What is Near Protocol, why is it needed?

Near Protocol: What is it and how does it work?

Near uses a delegated Proof-of-Stake (PoS) blockchain with smart contracts. It uses sharding for maximum efficiency and is managed by the holders of its own NEAR token.

Near also interacts with Ethereum via Rainbow Bridge, a robust bridge that allows assets such as ERC20 and NFT tokens to be transferred between Ethereum and NEAR. Eventually, you can even interact with smart contracts and DApps on both sides using Rainbow Bridge.

As for the architecture, it uses a sharding mechanism called Nightshade. Instead of creating multiple edge parachains, as in the Polkadot blockchain, Near chains are modeled as a single blockchain. Simply put, each block created on Near contains a snapshot of the transactions taking place on each segment of the other chain.

Each segment is supported by its own dedicated network of validators, and all these segments run in parallel. This means that Near can process about 100,000 transactions per second.

As for blockchain production, they use a mechanism called Doomslug. Despite its hardcore name, Doomslug is pretty simple and assumes that different validators take turns producing blocks according to how many Near tokens they put in.

What’s so special about it?

Near is incredibly fast. It can handle about 100,000 transactions per second (tps) and reaches transaction completion almost instantly thanks to a 1-second block creation. Near says their transaction cost can be 10,000 times lower than on Ethereum.

Near is also designed for those who know next to nothing about blockchain. Near has a convenient system of accounts and keys to access them. Ordinary users will be able to access DApps built on Near using their usual registration process, users may not even realize they are working with blockchain. This will help developers reach a wider audience, and reduce problems for those already used to using DApps.

Near provides developers with a number of modular components to help them get their projects up and running quickly. These include example implementations of non-interchangeable tokens (NFTs), smart contracts, and full-fledged DApps. The full list of examples and their code can be found on the official GitHub.

We pay special attention to Near accounts. They have an interesting and unique system. Accounts can have multiple access keys and use readable wallet addresses (like “name.near”), instead of a public key hash (like in Ethereum or Bitcoin).

We decided to put all the information about accounts in a separate article. You can read about how to create your own Near wallet, access keys and accounts on our website in a handy guide.

Near Protocol Tokenomics

NEAR is Near Protocol’s own cryptocurrency, used as the lifeblood of the network, it has several different uses. As a native currency, it secures the network, acts as a unit of account and medium of exchange for proprietary resources and third-party applications, and in the long run seeks to become a means of savings used by individuals as well as contracts and DeFi applications (decentralized finance).

The Near economy is designed to make the network secure but inexpensive to use, even as it scales. Now let’s find out how it works.

Near is a network on “Proof of Stake,” which means that each block of the network is only approved when enough validators agree that each of the transactions in the block has been executed correctly. Validators run the hardware that actually runs the network, but each is supported by a “Stacking Pool.” Token holders from across the ecosystem can delegate their tokens to any of these pools. When validators vote to approve blocks, their votes are weighted based on how many tokens they have in the Stacking Pools.

Network Commissions.

Applications and accounts deployed on the Near network must pay two types of fees:

They have to pay to store data by keeping a small amount of tokens in their account for every kilobyte of data that the account uses.
They have to pay to perform transactions, such as transmitting tokens. These fees are assessed based on the complexity of the transaction, and, as with other networks, they are assessed in a unit of account called “gas.” Unlike other networks, these fees are extremely inexpensive – they are about 10,000 times cheaper than Ethereum.

Because the amount of space in each block is limited, people are willing to pay to add their transactions to the block. If blocks become congested and fees are too high, the network will dynamically ramp up bandwidth by increasing the number of shards, providing a relatively stable transaction price.

Rewards Near

For providing services to the network, validators are rewarded with tokens per block. The amount of the reward is proportional to the amount of staked tokens the validator has in their pool. They can choose how much of these tokens to keep and how much to give to the delegates. Initially, the network creates 5% of new tokens each year, of which 90% go to reward validators and 10% are allocated to the protocol treasury to support development.

The commissions that are paid for transactions in each blockchain are divided into 2 parts:

A portion of the commission is passed on to the contract holder’s address, allowing developers to benefit from the rollout of contracts gaining popularity.
The remainder is burned off. This means that at a very high rate of network usage, the rate at which tokens are burned may exceed the rate at which new tokens appear, and the network will become deflationary.
Information about $NEAR’s circulating supply, total supply and blockchains is detailed at the official Near blog in a post about token supply and distribution, along with detailed charts, tables and methodology notes.

Near Protocol: The Future

Near has already released its long-awaited bridge with Ethereum, known as the “Rainbow Bridge.” This allowed users to redirect their tokens from Ethereum to Near, an important step in Near’s direction to make the platform as accessible as possible.

Near is currently working on implementing support for the Ethereum Virtual Machine (EVM), the software stack that Ethereum uses to run the DApp. Once completed, developers will be able to re-deploy their Ethereum applications on Near with virtually no changes. This will make the Near ecosystem even more expansive, which will attract a large number of new users.

And thanks to scalability and smart tokenomics, even with a large number of users on the network, fees and transaction rates will be kept about the same.

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