Author: Paul Veradittakit, Partner at Pantera Capital; Translated by: 0xjs@Golden Finance
introduction
As the cryptocurrency industry continues to rapidly evolve, I believe blockchain technology will become a key driver of innovation across multiple industries. Bitcoin and Ethereum are at the forefront of this revolution, with massive market capitalizations and widespread user adoption. Bitcoin, with a market capitalization of over $600 billion, is widely recognized for its pioneering role in the cryptocurrency space. Ethereum is a leader in facilitating programmable blockchains, supporting a wide range of decentralized applications (dApps) and smart contracts, increasing the versatility of its functionality.
Although both platforms have significant market share, they face significant challenges that limit the widespread adoption of blockchain technology. Scalability issues hinder their ability to effectively manage large volumes of transactions, while the limited programmability of these networks hinders the development of complex applications. Additionally, the lack of comprehensive developer engagement tools limits the growth and innovation potential of the blockchain ecosystem.
NEAR Protocol
NEAR Protocol is a platform designed to address these challenges head-on and advance the capabilities of blockchain technology. With a strong focus on scalability, ease of developer engagement, and user experience, NEAR Protocol is introducing solutions that address significant barriers facing current blockchain networks. By leveraging cutting-edge technology and strategic initiatives, I believe NEAR will reshape the landscape of decentralized finance and applications.
limit
The rigidity of Bitcoin and its energy-consuming Proof-of-Work (PoW) consensus mechanism makes it inflexible and inefficient in processing large volumes of transactions. Ethereum, despite its programmability, also faces scalability issues, resulting in high transaction fees and longer processing times. These limitations have hindered the widespread adoption of blockchain technology and limited its practical applications.
Industry Trends
The industry is actively exploring scalable and flexible alternatives to address these limitations. Emerging technologies such as Proof of Stake (PoS), sharding, and Layer 2 solutions aim to increase transaction throughput and reduce operating costs. NEAR Protocol stands out in this space by implementing a unique Threshold Proof of Stake (TPoS) system and Nightshade sharding, both of which significantly increase scalability and decentralization. These advances herald a new era for blockchain technology characterized by efficiency and user-friendliness.
Understanding Threshold Proof of Stake and Nightshade Sharding
Threshold Proof of Stake (TPoS) is a complex consensus mechanism used by the NEAR Protocol to enhance security and decentralization. Unlike traditional Proof of Stake (PoS) systems, where a small number of large stakeholders typically dominate network operations, TPoS promotes broader and fairer participation by setting a minimum stake threshold. Network participants, or witnesses, are selected through a pseudo-random process to validate transactions and protect the network. This approach alleviates the need for resource pools, reduces centralization risk, and enhances overall network security by making it more difficult for any single entity to gain undue influence.
Nightshade sharding is a scalability strategy used by the NEAR protocol to improve transaction throughput and efficiency. Sharding divides a blockchain network into smaller, more manageable parts (called shards), each of which can process transactions independently. Nightshade Sharding extends this concept by enabling these shards to run in parallel, significantly increasing the network's ability to handle large volumes of transactions. This design ensures that the NEAR blockchain can dynamically scale to meet growing demand without sacrificing speed or security. It also reduces transaction costs and latency, making NEAR an ideal platform for high-frequency trading and decentralized applications.
Progress and Milestones
Achievement
Since its inception, NEAR Protocol has achieved significant milestones, integrated various projects, and cultivated a strong ecosystem conducive to decentralized application development. One of the platform’s notable achievements has been the massive growth in its total value locked (TVL), which soared to $335 million at the end of last quarter, an impressive 547% increase in six months. This rapid expansion highlights NEAR’s growing appeal and the effectiveness of its strategic initiatives.
Technology Upgrade
NEAR’s commitment to technological advancement is key to its success. The deployment of Nightshade Sharding has greatly enhanced the scalability of the network, enabling it to process more transactions with lower latency. Additionally, NEAR’s vision of chain abstraction aims to simplify blockchain interactions for users and developers, which has led to the development of features such as NEAR Accounts, Chain Signatures, and Intent Relays. These advancements not only enhance the user experience, but also broaden the scope of innovative applications, solidifying NEAR’s position as a leading platform in the field of decentralized technology.
Driving force
market situation
NEAR Protocol has solidified its position as a leading blockchain platform, ranking high in TVL and user engagement, with daily active addresses reaching 1.2 million, a 42% month-on-month increase and a 377% increase in six months. This strong growth is driven by the success of apps such as KAIKAINOW, Sweat and the newly launched HOT Wallet, which have significantly expanded NEAR's user base. Since the fourth quarter of 2023, the platform's transaction volume has grown from approximately 35 million to more than 220 million, monthly active users have grown from 2.9 million to 15 million, and new users have grown from 1.8 million to more than 5 million, maintaining an average of two The monthly retention rate is around 40%.
NEAR’s AI Strategy
The NEAR Foundation emphasizes the importance of integrating AI into the web3 ecosystem through an open and decentralized framework to ensure that users have control over their own data and assets. User-owned AI is an intelligent tool that is optimized for the well-being and success of individual users and their communities, rather than maximizing profits for the companies that built the models. They caution against developing AI in a closed, profit-driven environment, which can lead to negative outcomes. Instead, they advocate for an open approach that fosters transparency, collaboration, and fair governance. Putting power and ownership in the hands of users can bring numerous benefits, such as higher productivity, better search results, more personalized experiences, and entirely new economic opportunities, all with privacy first. By leveraging their expertise in AI and blockchain, NEAR aims to pioneer this intersection and maintain an accessible and fair digital environment that prevents large tech companies from monopolizing control.
In June, the NEAR Foundation launched an incubation program to build infrastructure for user-owned AI. The first batch of incubation teams includes 6 teams: Mizu, Pond, Nevermined, Hyperbolic, Ringfence, and Exhibits. The AI Incubation Program aims to contribute to the larger vision of building a collaborative and user-owned AI ecosystem where users and developers can use secure, decentralized advanced AI solutions and provide support for end users and researchers who contribute to open source.
Popular Projects/Integrations
* Sweat Wallet is a digital wallet designed specifically for the Sweat Economy ecosystem, allowing users to send, receive, and store a variety of digital assets. Each Sweat Wallet is automatically assigned a NEAR address, enabling seamless interaction with the NEAR ecosystem and NEP-141 tokens. The integration with NEAR not only provides a powerful and secure platform for transactions, but also ensures that users can easily manage their assets without the need for additional wallets.
*HOT is a digital token on the NEAR protocol designed to be easily and conveniently mined through a Telegram-based wallet system. Users can create wallet addresses that are directly linked to their Telegram accounts, allowing for easy interaction and transactions. The mining process for HOT tokens is very simple, allowing users to collect tokens regularly. Initially, transactions are free, and users can choose to pay fees in HOT tokens as they progress. The integration with the NEAR protocol provides a secure and efficient environment for managing and mining HOT tokens, attracting users who want to easily enter the world of crypto without a large upfront investment.
* Frax Finance is partnering with NEAR Protocol to strengthen the development of decentralized AI and programmable money in the blockchain ecosystem. The collaboration aims to leverage NEAR’s advanced chain abstraction capabilities, enabling scalable and flexible application development across multiple blockchains. The initiative builds on Frax Finance’s success with Ethereum-based assets and aims to bring similar performance and innovation to the NEAR ecosystem. The synergy between Frax Finance and NEAR Protocol is expected to advance the future of decentralized finance (DeFi) by integrating AI and innovative financial solutions, ultimately creating a more user-centric and decentralized financial environment.
* Built on the NEAR protocol, Aurora connects Ethereum and NEAR, enhancing the scalability and usability of Ethereum applications. Aurora is fully compatible with the Ethereum Virtual Machine (EVM) and acts as a Layer2 solution with low transaction fees and fast finality. Key features include the Aurora Engine for easy deployment of Ethereum smart contracts and the Aurora Bridge for seamless transfer of tokens and data between Ethereum and Aurora. Leveraging NEAR's sharding technology, Aurora ensures high performance and scalability, combining the ecosystem benefits of Ethereum with the efficiency and low costs of NEAR.
Key players and their contributions
NEAR Protocol’s success is attributed to its co-founders Illia Polosukhin and Alexander Skidanov. Polosukhin, formerly an engineering manager at Google Research, co-authored the influential paper “Attention Is All You Need” that introduced the Transformer architecture, and led key projects such as TensorFlow. His expertise in AI has been critical in shaping NEAR’s innovative and scalable approach to blockchain technology. Skidanov, formerly the Director of Engineering at MemSQL, has extensive experience building scalable systems and leading engineering teams. His technical acumen has been critical in developing NEAR’s robust infrastructure. Their shared vision and expertise have brought NEAR Protocol to the forefront of the blockchain industry, fueling its rapid growth and innovation.
in conclusion
In summary, the NEAR Protocol has made significant progress in solving the major challenges faced by existing blockchain platforms. With an innovative focus on scalability, user experience, and developer engagement, NEAR is well-positioned to lead the blockchain industry into a new era of financial innovation, connecting AI and decentralized applications. Looking ahead, the NEAR Protocol's emphasis on chain abstraction and user-owned AI digital autonomy puts it at the forefront of the future blockchain ecosystem. As the platform continues to grow and expand, it will play a key role in shaping the future of digital applications for decentralized finance and application development, expanding the reach and influence of blockchain technology in the AI era.
