What Is NEAR Protocol (NEAR)? How It Works and How to Buy NEAR

NEAR protocol is designed to incentivise a network of computers to operate a platform for decentralised applications, utilising sharding for more efficient data retrieval and scaling.

Feb 13, 2024
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What Is Near

Key Takeaways:

  • NEAR protocol provides a platform for developers to create and launch decentralised applications (dapps) by leveraging a network of computers or nodes.
  • The core design of NEAR involves sharding, a process that divides the network infrastructure into segments, enabling nodes to handle only a portion of transactions, thus enhancing efficiency in data retrieval and platform scaling.
  • In contrast to centralised data storage systems, NEAR is operated and maintained by a distributed network of computers, establishing an architecture around that network and its native cryptocurrency, the NEAR token.
  • NEAR protocol operates as a Proof of Stake (PoS) blockchain, utilising the Nightshade sharding solution to distribute the computational workload into manageable chunks, minimising security vulnerabilities by allocating smaller sections of the chain to participating nodes.
  • The NEAR protocol includes the Rainbow Bridge application (for seamless transfer of Ethereum tokens) and Aurora (a Layer-2 scaling solution), allowing developers to launch Ethereum dapps on NEAR’s network.

What Is NEAR Protocol?

NEAR protocol is software designed to incentivise a network of computers (nodes) to operate a platform tailored for developers to create and launch decentralised applications (dapps). At the core of NEAR protocol’s design lies the concept of sharding, a process that divides the network’s infrastructure into multiple segments. This division enables nodes to handle only a fraction of the network’s transactions, contributing to the creation of a more efficient method for retrieving network data and scaling the platform.

In functionality, NEAR operates similarly to centralised data storage systems like Amazon Web Services (AWS), serving as the foundational layer upon which applications are constructed. However, in contrast to being governed by a single entity, NEAR is operated and maintained by a distributed network of computers. 

In essence, NEAR protocol establishes an architecture built around a network of computers and its native cryptocurrency, the NEAR token, much like how AWS facilitates code deployment in the cloud without the need for individual infrastructure creation.

How Does NEAR Protocol Work?

NEAR protocol operates as a Proof of Stake (PoS) blockchain, aiming to distinguish itself through its sharding solution, called ‘Nightshade’. Sharding allows each participating node to store only a small subset of the platform’s data, thereby enhancing scalability and transaction throughput, thus reducing transaction fees.

Nightshade

Nightshade, NEAR protocol’s sharding solution, enables the maintenance of a single chain of data while distributing the computational workload into manageable ‘chunks’. Nodes process these chunks, adding the processed information to the mainchain. 

One notable advantage of Nightshade is its potential to minimise security vulnerabilities by allocating smaller sections of the chain to participating nodes.

Rainbow Bridge

NEAR protocol incorporates the Rainbow Bridge application, facilitating the seamless transfer of Ethereum tokens between Ethereum and NEAR. To move tokens from Ethereum to NEAR protocol, users deposit tokens into an Ethereum smart contract, which locks the tokens. Subsequently, new tokens representing the original ones are created on NEAR’s platform. 

This process can be reversed when users wish to retrieve their original tokens, as the original funds are held in storage through the smart contract.

Aurora

Aurora, a Layer-2 scaling solution on NEAR protocol, is designed for developers to launch their Ethereum dapps on NEAR’s network. Leveraging Ethereum’s coding technology — Ethereum Virtual Machine (EVM) — and a cross-chain bridge, Aurora allows developers to seamlessly link their Ethereum smart contracts and assets, combining the advantages of NEAR protocol’s low fees and high throughput with the familiarity and application network of Ethereum.

The NEAR Token and NEAR Tokenomics

The NEAR token serves as the primary means for paying transaction fees and collateral for storing data on the blockchain. Stakeholders in the blockchain ecosystem, such as transaction validators, receive NEAR token rewards. Validators are rewarded every epoch, amounting to 4.5% of the total NEAR supply on an annualized basis.

Developers creating smart contracts also receive a portion of the transaction fees generated by their contracts. The remaining portion of each transaction fee is burned, contributing to the scarcity of the NEAR token. NEAR protocol has established a treasury, annually receiving 0.5% of the total NEAR token supply, which is aimed at reinvesting in the development of the ecosystem.

NEAR protocol supports ‘wrapped’ tokens from other chains and non-fungible tokens (NFTs), and it has established a bridge with Ethereum, allowing users to transfer ERC-20 tokens from Ethereum to NEAR.

How to Buy the NEAR Token

Near protocol (NEAR) is listed in the Crypto.com App with a growing list of 250-plus supported cryptocurrencies and stablecoins, including Bitcoin (BTC), Ethereum (ETH), Polkadot (DOT), USD Coin (USDC), and Cronos (CRO). 

Crypto.com App users can now buy NEAR with USD, EUR, GBP, and 20-plus other fiat currencies and spend it at over 80 million merchants globally using the Crypto.com Visa Card.

Alternatively, users can also buy NEAR on the Crypto.com Exchange. To start buying NEAR today, download the Crypto.com App.

Conclusion — Final Words on NEAR Protocol

NEAR protocol has emerged as a promising force in the realm of dapps, offering a robust platform driven by innovative solutions like sharding and the Nightshade sharding protocol. Its unique architecture, distinct from traditional centralised systems, underscores the potential of a distributed network of computers working in harmony to power the future of dapps.

The inclusion of features like the Rainbow Bridge and Aurora further enriches NEAR protocol’s ecosystem, providing seamless interoperability with Ethereum and offering developers a familiar environment with added benefits.

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