What is Near Protocol?
NEAR is an example of gen-3 blockchains, which aims to solve the scalability issues and allows both the end-users and developers to enjoy the full potential of smart contracts and blockchain technology. Instead of relying on layer-2 tech, NEAR breaks free from the idea that every single node that participates in the network has to run all of the code because that essentially creates a bottleneck.
To fix this issue NEAR uses a technique that is already extremely prevalent in the database world – sharding. If properly executed, it allows the network’s capacity to scale up as the number of nodes in the network increases. So, there is no theoretical limit on the network’s capacity.
What is sharding?
In a database, you sometimes have to deal with large bulky data. This dramatically hinders performance and throughput and makes the entire process extremely inefficient. This is where sharding comes in. Sharding does a horizontal partition of your database and turns it into smaller, more manageable tables.
It may sound sophisticated, so let’s talk about it in a more simple way. Imagine the scenario. There is a hypothetical network with three nodes – A, B, and C. These nodes have to verify data T. The data T is broken down into three shards T1, T2, and T3. Instead of all these nodes working on T as a whole, they can individually work on a single shard at the same time. That increases performance exponentially.
NEAR Brief history
NEAR protocol started in the summer of 2018 upon Alex Skidanov and Elijah Polosukhin deciding to pivot away from their previous entrepreneurial adventure. Very quickly, as Misha quit MemSQL, the team expanded from several to nine people within three days in August. The initial team consisted of seven engineers, Erik doing business operations, and Sasha talking to the market.
Today NEAR Collective is the globally distributed group of teams made up of many individual organizations and contributors, who self-organize in order to bring this technology to life. It is not a business or anything nearly so formal. Think of it instead like the groups of people who run large open-source software projects.
One of the Collective’s projects is writing the initial code and the reference implementation for the open-source NEAR crypto network. This is sort of like building the rocket boosters for the space shuttle. Their job is to do the necessary R&D work to help the blockchain get into outer space. The code for that chain is open source so anyone can contribute to or run it.
How NEAR Blockchain works
NEAR protocol operates on the basis of the Proof-Of-Stake (POS) system. All operations are confirmed not by a person or service that has the biggest computing power, but by validators.
The validator’s power stems from its balance (or the staking pool) that is used to confirm operations. That grants rewards to validators and stakers for, basically, running the network. While this provides an option to earn additional funds by staking NEAR tokens, it also brings some risks as validators may perform malicious actions that lead to serious punishment of them and their stakers, so be careful!
Here are a few points that you must keep in mind about network validators:
- NEAR protocol determines its network validators every new epoch, electing validators based on their stake.
- The already elected validators are re-enrolled by automatically re-staking their tokens plus the accrued rewards.
- Potential validators have to have their stake above a dynamically determined level.
- There are two methods that a validator can use to strengthen their stake – buy tokens by himself or borrow tokens via stake delegation.
- The reward you receive is directly proportional to your stake. The more your stake is, the more your rewards become.
What is the NEAR consensus algorithm?
Consensus protocols are used to reach an agreement on a single value between multiple participants in a system. If all network participants collaborate in accordance with the consensus protocol, new values may be appended to the ledger and verified by nodes. However, in case of disputes, the network may focus on either safety or liveness.
The consensus mechanism implemented on NEAR crypto is called Nightshade. Nightshade models the system as a single blockchain. The list of all the transactions in each block is split into physical chunks, one chunk per shard. All chunks are accumulated into one block. Note that chunks can only be validated by nodes that maintain the state of that shard.
The consensus is based on the heaviest chain consensus. Meaning, once a block producer publishes a block, they collect the signatures of validator nodes. The weight of a block is then the cumulative stake of all the signers whose signatures are included in the block. The weight of a chain is the sum of the block weights. Additionally, the consensus utilizes a finality gadget that introduces additional slashing conditions for higher chain security.
What is a NEAR token?
The NEAR token is the fundamental native asset of the NEAR ecosystem. Token’s functionality is enabled for all accounts. Its role in the NEAR network is similar to Ethereum’s role in the ETH network.
What is the NEAR token used for?
The NEAR token can be used to:
- Pay the system for processing transactions and storing data.
- Run a validating node as part of the network by participating in the staking process.
- Help determine how network resources are allocated and where its future technical direction will go by participating in governance processes.
Where Can I Buy Near Protocol Token?
NEAR is available on several major exchanges (Binance, for example), where you can sign up and buy the token. NEAR Protocol Token can also be purchased and stored in the Guarda wallet in a safe manner.
Here is how to do it with Guarda:
- Log into the Wallet.
- Find and click NEAR in the list of cryptocurrencies.
- Click Buy at your account’s NEAR wallet page.
- Choose the desired amount of fiat to be exchanged to NEAR.
- Click Buy.
- Fill in payment details and click Next.
Where to Store NEAR?
The NEAR coin project has developed its own official wallet. Its main disadvantage is the support of only NEAR-based tokens, of course, including the NEAR coin itself. Obviously, no other blockchains are supported.
So, if you want to store other cryptocurrencies along with a NEAR token – you can store it in a variety of different wallets as well, including Guarda.
How to Stake NEAR?
Being an example of PoS blockchain, NEAR coin supports staking by default. Overall, staking mechanics are similar to those of other PoS projects. You can find out the general review on the staking process in our previous article.
However, NEAR staking has some interesting specific manners. You can unlock your staking coins anytime. But you will be able to use them only after three epochs after the unlocking. This can’t be changed even if the validator decides to pause or switch off.
It’s possible to level up the validator stake. The procedure is called delegation. When applied, stakers and token holders form a sort of a mini staking pool. Stakers increase their rewards and share a small part of them with the validator. Win-win, huh?
Now about the rewards. The protocol generates new tokens at a rate of ~5% of the total supply (annualized) and most of them are rewards. For example, if the total supply is 1 billion tokens, and the annualized rewards are ~4.5%, all Validators will share 45 million NEAR tokens. Anyway, regardless if you become a validator or a delegator, the bigger the stake you provide, the higher your cut of those rewards.
There are different NEAR coin staking options available so far. One of them is going to be the Guarda Wallet staking. That will happen in the NEAR future. You can take a look at the current staking opportunities via this link. Stay tuned, another staking alternatives are quite NEARby.
NEAR Protocol & NEAR Token Summary
NEAR provides a scalable and solid blockchain structure on a Proof-Of-Stake basis. That enables fast transaction times and different use cases for NEAR tokens, including staking and running the validating nodes.