We have had some commenters wanting a video on the NEAR Protocol, so in this video, I’m going to cover it. By the way, if you ever want to see a coin or token or idea on our channel, drop a comment below because even though we are growing like crazy, we keep an eye on them all.
First of all, let’s dive into the 2 initial developers of the NEAR Protocol, Alex Skidanov and Illia Polosukhin. Alex was initially a Microsoft Software developer and kinda reminds me of Ethereum’s founder Vitalik Buterin. Illia was actually an engineering manager at Google Research at one point. So starting off, we have some very bright minds on this project.
The next important thing you need to know is that they were actually helped through the Venture Capitalist program called Y Combinator. Long story short, they raised around $50,000,000 in 2 private funding deals in the first 4 months without even having anything built. They also did this during a bear market. So they’re probably on to something special, right?
According to NEAR’s website, they say “The NEAR Collective is basically building the infrastructure for a new Internet which makes it harder for giant companies to steal your data and for bad guy countries to shut it down.” To me, it is interesting that they are trying to replace the internet, but let’s take a look at what that means in the technical side of the network.
NEAR Consensus Model
First off, NEAR is a blockchain that uses the Delegated Proof of Stake consensus mechanism. If you don’t know what Proof of Stake is, we’ve covered it well in 2 of our videos about it. The Delegated part basically means if you don’t have the coins or computer parts to set up your own validator node… you can still stake them, but let someone else use your staking power.
Their specific proof of stake protocol is called DoomSlug.
DoomSlug is a pretty cool name for the way that NEAR produces blocks. In their own words, because I couldn’t find a way to summarize them, Doomslug “allows us to achieve some sense of practical finality after just one round of communication”. This means instead of waiting for 35 extra blocks, like you do on Ethereum, you just have to wait for one. It’s really quite technical and has a few other benefits, but we’d have to get into explaining Practical Fault Byzantine Tolerance models and I don’t fully understand them yet, so you’ll have to wait for that.
The next thing I want to talk about is their Sharding mechanism called NightShade. Instead of using sidechains like many other blockchains to be able to process blocks faster, NEAR has their own mechanism where they use shards, and the main blockchain has snapshots of all these shards. If you have no idea what shards are, we have an entire video on what sharding is, with fun examples. In fact, Ethereum 2.0 supposedly going to use sharding, but NEAR already has it, and because of this, they can process around 100,000 transactions per second.
One of the unique things NightShade has is that each shard only has 100 seats. Each seat allows you to be a validator, and the cost to be a validator rises as more people join. This is so that more shards are created at the time they are needed. So when the network needs more shards because it is getting congested, new validators are actually incentivized to create a new shard. Delegation also happens within these mini-blockchain shards.
One thing to break the technicality of it all is that NEAR actually has human-readable addresses by default. Basically, this means we have an address like WhiteboardCrypto.near. Ethereum has something similar, for example we also have WhiteboardCrypto.eth, but we had to set it up and pay like $60 to reserve it… while NEAR automatically gave us whiteboardcrypto.near when we set it up. This is a big deal when it comes to getting our grandmas and grandpas on the crypto train.
Probably my favorite thing about the NEAR Protocol is their idea of Guilds. So Guilds are basically groups of people that do things for NEAR. If you don’t know what a DAO is, check out our amazing video on it, but a DAO is a decentralized company where you don’t need a president or CEO, instead decisions are made by token holders. In NEAR, guilds are like different departments of a company, where you have the Marketing guild, the HR guild, the Accounting guild, and groups of people can join to help out the protocol. Right now, the NEAR foundation is a little centralized by having 4 board members, although this is equivalent to Ethereum’s board… but the goal is to hand the keys of the NEAR kingdom over to the users by using DAOs, decentralized governance, and ideas like Guilds one day.
The analogy I have heard is that the foundation is like a space shuttle, where the guilds and the idea of DAOs are what is is carrying. They can’t get out of the atmosphere by themselves, but with the help of another entity, they can. After they get out of the atmosphere thought, they de-dock and leave the payload off to itself. In this analogy, the payload is the NEAR community.
Aurora Scaling Solution
One of the last things I wanted to explain what their Aurora system. So you know how Matic is a Layer 2 scaling solution for Ethereum? Where Matic is faster, cheaper, but a little more centralized, but you use it anyways because Ethereum gas fees have been ridiculous? Well, Aurora is kinda a layer 2 scaling solution for the NEAR Protocol, except it is a little different. For started, Aurora was created with the EVM in mind, meaning it is pretty much a copy of the Ethereum Virtual Machine. What this means for you, is that developers can easily copy and paste their Ethereum applications onto the Aurora network with ease.
Also, I don’t completely understand it, but Aurora is implemented as a Smart Contract on the main NEAR chain and somehow has their finality on the original NEAR chain, and also can tap into the sharding mechanism to have a really good horizontal scaling ability. Wrapping it all up, the idea of DoomSlug, NightShade, and Aurora may deserve their own video, so if you’re interested, make sure to subscribe so you get notified of our new videos and as a way to reward our hard work!
Rainbow Bridge to ETH
To move from the main network to the Aurora network, NEAR created a blockchain bridge they call the Rainbow Bridge. Now, you can currently move your Ethereum back and forth, but the developers are planning on allowing other chain transfers in the future, like BSC, Matic, Fantom… you know all the ETH lookalikes.
Tokenomics of NEAR
Lastly, let’s get into the tokenomics of the NEAR coin. It’s pretty basic from here and follows many different coins that we have explained. NEAR is inflationary, with the extra tokens coming from around a 5% staking rewards process. Also, NEAR is a governance token, meaning that new ideas are proposed and voted on by coin holders, as I hinted at in the guilds section.
Lastly, many of the early investors are subject to a locked time period, meaning they are only allowed to sell or transfer them after a certain date. This means to keep an eye out for those dates as many investors like to sell a portion of their coins to cash in for their initial investment. Also, I should mention that investors like Coinbase and Andreesen Horowitz back the NEAR Protocol, so it’s always good to see big names like this in a project.
Thanks for watching, we hope you enjoyed this video, we really hope you learned something, and most of all, we hope to see you in our next video!