In brief
The NEAR protocol is a layer 1 blockchain that uses Nightshade, a unique sharding technology to achieve scalability. It was launched in 2020 as a decentralized cloud infrastructure for hosting decentralized applications (DApps).
NEAR provides cross-chain interoperability through Rainbow Bridge and a layer 2 solution called Aurora. Users can connect ERC-20 tokens and assets from the Ethereum blockchain to the NEAR Protocol network, giving them access to higher throughput and lower transaction fees.
NEAR is the native token of the NEAR Protocol. It is used to pay transaction fees and store data. NEAR token holders can also stake their tokens on the NEAR wallet to receive rewards or use them to vote on governance proposals.
Introduce
As cryptocurrencies and blockchain technology became more popular, Bitcoin, Ethereum, and other networks began to face scalability challenges due to increased transaction demand. Growing interest in decentralized applications and non-fungible tokens (NFTs) makes these challenges even more concerning for the Ethereum blockchain. The Ethererum network regularly faces increases in gas prices and transaction costs due to heavy traffic, which can discourage many users and developers.
While there are several groups exploring various scaling solutions for blockchain networks, NEAR Protocol (NEAR) focuses on addressing these limitations through sharding.
What is the NEAR protocol?
The NEAR protocol is a layer 1 blockchain that uses sharding technology to achieve scalability. PoS Bridge, as the name suggests, applies the Proof of Stake (PoS) consensus algorithm to secure the network. Built by NEAR Collective, NEAR Protocol was co-founded by Alex Skidanov and Illia Polosukhin in 2020. The project is being developed as a community-run cloud infrastructure to host decentralized applications (DApp).
The NEAR platform contains a wide range of tools and programming languages, as well as smart contracts with cross-chain functionality that help developers build DApps. The platform has a simplified onboarding process and has human-readable account names instead of crypto wallet addresses. As a PoS blockchain, NEAR was awarded the Climate Neutral Product label in 2021 for its carbon neutrality.
How does the NEAR protocol work?
To compete with other smart contract-enabled blockchains such as Ethereum, EOS, and Polkadot, NEAR implements several features in its ecosystem to enhance its performance.
Nightshade Sharding
Nightshade is the core technology of the NEAR blockchain. This is a sharding technology to process data more efficiently. Sharding refers to dividing the work of processing transactions across multiple validator nodes. This way, each node will process only a small portion of the network's transactions, which allows for higher transactions per second (TPS).
On NEAR, Nightshade uses block producers and validators to process transaction data in parallel across multiple shards. Each shard generates a small portion of the next block. Each fraction is called a chunk. These blocks are then processed and stored on the NEAR Protocol blockchain to finalize the transactions they contain.
In theory, Nightshade could allow NEAR to process millions of transactions per second without affecting its performance. Depending on network conditions, it will automatically split and merge segments based on network traffic and resource usage. When the network is at high capacity, the number of nodes will increase. Then, overall efficiency can be maintained and transaction fees can be kept low.
Unlike other PoS networks, validators on NEAR do not compete for the next block based on the size of their stake. NEAR uses an election mechanism called Threshold Proof of Stake (TPoS) to select validators. The TPoS mechanism is similar to an auction, where a large group of potential validators indicate how many NEAR tokens they are willing to stake through a signed transaction. TPoS will then determine the minimum threshold to become a validator in each epoch (usually a 12-hour period). Those who have staked above that threshold will have a chance to be selected as validators, proportional to the amount they have staked.
Rainbow Bridge
Rainbow Bridge is an application on NEAR that allows users to transfer ERC-20 tokens , stablecoins, wrapped tokens, and even NFTs between the Ethereum and NEAR blockchains. This allows developers and users to take advantage of high throughput and lower fees on the NEAR Protocol.
Rainbow Bridge does not require licensed users at all and it operates decentralized. To connect tokens, users can send ERC-20 assets directly from MetaMask or another Web3 wallet to NEAR Wallet and vice versa. First, they need to deposit tokens in an Ethereum smart contract. Since tokens cannot be transferred directly between networks, tokens are locked and taken out of circulation on Ethereum. New tokens will be created on NEAR to represent the original tokens. This way, the total circulating supply of tokens remains constant on both blockchains.
In most cases, transactions on NEAR are confirmed in 1-2 seconds and cost less than 1 USD. However, if users want to transfer tokens back to Ethereum, the procedure may cost more and take longer to process. The final value will depend on current Ethereum traffic and gas prices.
Aurora
Aurora is a layer 2 solution on the NEAR Protocol blockchain. It aims to help developers scale their applications on the Ethereum-compatible platform, bringing low transaction costs to their users. According to NEAR, Aurora can store thousands of transactions per second, with block confirmation times of only about 2 seconds.
Aurora includes Aurora Engine and Aurora Bridge. Aurora Engine is an Ethereum Virtual Machine (EVM) on the NEAR Protocol, which means it is compatible with Ethereum and supports all tools available in the Ethereum ecosystem. This makes it easier for developers to get started with NEAR without having to rewrite their DApp or learn how to work with new development tools. They can also use Aurora Bridge (similar technology to Rainbow Bridge) to seamlessly connect their smart contracts and ERC-20 tokens between the Ethereum blockchain and the NEAR Protocol. Users can also pay transaction fees with ETH on Aurora.
What is NEAR token?
NEAR protocol (NEAR) is the native token of the NEAR ecosystem. It is an ERC-20 token with a maximum supply of 1 billion units. NEAR can be used to pay transaction and storage fees on the network. Additionally, smart contract developers can receive a portion of the transaction fees their contracts generate. To keep NEAR scarce, remaining transaction fees will be burned.
Token holders can also stake on NEAR Wallet to earn rewards. They stake NEAR to run validator nodes to receive rewards up to 4.5% of the total NEAR supply. They can also participate in the governance of the NEAR network by voting on decisions and submitting proposals related to the platform and products.
How to buy NEAR on Binance?
Users can purchase NEAR Protocol (NEAR) tokens on cryptocurrency exchanges such as Binance.
1. Log in to your Binance account and click [Trade]. Choose classic or advanced trading mode to get started.
2. Click [BTC/USDT] to open the search bar. Enter “NEAR” and you will see the available trading pairs. In this example, we will use the pair NEAR/BUSD.
3. Go to the [Spot] box on the right and enter the NEAR quantity to buy. You can use different order types to place orders. Select a buy order, such as Market Order, and click [Buy NEAR]. NEAR tokens will be credited to your Spot Wallet.
summary
As the blockchain sector grows, projects that can offer low transaction costs and higher transaction throughput can better reach the masses. NEAR's scaling solutions may appeal to developers who are looking to build DeFi products and decentralized applications (DApps) more efficiently. NEAR's development roadmap includes many steps, including layer 2 cross-chain solutions to scale the blockchain even further. This will benefit developers and end users.