What Is the NEAR Protocol?

The NEAR coin is the native token of the NEAR Protocol, which is an open-source blockchain. It functions as a cloud computing project that is managed by a community. Essentially, the project aims to solve the scalability and usability issues that other blockchains face. This includes improving throughput, interoperability, and transaction speeds. Make sure to check the NEAR Protocol price chart above to see the live NEAR price.

Overall, NEAR's stated objective is to create a platform that is both secure and efficient enough to manage high-value assets. Besides, it allows developers to create decentralized applications (dApps) on top of the NEAR network.

NEAR Protocol is a Layer-1 blockchain, which means that it’s not built on another blockchain, it has its own base level. Usually, Layer-1 blockchains are known for having issues with scalability. However, NEAR Protocol aims to solve these issues.

Besides that, NEAR Protocol makes life easier for both newbies and developers. For example, it uses addresses that are easy to read for regular humans and creates dApps that have a similar registration process as the traditional apps do. By doing that, NEAR Protocol makes the complicated onboarding process much easier for beginners.

Talking about developers, NEAR Protocol provides them with modular components. This makes it possible for developers to roll out new token contracts or NFTs much faster.

Lastly, it’s important to mention that the Rainbow Bridge makes NEAR interoperable with Ethereum. It enables developers to use Ethereum assets and smart contracts on NEAR as well as send or receive ETH through the NEAR network.

The Story of the NEAR Protocol

The NEAR Protocol was developed by Erik Trautman, Illia Polosukhin, and Alexander Skidanov. The trio is pretty complex because it has an entrepreneur (Trautman), a former Google employee (Polosukhin), and a computer scientist (Skidanov).

Several winners from the International Collegiate Programming Contest (ICPC) are among the large and skilled NEAR Collective development team. According to the organization, some of the few large-scale sharded systems have been constructed by its members, which is what the protocol is trying to do as well.

On April 22, 2020, the NEAR Foundation introduced the Phase 0 mainnet of NEAR. In this phase, NEAR was run by employing a Proof-of-Authority consensus mechanism. Though later, during Phase 1, the NEAR Protocol started to involve the community in the decision-making processes.

However, the network didn't fully decentralize and become community-run until Phase 2 of the mainnet (the final version) launched on October 13, 2020.

How Does the NEAR Protocol Work?

One of the central solutions that Layer-1 blockchains employ is sharding. It's used to increase scalability and it works by splitting the network into discrete data sets called “shards”, which the network can then process in parallel.

The NEAR Protocol crypto project has its own version of the sharding mechanism called Nightshade. Similar to traditional sharding, this approach uses individual sets of validators to process transactions simultaneously across shards. However, unlike traditional sharding, the Nightshade method also creates chunks, which essentially are portions of upcoming blocks. Because of these chunks, a one-second block cycle is created, which allows NEAR Protocol to accomplish up to 100,000 transactions per second. At the same time, it manages to maintain extremely low transaction fees.

Apart from having its own sharding mechanism, the NEAR Protocol also has a custom Proof-of-Stake (PoS) consensus mechanism called Doomslug. The Doomslug mechanism employs two consensus rounds. When a block receives the first round of communication, it’s deemed to be finalized immediately. Rather than directly competing with one another based on stake, validators produce blocks alternatively. This allows the NEAR Protocol to have nearly instantaneous finality.

What Is the Purpose of NEAR Coins?

Essentially, NEAR is a utility token. It allows NEAR token holders to develop and use dApps on NEAR. Also, NEAR tokens are used to pay fees for utilizing these dApps. There are two types of fees on the NEAR network – transaction fees and data storing fees (users pay for each kilobyte of space utilized by an account).

Transaction fees are determined based on the complexity of the transaction. The fees are established in what are known as "gas" accounting units. 70% of the transaction fees are burned to keep the NEAR token deflationary, while the remaining 30% are returned to contracts that participated in transactions.

Besides that, NEAR acts as a governance token by allowing holders to participate in the voting process while deciding on future technological developments of the protocol, resource allocation across the network, and participant rewards. One NEAR coin is equivalent to one vote.

Lastly, staking NEAR tokens allows holders to run validator nodes on the network and earn staking rewards. The stake size is based on the total amount of NEAR that is being staked at that moment as well as the stakes made by other validators within the shard. The staking rewards are issued when validators execute transactions, create new blocks, and maintain the network overall. NEAR token holders can lend their tokens to staking pools that back validator rewards.

Also, don't forget to check out the aforementioned NEAR Protocol price chart to see the current (or previous) NEAR price.

Tokenomics of NEAR Coins

The max supply of NEAR coins is 1 billion, which was created with the genesis block of the NEAR blockchain. However, each year, epoch incentives worth 5% of additionally issued supply are distributed to support the network. 4.5% of this incentive goes to validators, while 0.5% goes to the NEAR treasury.

Overall, the total supply of NEAR tokens was allocated for community sale, foundation endowment, early ecosystem, core contributors, backers, community grants, and operation grants. The percentage of the portions that each sphere received was ranging from 6.1% to 17.6%.

Besides, talking about the NEAR Protocol price, it should be noted that it’s prone to crypto market changes. This means that, as the whole crypto market fluctuates, so does the NEAR price. However, this is usually the case with most crypto assets because the whole market is almost never stable due to various internal and external aspects.

The Fund of NEAR Protocol

NEAR announced an $800 million fund dedicated to projects that aim at boosting the NEAR Protocol ecosystem's expansion on October 25, 2021. Proximity Labs dedicated $350 million to this fund.

NEAR concentrates on supporting teams that are actively innovating and redesigning the way people interact with money through decentralized finance. Additionally, NEAR seeks to find projects that focus on developing non-fungible tokens, decentralized autonomous organizations, and crypto-based games.

Out of the total amount of $800 million, $100 million was dedicated to the Startup Grant Pools. 20 businesses from these pools had a right to get $5 million each. Besides that, $250 million was dedicated to helping scale ongoing crypto projects.