What is NEAR Protocol (NEAR)?

By Kraken Learn team
9 min
19 Oca 2022
Share this:

A beginner's guide to NEAR 📖

NEAR Protocol is a Layer 1 blockchain for developers to create and launch their own decentralized applications (dApps) serving a wide range of use cases, including decentralized finance (DeFi), non-fungible tokens (NFTs), payments and gaming.

NEAR Protocol leverages a sharding mechanism to achieve increased scalability and fast, cheap transactions. Validators can process transactions on a section of the blockchain (called a shard) rather than the entire network.

NEAR Protocol’s native token, NEAR, is classified as an infrastructure token. These types of projects focus on enhancing the functionality of blockchains. 

More specifically, NEAR Protocol falls under the Layer 1 token category as a smart contract platform. NEAR holders can use their tokens to cover network transaction fees associated with using NEAR Protocol applications and participate in governing the network’s development.

Kraken allows users to buy and trade NEAR, as well as 250+ other types of cryptocurrencies.

There are some geographic restrictions which may affect the assets that are available in your verified country of residence.
$6.59
-%4,23
24H

How does NEAR Protocol work? ⚙️

Near seeks to improve on earlier iterations of blockchain infrastructure by implementing flexible scaling technology and an improved suite of developer tools.

The main components of Near are:

  • Sharding: Splits the network into multiple segments, allowing parallel processing of transactions and smart contracts.

  • Nightshade: A unique sharding mechanism that boosts capacity and speed.

  • Rainbow Bridge: Facilitates interoperability with Ethereum, allowing asset and data transfer between the two blockchains.

  • Human-Readable Account Names: Improves usability with easily recognizable account names.

  • Gas Fee Rebates: Developers can cover transaction fees, improving user experience.

NEAR Protocol's key innovations 🏆

NEAR Protocol is a smart contract platform that leverages its unique consensus mechanism, Thresholded Proof-of-Stake (TPoS), and the Aurora Virtual Machine to improve its scalability and reliability.

Here's a closer look at its key features. 

Thresholded proof-of-stake

Validators secure the network by staking NEAR tokens. Any malicious activity detected by the network can result in validators losing their staked tokens via a process called slashing. 

TPoS uses an auction system for validator selection which discourages resource pooling. This process aims to improve decentralization and fairness with regards to reward distribution. It also serves to reduce forking, ensuring faster transaction finality.

Validators on NEAR take on various roles:

  • Chunk producers: Verify transactions on individual shards.

  • Block producers: Gather transactions from different shards, aggregate them and send them to the main chain.

  • Hidden validators: Validating random shards only known to them, making it harder for malicious actors to target them.

  • Fishermen: Monitor the chain for fraud and report any malicious behavior.

This diverse validator set helps contribute to a more secure, decentralized and efficient network.

Aurora Virtual Machine

Aurora is a custom-built Ethereum Virtual Machine (EVM) by the NEAR Protocol team that provides developers a ready-to-use solution for running their Ethereum-compatible apps on a high-performance platform. 

This means NEAR users can interact with Ethereum-based applications while enjoying increased faster transaction speeds and lower transaction costs.

What problem does NEAR Protocol solve? 🥇

NEAR Protocol aims to solve the blockchain trilemma—the challenge of balancing security, scalability and decentralization.

Traditional blockchains like Ethereum face limitations with high fees and low throughput as they grow in size. NEAR's sharding technology allows the network to increase its capacity as demand rises, ensuring transactions remain fast and cheap to send.

NEAR emphasizes user experience with features like human-readable account names instead of long cryptographic addresses. For developers, NEAR offers an environment with familiar programming languages, streamlined deployment processes and a robust support community. 

These characteristics make blockchain technology more accessible and practical for real-world applications, while also helping to bridge the gap between traditional web and decentralized technologies.

crypto staking image

Why buy NEAR? 🤷‍♂️

NEAR Protocol (NEAR) is a cryptocurrency that powers the NEAR Protocol network and is used to pay for transaction fees and earn rewards for helping to secure the blockchain network via staking.

Someone may wish to purchase NEAR for the following reasons:

  • Participate in protocol governance: NEAR is used to empower the community to actively participate in the decision-making process of its protocols, ensuring a more democratic and inclusive approach to project management. 

  • Stake NEAR: staking allows NEAR owners to earn potential rewards by actively participating in the validation of transactions. 

  • Pay for transaction fees: These fees compensate validators for their work in processing and verifying transactions.

NEAR Protocol origin 🌍

Founding members Illia Polosukhin and Alexander Skidanov launched the NEAR Protocol mainnet on April 22, 2020.

The NEAR Foundation, a non-profit based in Switzerland, aims to support the development and security of the NEAR Protocol ecosystem, ensuring it remains open and decentralized.

Key Founders

Illia Polosukhin 

  • Title: Co-founder and CTO of Near Protocol; CEO of the Near Foundation

  • Professional Background/Qualifications: Illia has a background in engineering with contributions to TensorFlow at Google, enhancing his profile in both the open-source and machine learning communities. 

  • Key Contributions: Illia leveraged his specialized knowledge in data storage and distributed systems to design Near in a way that mitigates the burden of heavy amounts of stored data.

Alexander Skidanov 

  • Title: Co-founder and CEO of Near Protocol

  • Professional Background/Qualifications: Alexander's experience stems from his work at MemSQL (now SingleStore), where he focused on developing in-memory databases, and his technical roles at Microsoft and Yandex, grounding him in software development and system architecture.

  • Key Contributions: Alexander has used his understanding of distributed systems and blockchain technology to design and implement Near’s unique scaling and security solutions.

NEAR Protocol's fundraising journey has totaled $500 million since the project’s launch. 

Early support came from Accomplice in seed and private rounds, totaling $11.6 million, followed by significant venture rounds led by Andreessen Horowitz, which brought in nearly $22 million. The main sale in 2020 further fueled NEAR's growth, raising a combined $30 million at prices between $0.29 and $0.40 per token. 

These successful funding rounds, particularly the 2022 investments led by Three Arrows Capital ($150 million) and Tiger Global Management ($350 million), indicate strong investor confidence in NEAR's vision and potential to disrupt the blockchain landscape.

NEAR tokenomics 📊

NEAR Protocol has no maximum supply limit. The initial supply of 1,000,000,000 NEAR was distributed as follows:

  • 17% – 170,000,000 NEAR – Community grants & programs.

  • 14.5% – 145,000,000 NEAR – Core contributors.

  • 12% – 120,000,000 NEAR – Community sale.

  • 11.46% – 114,600,000 NEAR – Early ecosystem.

  • 11.4% – 114,000,000 NEAR – Operations grants.

  • 10% – 100,000,000 NEAR – Foundation endowment.

  • 7.57% – 75,700,000 NEAR – Venture round 1.

  • 7.06% – 70,600,000 NEAR – Private round 1.

  • 5.76% – 57,600,000 NEAR – Seed Round.

  • 2.16% – 21,600,000 NEAR – Pre-seed round.

  • 0.62% – 6,200,000 NEAR – Venture round 3.

  • 0.25% – 2,500,000 NEAR – Private round 2.

  • 0.22% – 2,200,000 NEAR – Venture round 2.

NEAR Protocol TPoS consensus mechanism introduces an inflationary model designed to reward validators for securing the network and participating in consensus mechanisms. Here’s a breakdown of NEAR Protocol’s issuance schedule:

  • Initial Supply: NEAR started with an initial total supply of 1 billion tokens at network launch.

  • Annual Inflation: The protocol’s initial annual inflation rate of 5% aims to incentivize network participation. This inflation is primarily used to reward validators who stake their NEAR tokens to secure the network.

  • Transaction Fees: All transaction fees on the NEAR Protocol are burned, introducing a deflationary mechanism. As the network’s usage increases, the burning of transaction fees can offset a significant portion of the inflation.

  • Validator Rewards: The new tokens created through inflation are distributed to validators as rewards. Validators are chosen based on their stake in the network (the amount of NEAR tokens they have staked) and their performance in validating transactions and securing the network.

  • Dynamic Inflation: The actual inflation rate can vary because it is dynamically adjusted based on network activities and the staking participation rate. The goal is to ensure network security through ample staking participation while minimizing inflationary pressure.

  • Staking Rewards Decay: Over time, as the protocol matures and transaction volume increases, the plan is for transaction fee burns to offset a larger portion of the new token issuance. This could potentially lead to a decrease in net inflation or even a deflationary token economy.

crypto staking image

Get started with Kraken

Ready to dive into the world of cryptocurrency?

Sign up for a free Kraken account today and start your journey with NEAR Protocol (NEAR)!

DisclaimerThese materials are for general information purposes only and are not investment advice or a recommendation or solicitation to buy, sell, stake, or hold any cryptoasset or to engage in any specific trading strategy. Kraken makes no representation or warranty of any kind, express or implied, as to the accuracy, completeness, timeliness, suitability or validity of any such information and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. Kraken does not and will not work to increase or decrease the price of any particular cryptoasset it makes available. Some crypto products and markets are unregulated, and you may not be protected by government compensation and/or regulatory protection schemes. The unpredictable nature of the cryptoasset markets can lead to loss of funds. Tax may be payable on any return and/or on any increase in the value of your cryptoassets and you should seek independent advice on your taxation position. Geographic restrictions may apply.