In the echo chamber of the crypto universe, it’s easy to forget that blockchain and crypto don’t yet have widespread, mainstream adoption. While it’s growing, there are still only 50 million wallet users in the world, and State of the Dapps lists just over 3,500 dApps compared to over two million on the Apple App Store alone.
However, developers and validators find things equally challenging. A blockchain such as Ethereum is a purely infrastructural solution, with hard-to-learn tools and its own programming language, putting further barriers in place for developers.
Finally, becoming a validator on one of the many proof-of-stake blockchains isn’t necessarily as attractive as the initial potential rewards may indicate, depending on how easy it is to receive tokens from the delegating community.
Now, NEAR Protocol has emerged as an open, developer-friendly blockchain platform. It aims to be secure enough to handle valuable assets such as money or identity. Sharding, combined with proof of stake, ensures that the network can perform to a level that makes the platform useful for everyday consumers. However, the standout feature of NEAR is a relentless focus on usability.
NEAR Protocol Elements & Features
NEAR Protocol offers various features designed to appeal to each of its key user segments – developers, end-users, and validators. In all cases, the platform’s design principles adhere to the pillars of usability, scalability, simplicity, and sustainable decentralization.
Developers can sign and prepay transactions on behalf of their users, significantly reducing the technical know-how required to engage with dApps, making the dApps more attractive to users. NEAR also provides developer toolkits that enable developers to compose applications and smart contracts using a range of existing programming languages. Therefore, the platform has the potential to appeal to a broader range of programmers who don’t want to learn Solidity or other blockchain-specific languages.
Finally, developers who write smart contracts used in multiple applications can earn a percentage of the transaction fees each time the contract is triggered. This mechanism provides an incentive for developers to contribute to the overall infrastructure.
NEAR Protocol deploys a “progressive UX” designed to ensure that any newcomer can use the platform without engaging with wallets or tokens. As the user becomes more proficient with the concepts underlying blockchain, the UX can become progressively more sophisticated.
The overall account setup offers a smoother onboarding experience with fewer steps.
NEAR Protocol consensus is called “Thresholded Proof of Stake” – another variation on delegated proof of stake. Delegators can stake their tokens to a particular validator into a staking pool that’s contract-controlled. Therefore, validators can create diversified offerings of their services, making NEAR attractive to validators.
Elements of NEAR Protocol
The NEAR platform is the infrastructure layer, conceptually similar to many other development platforms, such as Ethereum. Developers deploy dApps, and operational activities on the platform, such as account creation or transaction execution, are managed by the nodes on the network.
The NEAR development suite is a set of tools and reference implementations, including software development kits (SDKs), a wallet, and a blockchain explorer.
Other elements of the NEAR Protocol include the NEAR token (see below) and tokens or assets issued on the NEAR platform. Ultimately, it will also be possible for assets created on other blockchains to bridge into the NEAR Protocol. Recently, the NEAR team has developed the “Rainbow Bridge,” which connects the NEAR and Ethereum platforms.
How It Works
The NEAR Protocol white paper is extensive, underscoring that the technology under the hood is complex. However, it can be summarized into four main components: sharding, consensus, staking selection and game theory, and randomness.
NEAR Protocol uses a horizontal sharding design called Nightshade. Similarly to Ethereum 2.0, there’s a Beacon chain with connected shard chains. In Nightshade, it’s assumed that transactions from all shards combine to form a block. Therefore, each shard submits its own segment of each block, called a “chunk.”
A validator is assigned the responsibility to assemble each block from the chunks provided by the shards. Each shard assigns its own validator to produce its own chunk. Validators are selected using a secure randomized process.
The consensus model is called Thresholded Proof of Stake. The “threshold” part refers to an algorithm, set to allow as many validating nodes as possible to participate in a given half-day period, called an epoch.
The model operates a slashing mechanism whereby validators lose part of their stake if they’re found to be incorrectly validating transactions. The slashing protocol is progressive to offset the risk of accidental slashing. There are also “hidden validators” who are randomly assigned to shards to detect malicious network activity.
The randomness approach used by NEAR, combined with the systemic deterrents to bad actors, can tolerate up to two-thirds of malicious actors before any negative influence on the output. Therefore, NEAR is built to be highly secure and resilient against network attacks.
The NEAR Token
NEAR is also the name and ticker of the native token for the NEAR Protocol. It’s comparable to how ETH will be used in Ethereum 2.0, in that NEAR pays for transaction processing and is the staking currency for validating nodes.
However, NEAR can also be used by token holders who want to delegate to validators, and it also confers some other governance rights. For example, the decision to put the final version of the mainnet live in 2020 is subject to a community vote.
One billion NEAR tokens were issued at genesis. The tokenomic model allows for minting a maximum of 5% new tokens per annum. The precise number of tokens minted is based on the overall size of rewards for running a validating node.
Validators are eligible to receive 4.5% of new token issuance, while the remaining 0.5% is allocated to a dedicated Treasury for the future development of the NEAR Protocol.
Validators aren’t eligible to receive any share of transaction fees. Instead, 30% of fees are rewarded to the developer of the smart contract used in the transaction. 70% of transaction fees are burned.
NEAR Protocol was founded by Alexander Skidanov and Illia Polosukhin. The two initially started working together with a shared vision of making life easier for developers. In July 2018, they devised the concept of NEAR as a decentralized platform that would allow developers and entrepreneurs to build software and bring it to new markets more easily.
Skidanov started out at Microsoft in 2009, going on to become the first engineer at MemSQL. He’s a two-time medalist in the prestigious International Collegiate Programming Competition, the oldest and largest of its kind in the world.
Polosukhin is also an ICPC finalist who has over ten years of development experience, including three years at Google.
The two co-founders have assembled a stellar team of programmers, including previous colleagues at Google and MemSQL. The NEAR team now works under the banner of the NEAR collective, a decentralized group of teams combining expertise in programming, business, finance, UX, marketing, and more.
History and Roadmap
The first big milestone for NEAR Protocol came in July 2019 when the project successfully secured $12.1 million in funding from several big-name investors, including Electric Capital and Pantera Capital.
Following the first iteration of the mainnet launch in April 2020, another funding round, led by Andreessen Horowitz’s blockchain fund A16Z, raised a further $21.6 million.
In August 2020, the NEAR public token sale was a runaway success, selling out in two hours.
Other notable successes in 2020 include a partnership with Chainlink and the soft launch of the interoperable “Rainbow Bridge” allowing NEAR to interact with Ethereum.
NEAR will roll out a full version of the mainnet before the end of 2020, subject to a community vote. After that, the team plans to continue developing the mainnet with features that were taken out of scope for the first version. These include upgradeability without hard forking, safe locks for operations with assets spanning contracts and shards, and more.
NEAR Protocol is one of the more promising blockchain projects to emerge in quite some time. It’s solving similar infrastructural problems to Ethereum 2.0 and Polkadot, such as maintaining the security of decentralization while increasing throughput via sharding.
However, the NEAR Protocol aims to keep all this under the hood, with a clear focus on ensuring the platform is usable for its developers, validators, and end-users. In that respect, it emerges as a solid competitor to the current hotly discussed project. With some serious financial backing behind it, NEAR Protocol only needs to ensure that the project markets itself sufficiently well to gain adoption over the well-established competition. If it can do that, it stands a good chance of pulling ahead of other platforms.
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