NEAR protocol is a layer-1 blockchain that utilizes a proof-of-stake consensus mechanism, enabling the development of decentralized applications. It was founded by Illia Polosukhin and features a native token, NEAR, which is utilized for transaction fees and storage costs within the network. The mainnet of the NEAR Protocol was launched in April 2020, and by September 2020, it transitioned to being operated by its community.^[1][2]

Overview

NEAR protocol targets the scalability problem of traditional blockchains through the implementation of sharding. Sharding is a method used to reduce the computational load on the network by dividing it into smaller parts, called shards. Each node in the network only runs the code that is relevant to its specific shard, allowing the different shards to process information in parallel. This enables the network to handle more transactions and increase scalability as the number of nodes in the network grows. ^[1]

On January 30, 2024, NEAR Protocol announced the testing launch for Phase 2 of Sharding. Phase 2 introduces fundamental upgrades to NEAR’s core protocol architecture, enabling greater scalability and decentralization for the network. It also introduces a change to the implementation of stateless validation: an innovative approach to state change, or the process of updating the status of all the data posted to the blockchain. NEAR validators would no longer have to maintain the state of a shard locally and can retrieve all the information they need to validate state changes, or “state witness,” from the network. ^[22]

“NEAR continues to make progress on bringing Chain Abstraction infrastructure that can scale to a billion users and beyond,” said Illia Polosukhin, Co-Founder of NEAR Protocol and CEO of NEAR Foundation. “The scalability improvements from stateless validation can unlock even better user experiences for more end-user applications, whether multichain DeFi-style dapps or those aimed at mainstream users.”^[23]

Blockchain Operating System (BOS)

On March 2, 2023, NEAR announced that it was becoming the Blockchain Operating System (BOS). The BOS is an industry-first category: a common layer for browsing and discovering open web experiences, compatible with any blockchain. The framework is compatible with all blockchains and Near will act as the common entry point, said Polosukhin, in an interview with CoinDesk.^[27][28]

“The composable decentralized front ends as a framework can work with any Web2 or Web3 back end and any wallet,” Polusukhin said. “In the future we will be offering [use of] wallets from one chain to interact with another via seamless bridging,” he added.

“We are moving away from our layer 1 focus, it’s now about the user and the experience they have. We are looking at this as the frontend for blockchains in general.”^[29]

Nightshade

The NEAR Protocol uses a technology called Nightshade to enhance transaction throughput. Nightshade is a type of sharding in which groups of validators process transactions simultaneously across multiple sharded chains, increasing the overall capacity of the blockchain. Unlike traditional sharding, Nightshade creates small portions of the next block called "chunks". ^[4]

This allows NEAR to handle up to 100,000 transactions per second and achieve near-instant finality on transactions, with a one-second block time while maintaining low transaction fees. ^[4]

Rainbow Bridge

It is possible to transfer assets from Ethereum to NEAR and vice versa using the Rainbow Bridge, which is a tool built by Aurora that enables the movement of ERC-20 assets between Ethereum, Aurora, and NEAR. ^[12]

Popular ERC-20 tokens like stablecoins (USDT, DAI, TUSD), wrapped assets (WBTC, WETH), DEX tokens (UNI, 1INCH), lending tokens (AAVE, COMP), and service company tokens (HT, CRO) are compatible with NEAR. These tokens can be transferred directly between MetaMask or other Web3 wallets and NEAR wallets and apps, allowing for seamless interoperability between the two platforms. ^[13]

Doomslug

Near Protocol has its own version of the Byzantine Fault Tolerance consensus mechanism, known as Doomslug, and employs a finality gadget for additional security. It is a variation of the Delegated Proof of Stake (DPoS) mechanism, allowing the network to attain practical finality with just a single round of confirmation. ^[14]

NEAR's Doomslug distinguishes between two forms of finality: Doomslug finality, which is achieved once a block has received its pre-votes and cannot be undone unless the malicious validator is penalized, and BFT finality, which is accomplished after 2/3 of the block producers have pre-voted and pre-committed, similar to Tendermint or HotStuff. ^[15]

NEAR Token

The NEAR token is the native cryptocurrency of the Near Protocol, it is used for various functions such as paying for transaction fees, and for storage. Additionally, it can also be staked by holders to participate in validating transactions and reaching network consensus. ^[1]

The primary use of the NEAR token is to cover transaction fees and as collateral for data storage on the blockchain. It also provides a unit of account used for processing transactions and storing data. ^[30]

Tokenomics

One billion NEAR tokens were created at genesis, and its allocation is divided among several groups: 17.20% is allocated to Community Grants and Programs, 14.00% is allocated to Core Contributors, 12.00% is allocated to Community Sale, 11.76% is allocated to Early Ecosystem, 11.40% is allocated to Operations Grants, 10.00% is allocated to Foundation Endowment, 15.23% is allocated to Seed Round, and 8.41% is allocated to Venture Round. This allocation was designed to support and incentivize different stakeholders of the Near protocol ecosystem. ^[3]
Allocation of Genesis Tokens

NEAR Foundation

Created on April 22, 2020, the NEAR Foundation is a Switzerland-based non-profit organization that utilizes its financial and operational resources to support the mission of the NEAR Collective, which is a group of active participants who drive the NEAR ecosystem. ^[5] Its mission is:

…to accelerate the world’s transition to open technologies by growing and enabling a community of developers and creators. ^[5][6]

On the other side, the vision of the foundation is the following:

…a self-sufficient ecosystem of creators, developers, entrepreneurs, community members and tokenholders whose collaborative efforts make the NEAR ecosystem the best place to build massively impactful projects in the Open Web. ^[6]

The NEAR Foundation is led by AI innovator Illia Polosukhin as the appointed CEO since November 2023. He oversees the growth of the NEAR Open Web Ecosystem and guides the constellation of teams that leverage NEAR as a platform for dApp building^[25]. During his appointment, he mentioned:

“I’m honored and excited to officially join the NEAR Foundation and continue working together with the ecosystem to build towards our shared vision of an open web,” said Illia Polosukhin about his new role. “Effectively coordinating a decentralized ecosystem involves a lot of iteration and experimentation and I’m proud that NEAR has committed to refining this process since the very beginning. I believe this next step in our shared evolution will help us build our respective verticals faster and work together more efficiently.” ^[26]

On January 11, 2024, NEAR Protocol announced it would reduce its team by approximately 40%, impacting 35 colleagues, primarily across the marketing, business development, and community teams. This followed the review conducted with the NEAR Foundation Council (NFC) to discover that the Foundation was not as effective as expected. ^[18][27]

"Following this review, we have decided to significantly consolidate the core Foundation team to focus on a narrower and higher-impact set of activities" -  Near Foundation CEO, Illia Polosukhin stated. ^[19]

“The Foundation is well-placed to continue to support the ongoing growth, development, and further decentralization of the Near Protocol and ecosystem,” - Polosukhin added.

NEAR Data Availability (NEAR DA)

Launched on November 8, 2023, the NEAR Data Availability layer (NEAR DA) is an efficient and robust data availability layer, designed to help Ethereum rollup builders simplify their network and lower costs while ensuring they can scale like the NEAR Protocol. ^[20][21]

On January 18, 2024, NEAR DA integrated with Polygon CDK, an L2 tech stack and scaling solution on Ethereum that allows developers to build their custom L2 chains with their own configurations. With the integration, rollups can benefit from cheaper data availability costs to significantly reduce their overall rollup overheads. This is relevant considering data publishing costs are at all-time highs for L2s. ^[20]

Partnerships & Collaborations

NEAR Protocol x Google Cloud

NEAR Protocol announced on October 4th, 2022, a strategic partnership with Google to accelerate web3 startups, where NEAR grant recipients will receive technical assistance from Google Cloud. ^[8]

Google Cloud will be providing support for developers building and scaling their Web3 projects and dApps on the NEAR Protocol. With Google Cloud, developers can take advantage of core internet infrastructure to deploy their code quickly, securely, and seamlessly. This partnership allows NEAR projects to achieve scalability. ^[8]

"We will be supporting NEAR and giving Web3 developers the most secure, reliable, and sustainable cloud infrastructure on which they can build and scale. We continue to support tomorrow’s leaders in creating new products and services on blockchain-based platforms.” - Carlos Arena, Director of Digital Assets at Google Cloud^[8]

NEAR Protocol x SeatlabNFT

SeatlabNFT is an NFT-based event ticketing marketplace that is built on the NEAR blockchain. Nightshade, NEAR’s sharding architecture, helps solve the scalability problems, which allows the processing of large numbers of transactions without any negative impact on performance.

SeatlabNFT allows artists to create and sell event tickets directly to fans, bypassing scalpers and ensuring the authenticity of the tickets through NFT technology. This ensures that the buyers will not have to pay the markup prices and will have the original ticket with them. ^[9]

NEAR Wallet x SWEAT

London-based tech company Sweatcoin, which aims to promote healthier living by encouraging physical activity, has teamed up with the NEAR Foundation to launch SWEAT, an innovative new token. ^[10]

“Sweatcoin was founded with a vision to create a new economy of wealth through health. For every 1,000 steps you take, you earn a Sweatcoin that can be redeemed for goods and services in the app from brands including Sonos and Reebok, or to donate to important charities such as Save the Children via Sweatcoin for Good.”  - Anton Derlyatka, Co-founder at Sweatcoin^[10]

NEAR Foundation x Binance Custody

On November 7, 2022, the NEAR Foundation announced an integration with Binance Custody, a secure digital asset custody solution for institutional investors. The NEP-141 standard is now supported, which allows any institutional investors with NEAR to use their secure storage infrastructure. Additionally, the integration makes it simpler for Binance Custody to provide support for any tokens that are compatible with NEP-141 from projects that are built on NEAR. ^[30]

NEAR Foundation x Grupo Nutresa

NEAR has partnered with Grupo Nutresa, a major food processor in South America, to bring blockchain technology to the grocery industry. Grupo Nutresa will create one of the first open-source loyalty point programs on the NEAR blockchain, to eventually reach one million users in Colombia and Latin America. The partnership was made possible through the assistance of tech company Peersyst. ^[11]

NEAR Foundation x Meta Pool

On February 7, 2024, Meta Pool, the liquid staking solution built on NEAR launched the Enterprise Node Operators (ENO) program in collaboration with NEAR Foundation. The program aims to onboard top-tier Institutions and companies into the NEAR Ecosystem. ^[24]

The primary goal of the ENO program is to enhance the NEAR Ecosystem’s institutional network by forging partnerships with enterprise-grade companies. These companies, in turn, facilitate the onboarding of their partners into the NEAR community, fostering a collaborative and interconnected environment that contributes to the overall growth of NEAR. ^[24]

NEAR Foundation x D3

On February 8, 2024, The NEAR Foundation partnered with D3, a leading digital infrastructure provider specializing in domains, to apply to obtain the ‘.near’ Top-Level Domain (TLD) during the ICANN application window. The collaboration is to integrate D3’s interoperable digital identities into the NEAR ecosystem, enhancing utility for both users and developers. ^[25]

“We’re excited to work with D3 to secure the .near top-level domain and extend the power of NEAR accounts across the entire internet. As the functionality of NEAR accounts expands with Chain Abstraction, combining Web3 identity with existing internet infrastructure will help drive mainstream adoption,” - said Illia Polosukhin, Co-Founder of NEAR Protocol and Chief Executive Officer of the NEAR Foundation.^[26]

Funding

On January 13, 2022, the Near Foundation reported the completion of a $150 million funding round. The private token sale was led by Su Zhu's Three Arrows Capital, with contributions from prominent cryptocurrency-focused investment funds, including Mechanism Capital, Dragonfly Capital, Andreessen Horowitz (a16z), Jump, Alameda, Zee Prime, Amber Group, and others. ^[7][16]

Three months later, the protocol raised $350 million in a funding round led by hedge fund Tiger Global, to expedite the decentralization of the NEAR ecosystem. ^[17]

“NEAR is poised to be a leading smart contract blockchain platform, combining first-rate technology with a fast-growing developer ecosystem,” - partner at Tiger Global, John Curtius