Crypto Insiders founder writes: Why the future belongs to NEAR?

Author: Zoran Kole, Founder of Crypto Insiders

Translator: Jiang Haibo, PANews

Abstract: On April 7, an article titled "The Future Belongs to NEAR" by Zoran Kole, the founder of Crypto Insiders, sparked discussions in the crypto community. He wrote that on April 20, NEAR will announce the launch of their own native algorithmic stablecoin USN in collaboration with other well-capitalized stablecoins, which will offer an annualized interest rate of about 20%. The article also provides a comprehensive analysis of the NEAR public chain from technical and developer perspectives. Below is the full translation:

Overall Overview

NEAR is a developer platform built on a sharded, proof-of-stake, Layer 1 blockchain designed for usability. It includes a permissionless base layer, independent native tokens, a predetermined monetary policy, and a market for computational resources. The Near team consists of over 90 world-class developers and researchers from tech giants like Google, Meta, Microsoft, and MemSQL, who have formed NEAR through extensive open-source, decentralized collaborative efforts.

NEAR leans towards pragmatism rather than perfectionism, with its core value proposition being "simplicity will ultimately drive adoption." Therefore, its success is measured by the ease of use of the protocol and the ability of developers who have never owned cryptocurrency to build on NEAR. NEAR is a developer-centric Layer 1 blockchain platform that prioritizes the experience of developers and end-users, which is why it can achieve long-term success.

Blockchain Architecture

At the core of NEAR is a community-operated cloud that serves as a marketplace for computational resources among participants. On the supply side, there are validator nodes maintained through incentives to secure the network (currently 100 nodes). On the demand side, developers and end-users are the primary focus of the platform.

There is an inherent trilemma within the Layer 1 protocol, which is the biggest barrier to mass adoption and success. First, users want security, but the platform often does not focus on this as long as the user experience is smooth. Second, developers are primarily concerned with adoption, ensuring it has a sustainable source of long-term revenue. Additionally, validators want higher income to protect the proof-of-stake network. Finally, users, who are the main token holders, want this native token to serve as a store of value in the long term.

The underlying solution to this trilemma is that as the demand for tokens grows with new users and developers, the usage of applications on the network will increase. Then, the network's validators will earn higher income as fewer tokens are staked and more tokens are burned, thus increasing the validators' earnings. Through this economic flywheel, fees decrease while compensating validators, and end-users as token holders will also be pleased, leading to improved network security.

NEAR vs. ETH 2.0

To quote Naval Ravikant (co-founder of AngelList and early investor in Uber, Twitter, etc.), "NEAR looks like the roadmap for Ethereum 2.0, but it has already implemented it." The goal of Ethereum 2.0 is to become a sharded, proof-of-stake, EVM-compatible Layer 1 blockchain capable of achieving cheap, fast transactions while being environmentally and developer-friendly. The launch of Simple Nightshade (which introduced the first phase last November, splitting into four shards shared among about 60 validators) has brought NEAR closer to its goal of a fully sharded and secure blockchain.

NEAR employs a Delegated Proof of Stake (DPoS) consensus mechanism, currently achieving 2500 to 3000 transactions per second. It consists of shards and validator seats (100 validator seats per shard) that can linearly increase with network demand, thus lowering the barrier to entry and enabling future mass adoption.

The NEAR network optimizes for activity rather than security through a Byzantine fault tolerance assumption, allowing all transactions to achieve finality in under 2 seconds.

The main difference between NEAR and Ethereum 2.0 is that NEAR uses a single chain to shard each block instead of a beacon chain. This ensures consensus data availability while mitigating shard-level attacks. Dynamic re-sharding is expected to go live by the end of 2022, allowing the network to maintain low transaction fees while achieving higher throughput. This approach is also environmentally friendly, as NEAR was certified as a carbon-neutral project by South Pole in February 2021.

Developer-Centric Protocol

Compared to alternative Layer 1 blockchains, NEAR's strongest competitive advantage is its developer-friendliness. NEAR prides itself on being developer-first, encouraging mass adoption and usage of the network by focusing on the developer experience. Since nodes run Web Assembly (WASM, a method that uses non-JavaScript code and allows it to run in the browser), developers can write applications in Rust or Assembly Script without needing to learn a new programming language to start developing on NEAR.

Additionally, NEAR has its own Layer 2 protocol, Aurora, which is EVM-compatible and allows current Ethereum developers to seamlessly run their applications on NEAR at minimal cost. Aurora helps bridge the gap between Ethereum and NEAR with a 1-second block time, 2 seconds of finality, and approximately $0.02 per transaction. This low barrier to entry has led to significant developer adoption over the past few years.

Growth Analysis

According to Electric Capital, NEAR is one of the Layer 1 blockchains with the most full-time developers (excluding Bitcoin, Ethereum, Polkadot, Cosmos, and Solana).

NEAR has one of the fastest-growing ecosystems, with the total number of developers increasing fourfold over the past two years. This high growth rate of developers is a key indicator that the protocol's adoption and usage will continue to thrive.

Developer Incentives

If developers believe that the lifetime value of users will exceed gas costs, they can pay for gas and transaction costs. This provides predictable pricing for budget-conscious end-users.

30% of transaction fees go to smart contracts (averaged among all contracts used during the transaction), providing a sustainable revenue source for smart contract development. With the announcement of an $800 million incentive fund, developers have an attractive reason to build on NEAR.

There is a 95-97% drop-off rate in the onboarding process for blockchain-based applications and games. NEAR focuses on progressive security (high availability and low security, and vice versa). NEAR account names end with ".near," providing a convenient user experience for new end-users. Furthermore, NEAR's delegated proof-of-stake consensus also grants users the right to participate in the ecosystem's security, starting from the first interaction with the platform through the native wallet application. This ease of use, combined with the low barrier for developers, provides a core advantage for NEAR's long-term adoption.

Recent Change Factors

NEAR has several change-inducing factors that make it a fully attractive investment. At the end of January, NEAR completed a $350 million financing round led by Tiger Global, adding to the star-studded list of venture capital giants supporting the NEAR ecosystem. According to Messari, as of the third quarter of 2021, NEAR was the second most commonly held asset among crypto funds.

Additionally, NEAR will be listed on Coinbase in the coming months, which will help raise awareness among retail investors in unprecedented ways. This also paves the way for integrating NEAR NFTs into Coinbase's upcoming NFT marketplace. Finally, on April 20, NEAR will announce the launch of their own native algorithmic stablecoin USN in collaboration with other well-capitalized stablecoins. They will offer an annual interest rate of about 20%, which is highly attractive and will facilitate the rotation of DeFi capital into the NEAR ecosystem, drawing total TVL from other Layer 1 protocols.

With the growth driven by attractive stablecoin yields, NEAR will be compared to Terra. Terra currently has a market cap of about $40 billion, while NEAR's market cap is $10 billion. The aforementioned change-inducing factors will strengthen NEAR's fundamentals in both the short and long term and may lead to a valuation increase of at least 100% in the coming months.

In short, the future belongs to NEAR.