A Quick Guide & Overview of The Computing Platform for the Open Web
The past weeks have been hectic in the Proof-of-Stake Blockchain world. Many different networks have developed to Mainnet, and many new networks have made their entrance. Today, we’re taking a look at NEAR Protocol.
🧐 Part 1 — What is NEAR Protocol?
NEAR Protocol, also referred to as NEAR, is a decentralized application platform that is designed to facilitate the open web of the future and power its economy. The envisioned web of the future for NEAR has everything from new currencies to new applications and even wholly new industries. On the NEAR platform, developers can host serverless applications and smart contracts with easy access to open finance networks and benefit from an entire ecosystem of open web components.
The NEAR Protocol is based on the same underlying technology as Bitcoin and combines it with advances in community consensus, database sharding, and usability. NEAR Protocol prides itself on being built from the ground up to be the most accessible network in the world for both developers and their end-users, while still ensuring scalability and security to serve those same users. Three concepts make this possible: building decentralized applications and onboarding users with excellent experience and scaling applications. By doing so, NEAR is the first-ever community-based network to extend the reach of Open Finance and power the future of the Open Web.
So, what is this Open Web that NEAR keeps referring to? Technological advances and specific system design decisions have taken blockchain’s functionality through three generations of development. These are known as Open Money (everyone has access to digital money), Open Finance (apply programmability to the multiple capabilities of Open Money), and Open Web. The Open Web isn’t so different from Open Finance; instead, it is more of an addition.
Open Web use cases need some additional performance improvements as well as the capability to reach a new group of potential users. There are vital requirements for a platform to drive the Open Web, which are:
- Improved volume, speed, and lower cost-transactions; since the blockchain is no longer just handling slow-moving asset management decisions, it needs to be able to scale to support other data types and use cases.
- Usability; Open Web use cases will cross into consumer applications; the different components and apps must allow for an end-user experience that consumers are used to while preserving user-ownership of their data.
These two requirements are highly complicated, so no platform has been able to achieve them until NEAR.
The NEAR Protocol functions on a Proof-of-Stake election mechanism called Thresholded Proof-of-Stake (TPoS). In this system, the idea is that a predetermined way to create a large number of participants maintaining the network will increase decentralization and security and create a fair reward distribution system. The NEAR Protocol wants to have a large pool of participants (called witnesses) to make decisions during a specific time (set to 1 day). Every interval splits into block slots, which are set at 1440 slots per minute. The number of witnesses is set at 1024 per block. According to these default settings, there will be 1,474,560 witness seats. Each of these seats is defined by the stake of all participants that indicated their interest in signing blocks.
If you want to participate in the network maintenance, you can submit a particular transaction that indicates how much money you’d like to stake. When the transaction is accepted, the specified amount of assets is locked for a minimum of three days. Every 24 hours witness proposals are gathered with all of the participants who signed blocks during that day. The cost for an individual seat gets identified, and a number of seats for everybody who has staked at least the cost amount are allocated.
NEAR Protocol uses inflationary block rewards and transaction fees to incentivize witnesses to participate in signing blocks. The inflation rate is defined as the percentage of the total number of digital assets. Whenever someone signs up to be a witness, a portion of their assets is locked up. The stake of each witness is unlocked a day after the witness stops participating in the block signature. So, what are the advantages of TPoS?
First of all, in a TPoS network with witnesses, as NEAR has created, there will be a lot less forking. Forks are possible when there is a severe network split with less than one-third of adversaries present. However, in NEAR, the minority of the network participants will see blocks with less than half of the signatures, and will, therefore, have quick and clear evidence that the network might be split. Secondly, there is no need to pool stake or computational resources because the reward is directly proportional to the stake. And lastly, the security is higher. The reason for this is that an attack is hard to conduct because you would need the private keys from witnesses that hold two-thirds of the total stake amount over the two days in the past.
NEAR Protocol has implemented something called Nightshade Sharding for their Proof-of-Stake consensus mechanism. If you’re unfamiliar with sharding, check the video below to get a basic understanding.
While the original sharding model with shard chains and a beacon chain has proven to be very useful, it does have inevitable hiccups. For example, the fork choice rule needs to be executed separately in each chain, and the fork choice rule in the shard and the beacon chains must be built differently and then tested independently.
With Nightshade, the system is modeled as a single blockchain in which each block contains all the transactions for all shards and changes the whole state. It is, however, not necessary for participants to download the full state or logical block. Instead, each participant of the network only maintains the state that corresponds to the shards that they validate transactions for. The list of all the transactions in the block is separated into solid chunks, one chunk per shard. Ideally, each block contains one chunk per shard per block; however, in practice, each block contains around zero or one chunk per shard.
💰 Part 2 — The Token
The NEAR platform is designed to efficiently store different digital assets, like tokens bridged from different chains or created on top of the NEAR Platform. Stablecoins are found to be particularly useful for transacting on the network. Thirdly, unique digital assets, also referred to as Non Fungible Tokens (NFTs), ranging from in-game collectibles to representations of real-world asset ownership, can be stored and moved using the platform.
Besides all these different options, the platform also has a fundamental native asset for the NEAR ecosystem. The NEAR token, as it is called, is similar to Ether and can be used to pay, run validation nodes, to stake and for governance processes.
NEAR announced that 1,000,000,000 NEAR tokens were created at Genesis on April 22, 2020. However, as you can see in the image below, the NEAR token supply is expected to grow over the next five years. For an in-depth explanation of the supply circulation, check here.
More Information & Sources
- NEAR Protocol Official Whitepaper
- NEAR Github
- NEAR Twitter
- NEAR Protocol Official Website
- Stakin Official Website
DISCLAIMER: This is not financial advice. Staking, delegation, and cryptocurrencies involve a high degree of risk, and there is always the possibility of loss, including the loss of all staked digital assets. Additionally, delegators are at risk of slashing in case of security or liveness faults on some protocols. We advise you to do your due diligence before choosing a validator.