Every month, WhaleFin brings you in-depth research and insights on hot projects in crypto, blockchain, and Web3. This month is Near, a layer 1 blockchain network that provides a platform on which developers can build decentralized applications (dapps).
What is Near Protocol?
Near is a Layer 1 decentralized application platform powered by its native currency, NEAR. Running on hundreds of machines around the world, this blockchain is engineered to be performant and secure enough to create a powerful and decentralized data layer for the new web. The protocol aims to be a platform that has the potential to change how systems are designed, how applications are built, and how the web itself works.
Near’s technology was designed by Alex Skidanov and Illia Polosukhin, and the protocol use the Proof of Stake (PoS) consensus model. The crypto currency of the protocol is the NEAR coin.
Why Near?
Sustainable
As a Proof-of-Stake network, Near does not consume large amounts of electricity to validate its network and is rated carbon neutral by the global climate solutions provider South Pole. Staking validators securing the network are paid in NEAR token rewards in proportion to their total stake, much the same as Solana and Avalanche’s Delegated Proof-of-Stake systems.
Multi-billion dollar valuation
Near has shown itself to be capable of securing significant monetary value, having reached a multi-billion dollar valuation. While it is not the most popular decentralized application platform, it offers a unique and performant scaling proposition and development resources which make it a viable choice for app builders.
Multi-Chain Vision
Near believes in a multi-chain future in the digital world. Therefore, the platform works in harmony with Ethereum, Polkadot, Cosmos and other L1 chains. Near is built with interoperability in mind to allow for the free flow of assets and messaging between networks.
Lower Entry Barrier Into Web3
Additionally, the Near Protocol removes barriers to Web3 adoption. The protocol aims to grow with high speed, low fees, a modern UX, and climate-friendly operations.
One of the main focuses of Near Protocol is to be as accessible and user-friendly to new participants as possible, and this focus on accessibility has been in place since Near’s inception. This focus on user accessibility comes from when Polosukhin and Skidanov were working on program synthesis in 2017. In an interview with The Defiant in 2020, Polosukhin said:
We really wanted to have a machine learning model that a normal person who does not know how to do programming would be able to explain what they want, and the computer would write codes for them. It’s a very challenging task, a lot of people have been working on it.
In Near’s development, the founders stayed true to this vision of simplifying complex technological concepts as much as possible.
To achieve this, Near has made the wallet creation process arguably more intuitive and user-friendly than other networks. From the start, users create Near accounts with human-readable domain names without having to rely on third-party providers such as the Ethereum Name Service. In addition, Near accounts handle each wallet’s private keys through two-factor authentication, maintaining self-custody, but making the user experience less complex and more similar to what users are familiar with in Web2 applications.
A few more usability features come into play when interacting with apps in the Near ecosystem. A simple subscription interface allows users to manage the apps they allow, and the costs of using the network can be made more predictable by allowing app developers to pay fees on behalf of their users.
Near’s usability features also extend to developers. Application creation is made easier by giving developers the ability to build and deploy applications using the JavaScript, Rust, and AssemblyScript SDKs. A number of developer and user tools have also been created to facilitate usability, including Near Explorer, a Blockchain search tool that allows developers to view transaction details, accounts, and block details.
Another unique feature of Near is that smart contracts running on the network earn 30% of the fees paid by users for interacting with them. By deciding how these funds are allocated, the owner (or holders) of the contract can help decentralized autonomous organizations (DAOs) run more smoothly. The percentage of fees allocated is a system-level parameter, and can be adjusted by management votes, as is typical for DAO operation in the crypto space.
Sharding
A key rationale of Near’s value proposition as a competitive L1 blockchain is its scalability, and a core piece of Near’s architecture which enables that scalability is Sharding technology.
The core idea in sharding is splitting up one blockchain into multiple ones and calling each one a “shard.” In a simple design, total validators on the blockchain network are also separated evenly to validate each shard. For instance, if we split a non-sharded blockchain with 100 validators into 10 shards, each shard would have 10 validators.
This basic design already presents a couple of initial challenges. First, the security for each shard is 10x lower than the non-sharded blockchain. An attacker would only need to control ~6 validators (5.1% of total nodes) to corrupt a shard, whereas it would have to corrupt ~51 validators in the non-sharded version.
As such, sharding of blockchains, in principal, significantly weakens the security.
To address this, nearly all sharding designs use some form of randomness to assign shards to validators. Because of the extra computation required to generate random numbers, assign validators to shards, receive updates from shards, process stakes, and other coordination activities, there is usually a main “chain” that manages all of these tasks. This organizational chain is called the Beacon Chain in Near and Ethereum, the Relay Chain in Polkadot, and Cosmos Hub in Cosmos.
The above image also demonstrates another scaling property of sharded blockchains — quadratic scaling. If every node in the network becomes four times more powerful, then each shard will be able to process four times more transactions. In addition, the Beacon chain will be able to coordinate among four times more shards. Thus, performance improvement of the entire network increases by 16x (4 x 4, hence the name quadratic). A quadratic improvement in hardware results in an exponential improvement for the network.
Near’s Sharding Design
Nightshade
Near’s sharding technology — named “Nightshade” — models the network as a single blockchain, rather than sharded blocks. All block producers and validators build a blockchain called the main chain. The state of the main chain is divided into shards, and each block producer and validator processes only a subset of the state and the transactions that affect those parts. These shards are called “blocks” in Near terminology.
Beacon Chain Sharding Design (e.g., Ethereum Serenity) Vs. Nightshade Sharding Design (Near).
To generate blocks, validators stake a certain amount of tokens, and the number of shards they are allocated depends on the amount of $NEAR staked. Before each epoch, block producers download the state of their assigned shards and collect and process transactions related to those shards during that epoch.
To handle cross-shard communication, transactions must be executed separately in each shard, sequentially. Transactions are first processed in a shard, and once the shard is included in the block, it generates a confirmation transaction that is forwarded to the next shard that needs to execute the transaction. This process continues until the transaction is completed. Nightshade provides a challenge period during which external observers identify invalid blocks to ensure valid cross-shard transactions.
Nightshade’s design provides atomicity with good user experience. Cross-shard transactions are near-instantaneous — the destination shard does not need to wait until the challenge period is over and can apply the receipt transaction immediately. And because Nightshade’s shard chunks are all published together in the same main chain block, if any chunk was found to be invalid, the main chain simply rolls back. This is in contrast to a typical sharded blockchain design, where one challenge could impact another shard, which impacts another shard, and so on. Although an invalid transaction that rolls back the main chain is inconvenient, it would be a rare event and outweighed by the benefits of fast cross-shard transactions.
Tokenomics
There were 1,000,000,000 NEAR tokens created at Genesis on April 22, 2020. The tokens were/will be allocated as follows:
The initial distribution of Near Protocol (NEAR) tokens is as follows:
● 17.20% allocated to Community Grants & Programs
● 14.00% allocated to Core Contributors
● 12.00% allocated to Community Sale
● 11.76% allocated to Early Ecosystem
● 11.40% allocated to Operations Grants
● 10.00% allocated to Foundation Endowment
● 15.23% allocated to Seed Round
● 8.41% allocated to Venture Round
Where can NEAR be purchased?
NEAR can be accessed quickly and with low fees on the WhaleFin app or web platform both via one-click Swap and Spot purchase.
Earn on your NEAR on WhaleFin
Fixed Earn
With the WhaleFin Fixed Earn product, you can earn up to 8% APR on Near.
NEAR Staking
As with most cryptocurrencies using the Proof-of-Stake consensus mechanism, users do not necessarily have to be validators themselves and operate node hardware to participate. Via delegation, users can earn staking rewards and help to secure the Near blockchain by delegating as little as 50 NEAR.
WhaleFin handles the technicalities and an attractive dividend is returned to the delegator in return for the contribution of their stake.
Features
High Annualized Return
NEAR Staking offers approximately a 10% annualized return rate.
Low Barrier to Entry
WhaleFin handles all costs and responsibility of node construction and operation so that users can participate by staking as little as 50 NEAR.
Secure the Near Ecosystem
Blockchains that utilize Proof of Stake consensus mechanisms rely on token stakers for their security. Users participating in staking support and ensure that security while they earn rewards.
Rules
- Users must stake at least 50 NEAR per order to participate.
2. The NEAR transfer period is 1 day and the interest accrual period is 1 day. This means that users will begin accruing staking rewards approximately 2 days after staking.
WhaleFin submits transfer applications at 10:00 (SGT) every day. Therefore, the actual interest distribution period might be more than 2 days depending on what time a new staking contribution is submitted.
3. NEAR’s interest accrual period is 1 day, and interest will accumulate daily based on the staked principal.
4. The unstaking period is 2 days, during which no further interest will accrue.
5. When users unstake their NEAR, the principal will be returned to their account together with any staking rewards earned during the staking period.
As the blockchain world grows, platforms that offer lower transaction fees and a higher transaction rate are likely to play an important role in overall adoption. NEAR’s scaling solutions can attract developers who want to build more efficient DeFi products and decentralized applications.
Near, Due to the protocol’s emphasis on usability, exceptional user experience, and ecosystem funding support, the community has grown significantly since main net launch.
In our next article, we will talk about important projects in the Near ecosystem.
About WhaleFin by Amber Group
WhaleFin, powered by Amber Group, is an all-in-one digital asset platform designed to empower you to diversify, manage, and grow your wealth digitally in a secure manner. On WhaleFin, you can buy, sell, trade, and invest in crypto with ease.
Download the app here.
Amber Group is a leading digital asset platform operating globally with a presence in Asia, Europe, and the Americas. We provide a full range of digital asset services spanning investing, financing, trading, and spending, backed by some of the best investors across the world such as Sequoia Capital, Temasek, and Tiger Global Management.
For more on WhaleFin’s announcements and news, please follow us on social media.
For support and assistance, please contact us at service@whalefin.com
This material is strictly for information purposes only, and does not constitute or shall not be considered as, an offer, solicitation, or recommendation, to deal in any products. The information provided is not intended to provide a sufficient basis on which to make an investment decision. It is intended only to provide observations and views of certain personnel and has not been reviewed by any regulators elsewhere, which may be different from, or inconsistent with, the observations and views of Amber Group.
Amber Group assumes no obligation to update or otherwise revise this material, Amber Group does not represent or warrant its accuracy or completeness and is not responsible for losses or damages arising out of errors, omissions or changes or from the use of information presented in this material. Contents in any third-party sources (if any) in this material are completely beyond the control of Amber Group. As such, Amber Group shall not be held responsible for the accuracy, completeness and legality of the contents of such third-party contents. Any reference to third-party contents does not imply an endorsement, representation or warranty by Amber Group. No liability will be accepted for any loss or damage arising from or in reliance upon the contents of this material or these independent third-party contents provided here.
This material is not directed to or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Amber Group to any registration or licensing requirement within such jurisdiction.
This material does not purport to contain all of the information that an interested party may desire and, in fact, provides only a limited view. Any headings are for the convenience of reference only and shall not be deemed to modify or influence the interpretation of the information contained.
All rights reserved. This material is not to be reproduced, in whole or part, without the written consent of Amber Group
