Dragonfly: NEAR is not an Ethereum killer; it intends to collaborate and enhance Ethereum

This article was published on ChainNews, authored by Haseeb Qureshi, Managing Partner at Dragonfly Capital, and compiled by Perry Wang.

Today, we are excited to announce that Dragonfly Capital has made a significant investment in the NEAR project and will be joining the NEAR Validator Advisory Committee. We are now operating the third largest validator node on the NEAR mainnet, and in the future, we will work closely with other members of the NEAR Validator Advisory Committee to support the next phase of NEAR's mainnet adoption.

What is NEAR?

It's great to hear this question.

NEAR is the next-generation smart contract platform. It is the platform closest to the vision of Ethereum 2.0—a sharded, scalable blockchain—but it launched several years ahead of Ethereum 2.0.

Ethereum 1.0 could not meet the growing demand for decentralized applications. This became evident when the digital collectibles game CryptoKitties clogged the Ethereum network in 2017. Since then, the bull market in late 2020 exacerbated Ethereum's congestion issues. Gas fees have skyrocketed to historic highs, leaving users exhausted when interacting with smart contract-based applications.

Average gas prices on Ethereum over the past 3 years. Credit: Etherscan

We know this is just the beginning—DeFi applications have yet to reach a mainstream audience, but Ethereum 1.0 is already overwhelmed. Despite these constraints, most DeFi applications running on Ethereum today (like AMMs and lending protocols) perform exceptionally well; however, blockchain users and developers have higher expectations for public chains.

This issue was already deeply felt in 2018. At that time, the media dubbed other smart contract platforms as "Ethereum killers."

That phrase is too cliché.

NEAR is not trying to kill Ethereum. Ethereum will likely always be an indispensable part of the smart contract ecosystem, while NEAR is more inclined to collaborate with and enhance Ethereum, like another large city in the blockchain network landscape.

As of now, there is only one city that matters in the smart contract landscape: Ethereum, which you can think of as New York City. All activity related to smart contracts is currently happening on Ethereum. But now it is very congested and calcified, needing some way to scale.

Broadly speaking, there are three ways to scale smart contracts. The first approach is through "interoperability protocols," like Polkadot or Cosmos, which bridge multiple heterogeneous blockchains together. This is somewhat like building a highway system across the country, connecting some small towns.

The second approach is through Rollup layer two solutions, which you can think of as building taller skyscrapers on Ethereum—it's not arbitrary scaling, but a short-term good way to alleviate congestion.

The third approach is the path taken by NEAR: building a brand new, well-governed, and compatible L1 public chain that bridges back to Ethereum. In other words, NEAR is trying to build a second city: Chicago in the smart contract landscape.

That metaphor is quite vivid. Now let's talk about the technical aspects.

Introduction to NEAR

There are two ways to significantly increase blockchain transaction throughput: vertical scaling and horizontal scaling.

Horizontal vs Vertical Scaling. Credit: PudgyLogic

Vertical scaling means that to achieve higher throughput, we will require each node to be very powerful. This means that transaction processing can no longer be done by ordinary users, but such a network can handle more computation. Solana and DFINITY adopt this approach, which means that ordinary users cannot validate the blockchain on commoditized hardware in these two blockchains.

This is not necessarily a bad thing! Blockchains that use vertical scaling are very attractive for certain applications that require high performance and global state consistency. However, they achieve this at the cost of validator decentralization.

Horizontal scaling takes the completely opposite path. Horizontal scaling divides the system into multiple shards. Each shard only executes a subset of the total workload on the blockchain, and each validator only needs to validate a single shard (and part of a "coordinator" shard). Because the workload on each shard is lower, it allows more users to participate in validation. This maintains validator decentralization while still scaling the total throughput of the system.

This is precisely the vision for Ethereum 2.0: an arbitrarily sharded smart contract platform. The only regret is that Ethereum 2.0 seems to need several more years to come to fruition: Ethereum founder Vitalik recently stated that it will take too long to fully realize smart contracts on Ethereum 2.0, and Ethereum will have to fully adopt Rollup solutions during the transition period of several years.

NEAR adopts the exact same implementation strategy as Ethereum 2.0: a horizontally sharded blockchain capable of supporting several orders of magnitude more transactions per second. But unlike Ethereum 2.0, NEAR is already live.

Here are some numbers to give you a sense of the scalability improvements NEAR offers: each shard on the NEAR blockchain can handle 10 times more transactions than Ethereum 1.0. The NEAR blockchain will eventually have over 100 shards. This means that NEAR will ultimately be able to process 1000 times more transactions per second than Ethereum 1.0.

But scalability is currently a relatively easy promise. Many brand new smart contract platforms claim their powerful scalability, yet users still flock to Ethereum. The real challenge is to create a first-class developer experience that surpasses Ethereum. And that is where NEAR shines.

I have some of the best friends who are developers!

NEAR has remained friendly to developers all the way from its inception. With a WASM-based runtime, developers can get started and run on NEAR without learning a new programming language.

Are you a web developer? Use Script (a close relative of Typescript). Or if you prefer kernel debugging, write smart contracts in Rust.

NEAR contract similar to ERC-20 written in AssemblyScript. Credit: NEAR

Of course, most developers in the blockchain space today are already using Ethereum and Solidity tools. NEAR will soon launch EVM runtime in its virtual machine, which will allow Solidity protocols to be deployed on NEAR without significant changes. This also means that Ethereum tools (like Ganache or Metamask) will easily be compatible with NEAR-EVM deployments.

But what about assets? We all know that the most popular crypto assets are currently active on Ethereum, whether it's Tether, USDC, or DeFi tokens. Soon, you will be able to transfer these assets to NEAR through their trustless bridge—Rainbow Bridge. Almost all existing cross-chain bridges rely on trusted asset custodians, but Rainbow Bridge will present a completely decentralized solution, protected by cryptography and incentives rather than trusted protection.

There are many other excellent user experience (UX) improvements in NEAR. For example, human-readable addresses instead of names like 2e75ed2ffaae39e859b6… You can transfer your funds to dcp.near and leave it to us. All of this is implemented directly at the protocol level. You can even have multiple names with the same public key or nest them in another account as a sub-account (like haseeb.dcp.near).

NEAR wallet asset transfer experience

NEAR's design has many attractive features, such as the early implementation of EIP-1559, contract layer developer rewards, and storage staking. However, NEAR is still a very young network, and we hope that NEAR can evolve and grow alongside the next generation of crypto applications.

But the success of an L1 public chain requires much more than just technology.

Great blockchain platforms are ultimately built on their communities. NEAR's DNA comes from its founders: Illia and Alex, two highly talented and down-to-earth engineers who previously worked at Google and MemSQL, respectively.

By valuing user and developer UX, NEAR has built a world-class team and a vibrant community.

Growth of the NEAR developer ecosystem. Credit: Electric Capital

In addition to introductory developer tutorials, many projects are being built on the NEAR network through the Open Web Collective.

So far, NEAR has made impressive traction. But it is still a young network with many roadmaps to deliver. Whether the next few years will solidify its position as a dominant smart contract platform remains to be seen.
If you wish to learn more about NEAR, you can join the NEAR community on Discord or Telegram.

If you are interested in participating in the network, you can check the validator guide here. Or if you are a developer, you can find tutorials here.

Thanks to Ashwin Ramachandran for contributing to this article.