Written by: Geng Kai, Eric, DFG
NEAR has quickly become a leader in the increasingly integrated realms of Web3 and AI, but its foundation in AI runs deeper than many realize. Interestingly, NEAR was not originally envisioned as a blockchain project. One of its co-founders, Illia Polosukhin, embarked on this journey with a different goal: to create an AI-driven enterprise. Polosukhin was one of eight researchers at Google who introduced the revolutionary Transformer model (a key architecture powering today's most popular AI tools like OpenAI's ChatGPT), and he initially sought to advance AI in different ways.
NEAR founder Illia with Nvidia founder Jensen at NVIDIA GTC
However, when the team set out to initiate their first AI projects, they encountered significant challenges, particularly in incentivizing and coordinating the various contributors to building AI models. It was this barrier that made them realize that blockchain technology could provide the perfect solution. By leveraging a high-performance blockchain with integrated crypto payments, they could facilitate seamless exchange of foundational data, computation, and AI models—a key feature in building a superior decentralized AI ecosystem. This insight prompted the critical pivot from AI to blockchain, ultimately giving rise to what we now know as the NEAR protocol.
However, what truly sets NEAR apart is its remarkable alignment with some of the most compelling narratives in today's tech landscape. Whether the focus is on AI, chain abstraction, achieving modularity through data availability, or scaling through sharding, NEAR's name consistently comes up. This raises an interesting question: Is NEAR merely riding the wave of popular trends, or is it genuinely providing innovative products that enhance the blockchain experience?
To answer this question, we must delve deeper into NEAR's infrastructure.
Addressing blockchain scalability issues: NEAR's approach
Scalability is a challenge that blockchain networks face, and various solutions are being explored to meet the growing demand for fast and efficient transactions. While some blockchains have implemented technologies such as Layer 2 scaling, sidechains, and state channels, these approaches often entail trade-offs in terms of interoperability, composability, and usability.
Nightshade Sharding 2.0: NEAR's scalable backbone
One of NEAR's key features is its Nightshade sharding technology, which is a core component of the protocol's scalability strategy. Sharding technology splits the blockchain state into smaller, more manageable parts called 'shards,' each of which can independently process transactions. This design significantly increases the network's throughput without placing the burden of processing all transactions on any single node.
How NEAR blocks are split into chunks from each shard
In the initial phase, NEAR implemented a design that divides each block into 'chunks,' with each chunk containing transactions from specific shards. Block producers and validators are assigned to specific shards, meaning they only need to process transactions related to their shard. This not only optimizes processing efficiency but also allows NEAR to achieve a throughput of about 3,000 transactions per second (TPS) with the initial setup of four shards.
In its evolution, NEAR is enhancing this system through stateless validation, allowing validators to verify transactions without storing the entire blockchain state. This innovation lowers hardware requirements, further enhances accessibility, and achieves decentralization of the network. Additionally, NEAR is exploring the integration of zk-proofs (zero-knowledge proofs) and dynamic re-sharding into its sharding design, which can further improve scalability by enabling faster and more secure transaction validation. NEAR will expand to 10 shards by the end of the year, increasing network capacity by 50% to meet growing demand.
NEAR's Nightshade Sharding provides the scalability, speed, and interoperability required to support AI projects that need to process large datasets and execute transactions quickly. The network's rapid finality ensures that AI-driven applications can operate in real-time, making NEAR an ideal platform for developers looking to innovate in decentralized AI.
NEAR's blockchain interoperability full-stack modular architecture
As the blockchain landscape becomes increasingly decentralized, the demand for interoperability and seamless cross-chain interactions is more important than ever. The NEAR protocol recognizes this challenge and has built its platform to be a dominant force in unifying multichain ecosystems. By implementing a range of innovative technologies—such as rapid data availability (DA) layers, multi-party computation (MPC) for secure cross-chain transactions, super fast finality layers (SFFL), and chain abstraction—NEAR aims to provide a unified and user-friendly experience across multiple blockchains. Each of these components plays a crucial role in positioning NEAR as a top interoperable blockchain.
Enhanced cross-chain compatibility and connectivity
NEAR's commitment to interoperability is further reflected in its integration with Ethereum and the broader blockchain ecosystem. Aurora is a smart contract on NEAR, compatible with Ethereum's blockchain and ecosystem. Aurora's engine runtime supports seamless deployment of Solidity and Vyper smart contracts, allowing developers to leverage NEAR's powerful infrastructure while maintaining compatibility with Ethereum. NEAR is compatible with popular tools like Metamask through NEAR Snap, while the Rainbow Bridge facilitates the transfer of tokens and data between Ethereum, NEAR, and Aurora, highlighting its commitment to interoperability.
In addition to maintaining interoperability with other ecosystems, NEAR also offers assets for seamless cross-chain use through restaking. Allstake enables cross-chain native restaking of assets, creating a trustless decentralized ecosystem that contributes to the security of AVS. Restaking on the NEAR protocol allows for leveraging liquidity from multiple ecosystems to create a seamless experience across blockchains.
The fastest data availability layer on the market
NEAR's DA layer is managed by Nuffle Labs (the behind-the-scenes team for all NEAR modular products), ensuring that the blockchain can efficiently access and process large amounts of data. With Nightshade, NEAR DA provides a robust solution for Ethereum rollups and other high transaction volume projects. Unlike other DA solutions, NEAR's consensus mechanism maintains speed even under heavy data influx, ensuring quick publication and querying of data.
Overview of popular DA solutions:
NEAR DA
Celestia
Avail
EigenDA
Consensus
Nightshade
Tendermint
GRANDPA + BABE
Committee-based
Cost per block
Very low
Low
Low
Pending
Data throughput
16mb/s
6.67mb/s
-
1.39mb/s
Block time
1s
15s
20s
NA
Finalization time
2s
15s
20s
12min
DA Sampling
No
Yes
Yes
No
As more blockchains utilize zero-knowledge proofs to achieve unified security across chains, NEAR's DA provides dApps from multiple networks with easier and cheaper data querying and settlement. Furthermore, NEAR DA ensures that nodes remain synchronized even if operators go offline, adding a layer of reliability. This feature benefits not only current high-demand applications but also positions NEAR as a key player in future cross-chain settlements.
Using the super fast finality layer to support other blockchain infrastructures
According to the modular blockchain theory, NEAR has collaborated with Eigenlayer to develop the Super Fast Finality Layer (SFFL). This innovative settlement layer significantly reduces transaction times and Rollup costs while inheriting the security and finality of NEAR and Ethereum through Eigenlayer. SFFL relies on NEAR DA to obtain transaction data, allowing nodes to efficiently access and validate transactions.
Since SFFL supports cross-rollup transactions, it boosts NEAR's transaction volume and creates a deflationary effect on NEAR tokens due to 70% of transaction fees being burned. Collaboration with Swell further strengthens NEAR's position in the modular blockchain stack, which has delegated a large amount of ETH to SFFL, bringing the vision of chain abstraction closer to reality.
The unification of blockchains: NEAR's chain abstraction vision
The modular blockchain architecture achieves scalability but also leads to fragmentation, causing liquidity, user experience, and interoperability fragmentation. NEAR addresses these challenges by advancing chain abstraction—a concept designed to provide users with a unified experience across multiple blockchains.
Goals of chain abstraction
NEAR's FastAuth key management system allows users to manage their NEAR accounts using email addresses, simplifying account creation and recovery. The system also supports multiple keys for different functions, enhancing security and usability.
How different keys control different functions on a NEAR account
Moreover, NEAR ensures the security of cross-chain transactions through chain signature integration with MPC technology, allowing users to interact with multiple blockchains without managing different wallets and mnemonic phrases.
MPC signature process
NEAR's appeal
Stablecoin and TVL growth
This growth is reflected in the total locked value (TVL) of NEAR and its EVM-compatible sibling Aurora. From July 2023 to now, the total TVL of NEAR and Aurora has surged from about $55 million to $230 million, representing a threefold year-over-year increase in dollar terms. Adjusting for the native token value, the TVL calculated in NEAR has doubled, while the TVL calculated in AURORA has decreased by 40%.
DeFi on NEAR
The DeFi landscape on NEAR is currently dominated by two key platforms: Burrow and Ref Finance. The lending platform Burrow has seen a significant increase in activity due to its incentivized lending program for stablecoins. Similarly, the decentralized exchange (DEX) Ref Finance is actively incentivizing its stablecoin mining pools, with total trading volume recently surpassing $7 billion. These incentives are primarily funded by NEAR token rewards and could play a crucial role in the impending surge of stablecoin market capitalization in 2024.
Emerging categories and trends in the NEAR ecosystem
Restaking
Restaking has emerged as an increasingly growing category in the NEAR DeFi ecosystem, with platforms like Allstake contributing approximately $15 million to TVL. Although liquid staking is often not included in TVL metrics, it remains the largest category, with a TVL exceeding $280 million.
On the Aurora front, while there are several popular EVM DApps, the most widely used application remains Aurora Plus, a platform designed for fee-free transactions and promoting AURORA token staking.
NEAR's commitment to Web3 AI development
As part of a broader strategy to become the leading AI platform in the Web3 ecosystem, NEAR is making significant progress in developing and nurturing AI projects on its network. In addition to the efforts of the NEAR R&D lab, the protocol has launched the NEAR AI x Horizon (HZN) incubation program, specifically aimed at supporting pioneering projects at the intersection of AI and blockchain technology. Among the first batch of incubated projects, the program provides equity-free guidance, technical assistance, and scaling innovation guidance to six selected projects.
The equity-free model of NEAR HZN allows AI projects to fully focus on building and improving their products without the pressure of relinquishing ownership. This supportive environment is crucial for fostering innovation and has proven successful, as evidenced by previous cohorts that have raised over $20 million in external capital. The program begins a new round of funding every May, continuing three times a year to incubate a continuous stream of breakthrough AI projects.
The six projects currently supported by the NEAR HZN program cover key areas of the AI x Web3 stack, including data, computing resources, model networks, and payment infrastructure. These programs complement NEAR's collaborations with other AI-focused projects that are building networks in areas like AI consumer applications and agent infrastructure, and scaling AI through NEAR's data availability (DA) layer.
By addressing every aspect of AI architecture within the Web3 domain, NEAR positions itself as the preferred blockchain for developing AI applications. Its comprehensive support system (from incubation programs to cutting-edge technical infrastructure) demonstrates NEAR's commitment to fostering AI development on its platform, ultimately bridging the gap between AI and decentralized technology.
Conclusion: NEAR's strategic positioning as a leader in the blockchain and AI space
The NEAR protocol not only aligns with the trends of popular narratives but also lays the groundwork for the future of blockchain and AI through its innovative and extensive infrastructure. By integrating a powerful data availability layer, cutting-edge finality layer, and zero-knowledge technologies, NEAR has become a vital component of the infrastructure benefiting its ecosystem and the broader blockchain space.
NEAR is rooted in AI and has pivoted to blockchain, indicating a profound understanding of both fields. Its scalable and reliable infrastructure enables NEAR to refocus on AI, providing the necessary foundation to drive significant advancements that were previously unachievable. With features like chain abstraction, NEAR simplifies multichain interactions, making it an ideal platform for AI development that requires seamless access to various blockchains and fast transactions.
Even in a competitive environment, NEAR consistently delivers on its promises. Under the leadership of its co-founders, strategic partnerships, and dedicated R&D labs, NEAR is positioning itself as a true leader at the intersection of blockchain and AI. This is not just about keeping up with trends; it's about shaping the future of technology in a way that drives meaningful progress and adoption.
