NEAR Protocol

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Project overview

Originating from a machine learning project back in early 2017, NEAR Protocol is a high-performance proof-of-stake Layer 1 blockchain. It has smart contract execution capabilities, allowing users to create and test custom applications and blockchain solutions.

NEAR Protocol has a strong emphasis on user accessibility and uses a unique scaling mechanism called sharding to overcome industry bottlenecks such as network congestion and high transaction fees.

The project aims to streamline Web3 experiences through its Blockchain Operation System (BOS), making it easier for those unfamiliar with the crypto space and regardless of the underlying blockchain technology they choose.

Technology

NEAR Protocol uses a unique scaling mechanism, dubbed Nightshade sharding, which essentially means dividing or parallelising the network into smaller parts, called “shards”.  Each shard processes its own transactions and are built into the protocol itself, with the same security guarantees of the Layer 1 blockchain.

NEAR is actively working on interoperability and cross-chain features through solutions like the Rainbow Bridge, allowing users to move their ERC-20 tokens between the Ethereum and NEAR ecosystems.

Token supply model

NEAR has an inflationary token supply model, with a 5 percent fixed annual inflation rate. From the newly issued tokens, 90 percent (or 4.5 percent) goes to validators as rewards for securing the network, while the remaining 10 percent (0.5 percent) is sent to the protocol treasury.

NEAR also implements a burning mechanism, where 70 percent of t transaction fees are burned and permanently removed from the circulating supply. The remaining 30 percent is refunded to the contracts responsible for the transactions. This means that as the NEAR network grows in usage, the net issuance rate can become negative, creating a potential deflationary effect.  

The protocol treasury funds, which is currently managed by the NEAR Foundation, are dedicated to reinvesting in the development and growth of the NEAR ecosystem.

Key value drivers

The growing demand for scalable, high-performance blockchains could bring renewed interest to NEAR Protocol, despite being somewhat overshadowed by the more popular chains in the sector. However, NEAR Protocol is the first major Layer 1 blockchain to successfully implement sharding as a scaling feature.

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