What is the NEAR Protocol(NEAR)?

NEAR Protocol is a foundational blockchain that achieves scalability through the unique sharding technology called Nightshade. In 2020, the protocol launched as a decentralized cloud infrastructure for hosting decentralized applications(DApp).

The NEAR blockchain utilizes Rainbow Bridge and Layer 2 solution Aurora to enable cross-chain interoperability. Users can transfer ERC-20 tokens and other assets from the Ethereum blockchain into the NEAR network, enjoying the benefits of high throughput and low transaction fees.

NEAR is the native token of NEAR Protocol, used to pay for transaction fees and data storage costs. NEAR token holders can also stake tokens via the NEAR wallet to earn rewards or vote on governance proposals.

Introduction

With the rise of cryptocurrencies and blockchain technology, transaction demands are increasing, and networks like Bitcoin, Ethereum, and others are beginning to face scalability challenges. Decentralized applications and non-fungible tokens(NFT) are gaining attention, highlighting issues within the Ethereum blockchain. Peak traffic often causes gas fees on Ethereum to rise, increasing transaction costs and discouraging users and developers.

Today, several teams are exploring solutions to expand blockchain networks, and the NEAR Protocol(NEAR) team is focused on researching how to use sharding to address these limitations.

What is NEAR Protocol?

NEAR Protocol is a scalable underlying blockchain that uses sharding technology. The protocol employs smart contracts and utilizes a Proof-of-Stake(PoS) consensus mechanism to secure the network. The NEAR platform was co-founded by Alex Skidanov and Illia Polosukhin in 2020 and built by the NEAR team. Its goal is to establish community-operated cloud infrastructure for hosting decentralized applications(DApp).

The NEAR platform includes various programming tools, supports multiple programming languages, and runs smart contracts with cross-chain capabilities to assist developers in building DApps. The platform simplifies registration by replacing cryptographic wallet addresses with human-readable account names. As a PoS blockchain, NEAR achieved carbon neutrality in 2021 and received a climate-neutral product label.

How does NEAR Protocol work?

To outperform other smart contract-based blockchains like Ethereum, EOS, and Polkadot, NEAR employs the following technologies to enhance performance.

Nightshade Sharding

Nightshade is the core technology of NEAR blockchain, which improves data processing efficiency through sharding. Sharding involves dividing transaction processing work into fragments assigned to multiple validators. This way, each node only processes a small portion of the network’s transactions, increasing transactions per second.

According to Nightshade, block producers and validators on NEAR handle transaction data across multiple shards simultaneously. Each shard produces a part of the next block, called a (chunk). The NEAR blockchain processes and stores these chunks, recording the transactions contained within.

In theory, with Nightshade, NEAR can process millions of transactions per second without affecting overall operation. The network automatically splits or merges shards based on real-time network conditions, traffic, and resource utilization. During high traffic, the network increases the number of nodes to maintain efficiency and prevent transaction fee spikes.

Unlike other PoS networks, validators do not compete based on staked amounts to produce the next block. NEAR uses a TPoS (Threshold Proof-of-Stake) election mechanism to select validators. TPoS is similar to an auction: many validators willing to participate submit signed transactions indicating how much NEAR they are willing to stake. TPoS then determines the minimum stake required to become a validator at each interval (usually every 12 hours). Staking above this threshold gives a chance to be selected, with probability proportional to the staked amount.

Rainbow Bridge

Rainbow Bridge is an application on NEAR that allows users to transfer ERC-20 tokens, stablecoins, wrapped tokens, and even NFTs between Ethereum and NEAR blockchains. Developers and users can enjoy NEAR’s high throughput and low fees.

Rainbow Bridge is a fully permissionless and decentralized application. When bridging tokens, users can directly transfer ERC-20 tokens from MetaMask or other Web3 wallets into NEAR wallets, or perform the reverse operation. First, users deposit tokens into a smart contract on Ethereum. Since tokens cannot be transferred directly between networks, they are locked on Ethereum and removed from circulation. New tokens are created on NEAR to represent the original tokens, maintaining the total circulating supply across both blockchains.

Most transactions on NEAR are confirmed within 1-2 seconds and cost less than $1. However, transferring tokens back to Ethereum takes more time and money. Final costs depend on Ethereum’s real-time traffic and gas prices.

Aurora

Aurora is a Layer 2 solution within NEAR Protocol designed to help developers scale applications on an Ethereum-compatible platform, reducing user transaction costs. According to NEAR, Aurora can process thousands of transactions per second, with block confirmation times of about two seconds.

Aurora consists of Aurora Engine and Aurora Bridge. Aurora Engine is an Ethereum Virtual Machine(EVM) built on NEAR, compatible with Ethereum and supporting all tools in the Ethereum ecosystem. This allows developers to easily deploy DApps on NEAR without rewriting code or learning new development tools. Developers can also use Aurora Bridge (technologically similar to Rainbow Bridge) to seamlessly transfer smart contracts and ERC-20 tokens between Ethereum and NEAR. Users can pay transaction fees with Ether on Aurora.

What is NEAR Token?

NEAR(NEAR) is the native token of the NEAR ecosystem. It is an ERC-20 token with a maximum supply of 1 billion tokens. NEAR tokens are used to pay for transaction fees and data storage costs within the network. Additionally, smart contract developers receive a portion of the transaction fees generated by their contracts. To ensure scarcity, the remaining transaction fees are burned.

Token holders can use NEAR Wallet to stake tokens and earn rewards. Staking allows running validator nodes to earn additional NEAR tokens. The total reward pool accounts for 4.5% of the total NEAR supply. Token holders can also participate in NEAR’s governance by submitting proposals related to the platform and products and voting on them.

Summary

As blockchain development progresses, platforms with lower transaction fees and higher throughput are more likely to lead the industry toward mainstream adoption. NEAR’s scalability solutions can attract developers aiming to build more efficient DeFi products and decentralized applications(DApp). NEAR’s roadmap includes advancing sharding technology and Layer 2 cross-chain solutions to further expand its blockchain and ultimately benefit developers and end-users. $RUNE **$ONE **$NEAR