A Deep Dive Into NEAR

Token Sales Aug 05, 2020

CoinList is excited to be partnering with NEAR to not only raise awareness of their next generation smart contract platform, but also to announce their upcoming Community Sale. We had the opportunity to chat with NEAR and discuss what they are building.

Q: To begin, what is NEAR and what is NEAR trying to achieve?

NEAR is a decentralized application platform which forms the backbone infrastructure of the Open Web stack and supports an entire wave of new applications that will be built using open technologies.  This platform is based on a public, sharded, proof-of-stake blockchain called the NEAR Protocol.

With NEAR, developers are able to quickly deploy applications to this platform and, instead of their code running on Amazon-owned servers, it is automatically run by hundreds of independent nodes located around the world. Unlike other blockchain-based platforms, NEAR provides both the dynamic scalability that allows apps to perform once they’re huge and the usability features that make them usable enough to actually need it.

Q: Okay a few questions here to follow up. First, can you walk me through what  NEAR enables in 2020 and beyond?

Over the past 10 years, both technological advances and specific system design decisions have driven blockchain’s expanding functionality.

Bitcoin piloted the idea of blockchain-based Open Money. Later, Ethereum expanded on the idea to build a platform which powers the early use cases of Open Finance (like today’s “DeFi”). As we’ve seen with Ethereum, Open Finance primitives and applications have their full potential blocked by limitations of the technology, and they have never reached consumer scale as a result.  If you think even bigger, there is a whole Internet of apps, called the Open Web, which can be built on top of blockchain technology if it is able to scale sufficiently.

NEAR is both sufficiently scalable and composable to solve the existing challenges in Defi today, but its ultimate goal is to drive the much broader vision of a truly Open Web.

Q: How does NEAR scale to meet the requirements for the Open Web?

NEAR Protocol uses a new sharding mechanism called Nightshade, which splits the network into multiple pieces so that the computation is done in parallel. Parallelism increases throughput and allows the network to scale up as the number of nodes on it increases. This also prevents issues with congestion raising gas prices while still encouraging applications to interoperate with each other. With NEAR, there isn’t a theoretical limit on the network’s capacity and it can achieve block times of under 2 seconds.

Q: What does the implementation of the network look like?

NEAR is actually a whole product suite built on top of the NEAR Protocol. This includes all the libraries, wallets, explorers, tooling, testing etc. that it takes for a developer to build, test and deploy a decentralized application.  It has the “push to deploy” simplicity that developers expect from today’s web-based cloud platforms (and don’t typically get from blockchains). Similar to existing cloud platforms, NEAR features a homogeneous environment with little configuration needed and allows the developer to focus on building instead of worrying about system setup, security, governance, or economics.

This is different from competing approaches that leverage “app chain” or “parachain” models, which allow for high configurability but require developers to engage significant complexity with their applications (thus are more similar to building on-premises hardware in today’s web).

Q: Alex (Co-founder) was engineer #1 at memSQL, a sharded database solution used by major multinational firms. Many of your core team came from there as well. How has this experience guided the building of the protocol?

Scaling blockchains is extremely complex, which is why most solutions have taken shortcuts rather than designing fully sharded designs. We’ve been incredibly lucky to have a core team which came directly from the challenging world of scaling databases because it gave them muscle memory for designing complex distributed systems while abstracting that complexity away from users and developers. It doesn’t hurt that many of them have championship-level competitive programming experience as well.

Q: Can you explain the need for the NEAR token and what one can do with it?

Because NEAR is a decentralized network that needs to operate across a wide range of non-trusted node operators, it uses a token to coordinate and incentivize the proper operation of the network.  Users of the network pay their fees to the network itself, which then distributes them properly to the providers of its services (typically called the “Node Operators” or “Validators”), who have put up a number of tokens as a sort of deposit that guarantees their good behavior.  This is called Proof of Stake.

Thus, users (whether end-users or the developers of applications who pay on their behalf) need to acquire NEAR tokens in order to pay for their usage of the platform and validators need to acquire the token to get the right to provide compute and storage services to the network.  This means that the entire economy of NEAR is expressed via the token itself.  While a portion of generated fees (30%) is allocated directly back to the apps themselves and another small portion of ongoing inflation (10%) is allocated to a non-profit foundation to support the ongoing evolution of the network, there are no for-profit organizations who benefit directly from the activity of the network without running a validating node themselves.

Because the overall number of tokens is relatively limited (there are 1 billion at start and the network will mint a net maximum of 5% new ones per year), an increase in the amount of activity on the network (and thus fees generated) will allow the holder of each token to provide proportionately more compute and storage to the network and thus benefit more from the payments for this service.  Thus, the token’s value to a potential validator should increase with the overall activity on the network, and participation as a validator represents the best way to capture the network’s increasing value as it grows.  Because the large portion of transaction fees are burned, the network can actually be deflationary at high rates of usage.

Q: How is NEAR tackling the usability problem?

Though most projects only focus on scalability, NEAR was designed with a dual mandate to provide both scalability and usability. NEAR’s flexible contract-based account model is the heart of its usability because it allows accounts to handle a nearly limitless range of potential keys or permissions.

As one example of this in action, the user experience during early interactions with apps is substantially simplified by eliminating the need to set up wallets.  This is because apps can pay for a user’s transactions and securely manage accounts on their behalf so users don’t have to know that they are using a blockchain-based app at all. When the user is ready for the advanced functionality of the chain (like ownership of assets or transfers), the app can securely hand the account off to the user.  This significantly reduces the problem of blockchain-based apps requiring users to hold wallets and use tokens too soon and makes these apps much more similar to today’s web apps.

Another example of flexible contracts is delegation, where users who hold tokens can send them to a validator who runs a node on their behalf. Users like this because they can earn a portion of staking rewards without having to run the technical infrastructure themselves. Most protocols implement this in a vanilla way on the protocol level, which means validators who want to attract people to stake with them can only compete by lowering their fees. On NEAR, delegation is contract-based, meaning each validator can implement their own version of the delegation contract. This allows them each to compete on different criteria -- maybe price, maybe how much stake is offered, maybe it’s how long that stake is offered for -- and it allows delegation contracts to interoperate with other decentralized finance tooling.  Think of what can be created when staking is a first-class component of the decentralized finance rails!

To learn more about NEAR, read the Beginner’s Guide

To get into greater depth on all areas, read the White Paper

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