Terra isn’t dead: the network is back up and running on a new blockchain, focusing on a more decentralized governance model. The community is making no attempts to revive its recently failed TerraUSD (UST) stablecoin. It has, however, re-launched a new version of the LUNA governance token, restarting its supply at 1,000,000,000 tokens. Here are the facts on the new blockchain, why it was launched, and the new token’s airdrop/ distribution. Background on Terra 2.0 Terra 2.0 (now known formally…
The already broad universe of blockchains is expanding at a rapid pace. Every year or so, we hear of a new, ambitious project ready to innovate and impress. Many do not live up to their expectations. Others, like NEAR Protocol, exceed them.
With a development team brimming with talent and experience, and more than $60 million in funding, NEAR Protocol is one of the emerging stars in the blockchain space. What started as an open-source platform built to accelerate decentralized applications has just turned into a decentralized autonomous organization, less than two years after its inception.
In this guide, we try to find out how it managed to come so far, so fast, and discover what’s up next for NEAR Protocol.
What is NEAR Protocol?
NEAR Protocol is a decentralized application platform that uses smart contract functionality to enable users to create, execute, and access DApps freely. Its primary purpose is to put “the power of the Open Web” in everyday people’s hands.
Often referred to as NEAR, the project promises stable fees, scalability, and developer-friendly features. Two of these features include:
- Nightshade – a Proof-of-Stake (PoS) consensus mechanism
- Doomslug – a mechanism for generating blocks able to process more than 100k transactions per second (TPS)
The NEAR fees are so small that they have their own unit of measurement named “yocto.” The platform has a native utility token, called NEAR, which holders can pay fees, run validator nodes, or cast their votes on network governance proposals.
According to the NEAR whitepaper, the NEAR platform is also interoperable with Ethereum through NEAR’s Rainbow Bridge. The project aims to become a blockchain for private shards and one day be powered by mobile nodes.
NEAR Protocol has just completed a three-stage rolling-out plan of its mainnet, which started in April 2020 and reached community-governed status at the end of October 2020. This latest development has turned NEAR into a full-functioning decentralized autonomous organization (DAO).
Who is behind NEAR Protocol?
Few crypto projects out there can brag about having a development team as talented and experienced as the one behind NEAR Protocol.
There are more than 50 developers and programmers under the NEAR Collective badge working on NEAR worldwide. Some of its most illustrious members include:
- Alex Skidanov – former software engineer at Microsoft and director of engineering at MemSQL
- Illia Polosukhin – former engineering manager at Google
- Mikhail Keven – former senior software engineer at MemSQL and 2-time world champion of the International Collegiate Programming Contest (ICPC)
- Evgeny Kapun – former programmer at Google and 2-time world champion of ICPC
Skidanov and Polosukhin met while working at U.S. startup accelerator Y Combinator. In July 2018, they started working on a project that aimed to provide developers with better tools for creating and releasing software.
The two talented developers managed to build their team within a single day of announcing the project in 2018. They established the NEAR Foundation, a Swiss non-profit, which oversaw the NEAR Protocol’s governance and development until it became a permissionless, community-governed platform in October 2020.
What is the NEAR token?
NEAR is the native cryptocurrency on the NEAR blockchain. Token holders can use it for:
- Staking on the network
- Paying the fees for processing transactions and storing data
- Running validator nodes on the network
- Governance votes to determine the allocation of network resources
NEAR is a deflationary asset. The annual inflation should turn to zero if the network manages to process more than a billion transactions per day. However, it can also drop below -2% if daily processed transactions exceed 2 billion. Some NEAR tokens are burned to pay for network fees.
The NEAR token was launched in August 2020 through an Initial Coin Offering (ICO), which raised roughly $33 million after selling 120 million units.
A total of 1 billion NEAR tokens have been minted. After the ICO ended, the remaining supply was distributed this way:
- 17% has been reserved for Community Grants and Programs
- 14% has been allocated to Core Contributors
- 6% of NEAR’s initial supply was sold to Prior Backers
- 7% of NEAR’s initial supply will go to Early Ecosystem initiatives
- 10% of NEAR’s initial supply has been allocated to the NEAR Foundation
The Prior Backers are the initial supporters of the NEAR Protocol. They pumped $35 million in the project during seven private funding rounds between 2017 and 2020.
At the time of this writing, the NEAR token is among the top-100 cryptocurrencies by market capitalization, with a cap of $107,492,489. One NEAR is trading for about $0.6, and there are 174,876,443 units in circulation.
You can buy NEAR tokens from prestigious crypto exchanges like Binance and Huobi. However, when it comes to storing them, you do not have many options. The platform offers a web wallet, but it is still in full development. Your only safe alternative would be Trust Wallet.
How does it work?
We already mentioned the two mechanisms that make NEAR Protocol work, Nightshade and Doomslug. Now, let’s take a closer look at them!
Nightshade is a PoS mechanism that allows the validator nodes on the NEAR blockchain to broadcast their current state’s shards whenever a new block appears on the chain. Instead of sharding in other cryptocurrencies, as other blockchains do, Nightshade attaches a snapshot of every shard to the chain’s blocks. Many executed transactions do not overlap, so the network is faster and more efficient.
Doomslug is a mechanism that enables the validator nodes on the network to create blocks alternatively. Each of them takes its turn once every epoch, a period that lasts 12 hours. The block-generating speed of the NEAR network is one block per second.
Nodes receive block rewards from inflation, which is currently around 5% per year. The staking validators and delegators take their share of rewards from 90% of every block’s value. The remaining 10% goes to the NEAR treasury, which is under the NEAR Foundation’s supervision.
Users who want to become validator nodes on NEAR have to stake their NEAR tokens. The more tokens they stake collectively within a given shard, the bigger their cut of the block reward.
To enter a shard, a user has to occupy at least one of its 100 eligible seats. The price for each seat varies depending on the total amount of staked tokens. The platform facilitates access to smaller shards for the validators to increase speed and efficiency.
Users who wish to become validators and cannot afford to occupy a seat have the option to convince delegators to delegate their tokens for them. The delegators can do so by using staking pools. In return, they receive a part of the validator’s block reward.
Validators and delegators can opt to unstake whenever they want. However, those who break the rules may lose a significant part of their stake.
The Bottom Line
NEAR Protocol seems like a late arrival on the blockchain-based applications market. Its niche is already under the dominance of more powerful and popular projects, like Polkadot, for example. At first sight, it looks like the platform will have plenty of catching up to do.
However, NEAR has the advantage of significant funding. It also has a highly-experienced team, which is full of some of the rarest and most promising talents in the industry. It won’t be long until we see NEAR battling with similar projects, or even with Ethereum, for supremacy in the crypto space.