Smart contracts are one of the most innovative mechanisms to emerge in the 21st century. Smart contracts are basically agreements that can be written in code and stored on the blockchain so they can be tracked and authenticated. Think of them as a regular legal contract, but instead of a lawyer verifying terms, the verifying is done by a computer.
Platforms like Ethereum first popularised smart contracts. As Ethereum is the second-biggest cryptocurrency, there was a lot of liquidity (money) involved, which led to the development of lots of apps and financial instruments on the blockchain. While Ethereum was the first, it is far from the last. Due to the scalability issues Ethereum faces, a huge space in the market formed for other smart contract-enabled blockchains to emerge. Solana, Cardona, Avalanche, and NEAR protocol are some of them.
The blockchains that are best able to tackle the issues Ethereum is facing are positioned to take a big share of the layer 1 blockchain market.
What Is NEAR Protocol (NEAR)?
NEAR Protocol is a layer-one blockchain designed to eliminate some of the scalability issues blockchains face; low transaction speeds, low throughput, and poor interoperability. Achieving this would make NEAR a perfect hub for developers looking to build decentralized apps.
Meeting the team
Erik Trautman, a Wall Street entrepreneur, and Illia Polosuckhin, an engineering manager at Google founded NEAR in 2020. The pair secured over $50 million in funding within 4 months thanks to their partnership with VC firm Y Combinator.
NEAR Protocol is led by its founders but is run by the NEAR Collective, a community dedicated to updating the code and releasing updates to the ecosystem. Their goal is to build a platform that is secure and easy to use for developers and users alike.
How does Near work?
Delegated proof of stake.
Delegated proof of stake is similar to proof of stake. However, to tackle issues of decentralization, if you don’t have enough tokens to stake and become a validator, you can lend your coins to someone who can and still benefit from validating. NEAR calls their DPoS mechanism ‘doomslug’. Quite the name!
Nightshade Technology
NEAR uses its Nightshade technology to improve transaction throughput massively. Nightshade is a variation of sharding. This involves individual sets of validators processing transactions in parallel across multiple sharded chains. Nightshade improves the overall capacity of the blockchain. Sharding occurs when data is split into smaller chunks for storage reasons. Picture a highway broken down into multiple roads to massively reduce congestion
As a result, the protocol achieves up to 100,000 transactions per second with near-instant transaction finality, whilst keeping transaction fees at virtually zero.
Human readable Addresses
NEAR Protocol also makes onboarding more user-friendly. It uses readable addresses (names) and builds decentralized applications with interfaces that are more similar to those people are familiar with (such as Apple and Android apps). For example, instead of using long wallet addresses, people see the names of people they are interacting with. This can be done on Ethereum. For example, we have Cryptonary.ETH. However, this cost us about $100. NEAR gave us Cryptonary.NEAR for free. Consider how much easier this makes the process of getting more people into crypto.
What else makes NEAR so special?
NEAR also make things easier for developers by providing them with simple components to help them start projects like token contracts or NFTs more quickly. This is similar to what Shopify and Wix do to help people launch businesses and websites.
The platform is also compatible with multiple wallet applications and includes interoperability modules to provide developers with a comprehensive, intuitive, and scalable ecosystem.
Tokenomics
NEAR is an inflationary utility token similar to many others we have discussed throughout our Simply Explained series. New tokens come from rewards for stakers, and tokens can be used to govern the NEAR protocol.
Many early investors have their tokens locked until certain dates. Keep an eye on those dates as many early investors are expected to dump when their tokens when they’re unlocked which would crash the price.
