second, NEAR lacks a public figure like those that drove Solana, Fantom, and Terra to extreme heights. The importance of narrative for price in crypto is impossible to overstate. Without a Sam Bankman-Fried, Daniele Sesta, or Do Kwon constantly pushing the chain, it is tough to separate from the pack.
Third, and most out of NEAR’s control, is that this is just bear market blues. NEAR is far from the only blockchain to suffer during this bear market. However, as long as they keep building, they will be well-positioned to capitalize during the next bull market.
Looking Ahead: The Future of NEAR Is Bright
NEAR has done a lot of things right. They have a blockchain that is fast, cheap, and infinitely scalable. They are carbon-neutral, tossing the “crypto is bad for the environment” narrative into the trash. They support developers like no other blockchain in crypto. They have a massive war chest of cash from venture capitalists. Overall, things look pretty good.
However, NEAR is currently lacking in perhaps the most critical component of blockchains: decentralization.
NEAR currently only has 124 validators, and the top 17 validators control half of the total stake. Although NEAR’s sharding mechanism prevents the network outages that plague Solana, this is still a bit concerning. The fewer validators a blockchain has, the less censorship resistant that blockchain is. In an era where governments are sanctioning code, it would be wise for NEAR to prioritize decentralizing as fast as possible. Their future security could very well depend on it.
If NEAR can sufficiently decentralize, then suddenly, you have a blockchain capable of permissionlessly, trustlessly, and securely servicing the entirety of decentralized finance.
That is a blockchain worth keeping an eye on.