It’s Layer One season! And one of the most exciting Layer Ones in the space is the NEAR protocol. But why is this so, and what could be the bull case for the protocol’s native cryptocurrency $NEAR?
What is Near Protocol?
So, what is the NEAR Protocol anyway? The NEAR Protocol is an open-source platform where developers can build applications. Because of the blockchain’s architecture, users can interact with these applications without worrying about high gas fees!
The founders behind the project are Alexander Skidanov and Illia Polosukhin. Both are very experienced software engineers. Skidanov used to work for Microsoft, and Polosukhin used to work for Google. In 2017 they founded the NEAR Protocol and raised $50 million in the first four months.
But what makes the network so special?
NEAR Protocol: blockchain architecture
Ethereum is not scalable at all at the moment. This may not be breaking news, but users on Ethereum have to deal with high gas fees daily.
And due to its architecture, the NEAR protocol represents a scalable alternative!
The Near protocol is currently more scalable than Ethereum because the network uses a Proof of Stake consensus algorithm. Ethereum still uses Proof of Work to secure the network. The network may switch to Proof of Stake when upgrading to ETH 2.0, but the current PoW consensus algorithm makes Ethereum slower and more expensive.
The second reason why the NEAR Protocol is currently more scalable than Ethereum is sharding. Sharding is a common term in computer science. Sharding describes the process of splitting a database horizontally. Also, Ethereum will implement sharding when upgrading to ETH 2.0. So-called shard chains will spread Ethereum’s load across 64 new chains.
But the NEAR protocol uses shards already!
The main blockchain has snapshots of all the shards in the network, which ensures security. Each shard allows 100 so-called seats. To become a validator in the PoS network, you need a seat. But this seat has a price or a staking minimum, better said (seatPrice). The price of the seat gets determined dynamically.
Besides the seatPrice, also “epochs” are elementary for the Proof of Stake consensus algorithm. The white paper of NEAR describes epochs as follows:
The network determines new validators within every epoch. Already elected validators restake their tokens plus the accrued rewards. But new validators are only elected if their stake is above the dynamically determined seatPrice.
All in all: the sharded architecture and the efficient PoS consensus algorithm make the Near protocol scalable.
But what about NEAR’s tokenomics?
As already mentioned, NEAR’s main purpose is to secure the network by staking. Besides, $NEAR is also a governance token. So, people can use it to vote on governance proposals, etc.
$NEAR has an annual inflation rate of 5%. However, $NEAR gets burnt when paying transaction fees. The asset becomes deflationary when reaching one billion transactions per day.
$NEAR’s total supply is one billion.
Is Near Protocol the next Layer 1 to watch?
So, is the NEAR protocol the next Layer 1 to watch? Well, this is what you have to decide on your own. But the network could develop a massive network effect – especially when the whole staking economy takes off! Also, well-known Ethereum native projects like 1inch or Balancer launched on the NEAR protocol already.
And NFTs could drive a lot of attention on NEAR. Minting NFTs on Ethereum is for most people not affordable anymore. But projects like Mintbase are scalable alternatives! They could eat a part of Ethereum based NFT projects.