A Deep Dive Into NEAR

A Deep Dive Into NEAR

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Near has many features that make it convenient for the development of decentralized applications

A Deep Dive Into NEAR


Since the introduction of smart contracts on decentralized networks, the blockchain industry has been transformed. Smart contracts open up blockchains to an entire world of new applications. Although these tiny snippets of code on the network were first introduced and popularized by Ethereum (ETH), it’s far from the only network that uses them.
Today, smart contracts are almost synonymous with distributed applications, enabling users to deploy financial applications on a shared framework. Ether’s steady rise to the second-largest cryptocurrency has primarily been fuelled by the evolution and popularity of smart contract-based applications and the decentralized finance (DeFi) space. However, while delayed updates, congestion and high fees continue to plague the Ethereum network, alternative platforms such as NEAR have emerged as an attempt to resolve these issues.

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What Is NEAR? 

NEAR is a development platform for decentralized applications (DApps). It is built atop the NEAR Protocol, which uses a proof-of-stake (PoS) consensus mechanism to underpin its developer-friendly, public, sharded platform. Its scalability and low cost make it useful for developers building DApps. It’s also climate-neutral, meaning that the platform consciously commits to measuring, reducing and offsetting its carbon footprint with green initiatives. 

The platform has many features that make it convenient for the development of decentralized applications. It uses all kinds of command-line interface (CLI) tools, is compatible with various wallet applications, and includes interoperability modules to provide developers with a comprehensive, intuitive and scalable ecosystem.

Scalability is one of the biggest challenges for all blockchain networks and many platforms achieve higher scalability by reducing decentralization and using high-end hardware to boost the network’s throughput. The NEAR Protocol is not one of these projects and can scale linearly to billions of users without compromising its decentralization.
Instead of being a specialized, task-specific blockchain, NEAR is an all-purpose platform that allows developers to create all sorts of DApps on it. As a layer one protocol, it competes against some of the most popular projects in the industry, including Ethereum (ETH), Cardano (ADA) and Polkadot (DOT). Due to its operations being spread across hundreds of thousands of nodes, NEAR functions like a “community-operated cloud.”

The team behind the platform calls itself the NEAR Collective and has claimed that it should take developers less than five minutes to build an application for their ecosystem. The collective is an internationally distributed workforce of industry professionals and experts in blockchain research and development. Their primary goal is to maintain the platform and its features for both developers and users, while also promoting the development of decentralized applications.

Due to its open membership policy, anyone can contribute to the network’s development. 

What Makes NEAR Unique?

Sharding, through which data is split into smaller chunks for storage, is an important mechanism used by NEAR that enables the network to process computations in parallel, leading to vastly improved throughput. Bitcoin (BTC) requires each node to store the entire history of the blockchain and to verify every transaction and, during periods of high activity, this can clog up the whole network. 

NEAR fixes this issue both by splitting the network and removing nodes’ capacity limitations on the network in order to allow for more scalability. Additionally, though most other sharding techniques involve the use of complex node hardware, NEAR strategizes its sharding in a way that keeps its nodes simple, light and efficient for cloud-hosting.

This sharding system ensures scalability and, by using a horizontal approach (specifically, through its recent Doomslug consensus mechanism), the network can run an unlimited number of shards in parallel, making NEAR a compelling and versatile solution for developing DApps.

A network of assigned validator nodes maintains each shard and this division of labor allows for a more dynamic distribution of computational tasks. This raises the network’s capacity to nearly 100,000 transactions per second. Moreover, NEAR aims to offer much cheaper transaction fees than Ethereum. 

However, scalability and cost are not NEAR’s only areas of focus. The collective has also devoted attention to the question of accessibility. Blockchain is still a developing technology in a growing industry, so projects can be complicated for end-users to use or understand. This weighs heavily on developers too, causing some DApps to struggle to gain adoption despite being entirely functional.

The urgent need for scalability can also push developers to create their own blockchain platforms, which is an arduous task and isn’t very economical, akin to building an on-premise server farm just to launch a website. Just as the advent of Amazon’s AWS and Microsoft’s Azure platform provides the infrastructure for new online services, NEAR hopes to provide developers with a common framework for building and maintaining decentralized applications with more ease.

NEAR’s Key Features

As mentioned above, usability and developer-friendly features are the core of the NEAR platform. Due to its protocol-level implementations, the platform is capable of catering to all kinds of use-cases and actors. These include:
  • Developers: Using its contract-based account model, developers can build advanced permissions into their applications to sign transactions on the user’s behalf. NEAR’s infrastructure also offers a highly composable environment, offering them access to specific tools and incentivizing developers to create seamless apps. Further, NEAR also encourages devs to maintain critical system functions by facilitating a protocol-level fee rebate.

  • End-users: NEAR offers an intuitive user experience, which includes its flexible account model. Most decentralized platforms require users to go through the cumbersome process of setting up an account, an associated wallet, and handling their tokens. With NEAR, even newbies who aren’t too well-versed with DApps can experience a smoother onboarding process that doesn’t require multiple steps or involve pop-ups.

  • Validators: The platform also allows projects to diversify their offerings and optimize services for the end-user. It does this by permitting validators to access delegation features at the contract level. This makes NEAR an attractive site for operating validator nodes.

A Brief History of the NEAR Protocol

Alexander Skidanov and Illia Polosukhin announced the NEAR Protocol in July 2018. Skidanov was a former software engineer at Microsoft, after which he worked at MemSQL as director of engineering. Polosukhin was an engineering manager at Google’s research center, where he helped develop language technologies for Google Translate.

The two met at the 2018 Y Combinator startup accelerator program and started working on NEAR journey soon after. Having grown their team from two to 10, they raised an initial $15 million in funding during a crypto bear market, before the project’s development began.

While researching program synthesis, the team discovered the concept of smart contracts on distributed payment networks like blockchains and this encouraged them to explore deeper. After testing a wide range of available blockchain platforms in 2018, they concluded that what they needed hadn’t been built yet, and started to develop NEAR.

Throughout the development process, Skidanov, Polosukhin and the team focused on their aim of providing both users and developers with an easy-to-use and scalable platform to create and use decentralized applications. For this reason, NEAR opted for a proof-of-stake consensus mechanism and, after a year of testing, the NEAR platform officially launched in April 2020.

NEAR now has a team of over 50 employees. Its headquarters are located in San Francisco, which gives it the advantage of being close to projects like Solana (SOL), Cosmos (ATOM), Polkadot (DOT) and Ethereum (ETH).

Architecture and Design

NEAR has two separate layers, i.e., a blockchain layer and a runtime layer. Each layer operates independently. The blockchain layer has its own virtual machine (RISC-V) and fees, whereas the runtime layer receives transactions without knowing anything about the source. In fact, the runtime layer does not know anything about its parent blockchain, its sharding mechanism, nor the network’s consensus algorithm.
NEAR can also connect to other blockchain networks via what it calls a “Rainbow Bridge.” For instance, the ETH ↔ NEAR Rainbow Bridge acts as a permissionless, trustless protocol to connect to the Ethereum (ETH) blockchain. This gives developers and users access to resources on the Ethereum network, without having to trust anyone outside the connected ecosystems. 

Depending on their preferences and requirements, network participants can either use an existing bridge or deploy a new one. The bridge protocol also allows them to join the maintenance of an existing bridge in a permissionless fashion. The network also recently saw the launch of Aurora, which is an Ethereum layer two protocol that allows developers to run Ethereum-based DApps on NEAR.


The protocol uses a consensus algorithm that requires validators to stake a fixed amount of NEAR tokens as collateral to disincentivize foul play. Validators are a network of nodes that execute transactions by aggregating them into blocks and maintaining their last updated record. This consensus algorithm is called proof-of-stake (PoS) and ensures a safer network as each validator node has a personal stake in the network. 

Validators receive a reward at the end of every epoch (~12 hours) for staking their tokens and serving the network. If a node wishes to unlock its stake, it can do so anytime but must wait for three epochs to actually spend tokens. On the other hand, if a validator attempts to attack the network (and fails) or engages in some malicious activity, either a certain amount or all of their staked tokens are destroyed. This is called a “slashing penalty” and can be implemented in varying degrees of severity. The dishonest validator may also be banned from the blockchain for the duration of the current epoch, or even permanently.

The NEAR Protocol selects its validators through auctions, in which anybody with a validator node can stake their tokens to participate in the process. At the end of each epoch, nodes with the highest stakes are automatically chosen by NEAR as eligible validators that can then create and validate new blocks to earn rewards. However, if a participating node has not staked enough tokens, it might not win a validator seat, in which case it remains a relay node on the network and will have to wait for the next epoch to compete again.

However, this creates a problem, since only the wealthiest nodes on the network will validate transactions. This could also lead to cases where specific nodes are selected every epoch due to the disproportionate amount of tokens held by them. To prevent this, NEAR uses a model of PoS that involves “delegation.”

With PoS, delegation is a vital concept that plays a considerable role for validator nodes, allowing holders to freeze their tokens into a staking pool and link it to a single or a set of elected delegates. The delegates validate new blocks and receive transaction fees as rewards, which are then divided among those token holders who participated in the staking pool. Delegation gives small stakeholders a chance to increase their stake and earn rewards. 

The amount they receive is proportional to the tokens staked and can be earned after each epoch. Delegates, meanwhile, receive a validator fee from token holders. Annually, NEAR mints nearly 5% of its token’s total supply, mainly through validator rewards. For instance, the total supply of NEAR is 1 billion tokens, so if the annual rewards were 4.5%, 45 million tokens would be distributed to validators on the network. As mentioned above, this distribution is proportional to the stake held by the validator or delegate.

The NEAR Token

The NEAR economy is built around utility tokens and its native NEAR token is the core medium of exchange within the ecosystem. The token is mainly used by two groups of people: users, to pay for using DApps, and validators/delegators. 
As a fully permissionless network, anyone can validate transactions on the network to earn rewards in NEAR. The token can also be used to participate in the blockchain’s governance systems. This enables users to vote on proposals to make community-driven decisions about the future of the network, including the slashing penalty and percentage rewards for delegates and validators.

Since the platform is governed by its community, NEAR is designed to empower those participants who have the vision to lead the network’s efforts. When an issue is detected on the network, anyone can submit an improvement proposal, which is then voted on by the community.

To make the decision-making process more efficient, a qualified entity known as the “reference maintainer” is selected to oversee the network’s governance. On receiving a sufficient number of votes, developers start working on implementing the changes detailed in the improvement proposal. Users can also submit suggestions at the NEAR Enhancement Proposals repository on Github.

NEAR tokens can be obtained in a few different ways, including earning them, purchasing them, or asking a friend. Users can earn NEAR by participating in development bug bounties, winning NEAR-focused hackathons, or maintaining the network’s communities.

Those who already possess NEAR tokens can earn more by staking them using a validator node. Though NEAR is traded across most popular cryptocurrency exchanges, anyone can receive NEAR tokens using the platform’s NEAR “Drop” feature, which doesn’t even require a NEAR account to use. 

Transaction fees are split between developers and a burn contract. Through this model, the rate of burning tokens can actually surpass the rate of minting new ones during extended periods of high-usage of the network, making the token deflationary in the long term.

NEAR’s Future

NEAR is encouraging the development of more DApps on the network through its NEAR Grants Program, which provides development resources and funding to projects building on NEAR. Administered by the NEAR Foundation, it was created to promote DApp development within its ecosystem.

As a protocol that is driven by its community, NEAR doesn’t have a structured roadmap like most blockchain projects. Instead, the NEAR Collective is continually working to improve upon its existing technology and to ensure its features are adequately implemented and kept open-source. This allows anyone in the world to modify the code, propose changes, and help the network to grow.

Unlike other blockchains that are working to solve the scalability problem, NEAR does not rely on creating new blockchains or parachains but instead shards its network down to the block level. Ethereum 2.0 is on the horizon, and one of its most anticipated features is its sharded architecture. NEAR has already implemented this and, over time, as the network builds its repository of applications, this community-driven platform is one to watch as the industry continues to evolve.

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