In this article, we delve into the NEAR Protocol project, which launched on Binance on October 19, 2021, and has already shown a 563% return since the beginning of this year! By reading this review, you’ll gain an exclusive insider perspective, understand whether it’s worth investing in the NEAR token now, and discover the price forecast for the near future.
What is Near?
NEAR is a decentralized platform for development, built on the NEAR Protocol, a public and developer-friendly Proof-of-Stake blockchain.
The NEAR platform is based on the NEAR Protocol blockchain and offers a wide range of tools—from explorers to CLI utilities, from NFT applications to compatibility components—that help developers build simpler applications and enable the ecosystem to grow.
NEAR’s architecture employs a sharding mechanism called Nightshade. Unlike other blockchains that create multiple parachains controlled by a single chain, NEAR simulates these as a unified blockchain. Each block produced on NEAR includes snapshots of transactions occurring across different segments (shards) of the chain. Each segment is supported by its own dedicated network of validators, all working in parallel. This design allows NEAR to process thousands of transactions per second.
Origin and Purpose of the NEAR Protocol
NEAR was created by Alexander Skidanov and Illia Polosukhin, both of whom hail from Ukraine and have strong backgrounds in computer science and mathematics. They began developing the NEAR Protocol in 2017 after contributing to the open-source Ethereum project. The NEAR mainnet was officially launched in August 2020.
Illia Polosukhin also gained experience working with open-source machine learning libraries like TensorFlow. The duo established their company in San Francisco, a common hub for developers looking to push the boundaries of software innovation. Their goal was to build an improved version of Ethereum without relying on layer-2 scalability solutions.
Unlike Ethereum, NEAR Protocol focuses on layer-1 scalability, allowing it to offer enterprise-level performance from the outset. NEAR is capable of processing up to 100,000 transactions per second following full upgrades, making it an attractive platform for large-scale deployment of decentralized applications (dApps) and Web3. This has led to NEAR gaining global popularity, with over 1,700 active developers contributing monthly.
To date, NEAR has attracted $566 million in venture capital funding from industry leaders like Andreessen Horowitz, DCG, Coinbase Ventures, Tiger Global, Accomplice, Pantera Capital, Electric Capital, Blockchange, Dragonfly Capital, Blockchain.com, and others.
Brief History of NEAR
2017 — The Beginning with AI:
It all started with artificial intelligence. Illia Polosukhin and Alexander Skidanov launched NEAR.ai with the goal of exploring program synthesis and predicting the arrival of the “singularity.” During their work, they attempted to use Ethereum to reward contributors but soon realized that the blockchain was not suitable for their needs.
2018 — The Vision Takes Shape:
Realizing the limitations of existing blockchains, they decided to create their own, leading to the birth of the NEAR Protocol. Their vision was to provide developers with a simple way to build decentralized applications that could easily scale.
2019 — Establishment of the Foundation:
The NEAR Foundation was established as a non-profit organization to promote the development of the NEAR ecosystem and protocol.
2020 — Launch of the NEAR Mainnet:
In April 2020, the NEAR mainnet was launched, and by September 2020, it transitioned entirely to community governance. In October 2020, a vote was held to enable token transfers.
2021 — First Phase of Sharding:
NEAR implemented the first phase of sharding, a unique technology that facilitates easy scalability of the NEAR blockchain.
2022 — Completion of Funding Rounds:
Following two rounds of funding in 2022, NEAR raised $500 million to support further development of the protocol and its ecosystem.
How the NEAR Protocol Works
Similar to Ethereum, Cardano, and Tron, NEAR can be described as a foundational blockchain layer, serving as the infrastructure for building and deploying other applications.
NEAR leverages a technology known as Nightshade to achieve high throughput. This scalable solution uses separate sets of validators to process transactions in parallel across multiple segmented chains, significantly increasing the blockchain’s overall transaction capacity. What sets this approach apart from other blockchains is that each segment contributes to the formation of the next block, creating a component known as a “chunk.” These chunks are processed and stored within the NEAR blockchain to finalize the transactions they contain.
The NEAR Protocol is designed to streamline the developer experience by offering a powerful set of tools for creating next-generation applications. With its contract-based account model, developers can build sophisticated applications capable of signing transactions on behalf of users, enabling them to execute agreements without requiring the user’s physical presence to confirm actions.
Assessing the NEAR Project: Product-Market Fit
The NEAR Protocol aims to solve blockchain scalability issues through a distinctive solution—its sharding mechanism known as Nightshade. Sharding divides the network into smaller fragments (shards), which reduces the computational load on each node. NEAR uses an auction system to select validators for each “epoch” (approximately every 12 hours), with validators who stake higher amounts having greater influence in the consensus process.
The primary function of the NEAR token is to pay for transactions or serve as collateral for storing data on the blockchain. Various participants within the NEAR platform are also rewarded with NEAR tokens. For example, validators receive NEAR tokens as rewards for their work every epoch. Additionally, developers who create smart contracts earn a percentage of the transaction fees generated by their contracts.
Assessing the NEAR Project: Investors
The NEAR project has attracted $607 million in investment, with $533 million raised through private funding rounds. Notably, Tier 1 and Tier 2 funds are among the backers. Key investors include:
- Andreessen Horowitz (a16z): This fund has invested in 219 projects, with SOLANA being its most successful investment to date.
- DragonFly Capital: This fund has invested in 156 projects, with MATIC being the most successful so far.
The level of investor backing is exceptionally high. All the major funds that have invested in NEAR have also supported large and prestigious projects, demonstrating strong confidence in NEAR’s potential.
Narrative
The NEAR Protocol falls within the Blockchain category, which boasts a total market capitalization of $796 billion. The average return across this category is an impressive 150x.
The most successful listings in this category include ETH, BNB, and SOL. It’s worth noting that NEAR is not far behind the industry giants, currently ranking 10th in market capitalization with a value of $7.7 billion. NEAR Protocol has significant growth potential, especially when compared to Ethereum’s $413 billion market cap.
Additionally, the blockchain category remains strong, with 70% of projects showing positive token price trends over the past week. NEAR itself saw a 13% increase in the last 24 hours.
Fundamentals
The NEAR project boasts a highly active user base, with 1,800 developers contributing to the ecosystem. To date, 290 applications have been successfully built on the NEAR Protocol, including notable examples like Rainbow Bridge and Aurora. The platform also shows consistent growth in revenue, earning $1.5 billion in the first quarter of 2024—an increase of $500 million from the previous quarter.
Team
According to public data, NEAR has two co-founders. Alexander Skidanov spent five years at memSQL, where he served as Director of Engineering. Illia Polosukhin worked for six years at Salford Systems before becoming a Development Manager at Google. Eric Winer, the company’s CTO, previously led development at the U.S. cryptocurrency exchange Gemini for over six years.
It’s worth highlighting that co-founder and CEO Illia Polosukhin participated in the “AI Transformation” conference, hosted by Nvidia’s CEO Jensen Huang, which underscores Illia’s high level of expertise in the field.
Market Capitalization (FDV)
Currently, the NEAR token is trading at $7.47, with an overall market valuation of $8.54 billion FDV. In comparison, leading tokens in the category include ETH ($425.9 billion FDV), BNB ($88.4 billion), and SOL ($86.2 billion). NEAR Protocol has $279.8 million in Total Value Locked (TVL), whereas Polygon has a TVL of $1.09 billion, with a comparable market cap of $10.3 billion.
Thus, NEAR has a relatively low amount of locked assets compared to its market capitalization, which might suggest that the token’s rapid price growth could be more speculative than fundamentally driven—reflective of the current market phase.
Social Metrics
The project has 1,900 followers on X and TwitterScore 415 (Excellent). The website saw over 820,000 visitors in the past month, a 20% decrease compared to the previous month.
NEAR Tokenomics
The NEAR Protocol, like other public Proof-of-Stake networks, employs its native cryptocurrency, NEAR, to incentivize decentralization. Validators, similar to Bitcoin miners, receive NEAR as rewards for processing transactions. These validators also mint new NEAR tokens through transaction processing and rewards.
NEAR’s tokenomics is predictable, akin to how the Federal Reserve stimulates the economy through the infusion of trillions of dollars. However, NEAR’s system is more structured and includes the following elements:
- Maximum Supply: 1,000,000,000 NEAR tokens.
- Circulating Supply: Less than 90,000,000 NEAR, representing 91% of the total supply.
- Market Capitalization: $1,566,400,890, with the NEAR token priced at $1.57 at the time of writing.
NEAR Ecosystem
The NEAR Protocol ecosystem is a vibrant community of over 550,000 participants. This community has played a crucial role in funding 125 DAOs with a total of $5,000,000, supporting a diverse range of decentralized applications (dApps) on the NEAR blockchain. These applications span various sectors, including lending, NFT trading, gaming, launchpads, and exchanges. A key tracker and aggregator for all dApps on NEAR is AwesomeNear.
Notable applications within the NEAR ecosystem include:
- Paras: An NFT marketplace utilizing decentralized IPFS storage and featuring its own token, PARAS. It hosts intriguing NFT collections, including NEAR’s version of CryptoPunks, known as NPunks.
- Flux: An open prediction market protocol based on FLX tokens. Users can engage in predicting various events and market conditions using this protocol.
- Burrow: A lending protocol on NEAR, similar to the Aave protocol on Ethereum. It allows users to borrow and lend using a variety of digital assets.
- Ref Finance: A decentralized token exchange platform, similar to Uniswap, where users can easily and securely swap different tokens on NEAR.
To facilitate interaction with Ethereum-based dApps, NEAR introduced the Rainbow Bridge, enabling cryptocurrency transfers between networks. Users can transfer their tokens from Ethereum to NEAR by locking them on Ethereum and receiving equivalent NEAR tokens through the NEAR wallet for use within the NEAR ecosystem.
How the NEAR Token is Used
The NEAR token has several critical use cases within the NEAR Protocol ecosystem:
- Transaction Fees: NEAR tokens are used to pay transaction fees required for processing transactions on the network. These fees help maintain and secure the NEAR blockchain.
- Token Burn: A significant portion of transaction fees is burned, reducing the overall supply of NEAR tokens. This deflationary mechanism helps manage token supply over time.
- Developer Rewards: A small portion of transaction fees is allocated to reward developers whose smart contracts were involved in the transactions. This incentivizes developers and supports the growth of the NEAR ecosystem.
- Inflation Management: NEAR’s inflation rate is capped at 5% per year. This inflation is recalculated every half-day based on the fees collected during that period. Notably, the transaction fees collected are excluded from inflation calculations, helping to mitigate inflation levels. Newly created tokens due to inflation are used to reward block validators on the NEAR network.
These mechanisms collectively support the stability and growth of the NEAR ecosystem, encouraging continued participation and development.
Future of NEAR Protocol
The NEAR Protocol is undoubtedly a promising and intriguing project with significant potential for future success. As a blockchain project, it is well-positioned for growth. The developers have made considerable efforts to attract a broad audience by simplifying the system and reducing financial barriers through lower fees. This positions NEAR to continue thriving and solidifying its market presence.
Several factors could drive NEAR Protocol’s future growth and development:
- Ecosystem Expansion: The growth of new dApps and projects on the NEAR platform will contribute to its expanding ecosystem, attracting more users and developers.
- Technological Innovations: NEAR Protocol is actively implementing new technologies and improvements that enhance the network’s performance, scalability, and security.
- Increased Interest in Decentralized Applications: Growing interest in decentralized applications (dApps) and DeFi could boost demand for the NEAR platform and its token.
- User Base Growth: Attracting new participants to the NEAR network can drive growth and potentially increase the token’s value.
- Overall Cryptocurrency Market Growth: The expanding cryptocurrency market and influx of new investors could positively impact the price of NEAR tokens.
However, it’s essential to note that the cryptocurrency market is highly volatile. The price of NEAR tokens may fluctuate due to various factors, including overall market conditions, project news, competition from other blockchain platforms, and other external influences.
Conclusion
In conclusion, NEAR Protocol holds considerable promise as it advances its technological and ecosystem goals. With its innovative approach to scalability and user-friendly design, NEAR is well-positioned to capitalize on the growing interest in decentralized technologies and applications. While the potential for substantial growth exists, investors should remain mindful of the inherent volatility of the cryptocurrency market. Staying informed about developments within NEAR Protocol and the broader market landscape will be crucial for making well-informed investment decisions.
FAQ
- What is NEAR Protocol? NEAR Protocol is a public blockchain network designed for creating and running decentralized applications (dApps). It focuses on scalability, usability, and developer-friendly features. Its unique sharding mechanism, known as Nightshade, enhances transaction throughput and network efficiency.
- How does NEAR Protocol work? NEAR Protocol utilizes sharding to split the network into smaller segments, or shards, which operate in parallel. This architecture enables high transaction throughput and low latency. The protocol also features a user-friendly design to simplify dApp development.
- What are the main uses of NEAR tokens? NEAR tokens are primarily used to pay for transaction fees on the network, reward validators, and incentivize developers. A portion of transaction fees is burned, reducing the total supply of tokens, while some are distributed to developers for their contributions.
- What are the key factors driving NEAR Protocol’s growth? Key factors include the expansion of its ecosystem through new dApps, ongoing technological innovations, increasing interest in decentralized applications and DeFi, growth in its user base, and overall market expansion in the cryptocurrency sector.
- What are the potential risks associated with investing in NEAR Protocol? Potential risks include market volatility, competition from other blockchain platforms, and changes in regulatory environments. Investors should consider these factors and stay updated on market developments and project news.
- How can I get involved with NEAR Protocol? You can get involved by using or developing dApps on the NEAR network, participating in its community, or investing in NEAR tokens. The protocol’s website and official social media channels provide resources for getting started.
