We have launched Cryptogram, an India-focused free weekly newsletter on blockchain tech, global crypto markets, and Web 3.0 technologies which promise to change our future. If you would like to subscribe to this newsletter, click here. You can read our past editions here.
Near protocol is a Layer-1 blockchain that banks on Nightshade, its sharding technology to achieve impressive scalability. In todayâ€™s article we look at the Near protocol, their Tokenomics and their price actions.
How it Started
Alex and Illia are the brains behind Near. Alex, a software developer from Microsoft and Illia, an engineering manager from Google came together to create Near with the help of the venture capital program Y Combinator. The fascinating point was that they were able to successfully raise $ 50 million in 4 private rounds and series A, even before they could launch their token.
What is Near & How does it work
Near Collective, a common term in the Near ecosystem, is basically a group of people that came together to build the infrastructure behind a new internet, that promises to operate autonomously and to make data of people safer. As a blockchain that uses delegated proof of stake consensus mechanism, Near has a specialized proof of stake protocol called Doomslug.
Delegated Proof of stake is where people lend their tokens to someone else that has setup their own validators. Doomslug allows us to achieve a sense of practical finality after just one round of communication. This implies that, instead of waiting for 34 blocks in the case of Ethereum, we just have to wait for one block.
Nightshade â€“ The sharding Ninja
Near operates on a sharding mechanism called Nightshade. When many popular blockchains use side chains to process blocks faster, nearly has their own mechanism where they use shards. When Ethereum has plans to implement sharding in near future, after their merge to proof of stake chain recently, Near already has it that helps them to process 100s of thousands of transactions per second. One of the unique features of Nightshade is that each share has only 100 seats and each seat allows people to be a validator. The cost associated with becoming a validator rises, as more people join the shard, so that more shards are created when needed.
Near is inflationary with extra tokens coming from around the 5% staking reward process. Also, near is a governance token, meaning that new ideas are proposed and voted on, by the coin holders. Lastly, as with many alt coins, many of the early investors are subjected to a locked time period, implying they cannot sell it till a certain date. NEAR protocol created 1 billion NEAR tokens at genesis, which were allocated to individuals and organizations on an ongoing basis during the rollout of its mainnet on Apr. 22, 2020.
The NEAR Foundation held a public token sale in August 2020 that distributed a little over 120 million NEAR tokens,
- Option 1: $0.40, no vesting schedule (raised $10,000,000)
- Option 2: $0.34 with a 12-month vesting schedule
- Option 3: $0.29 with a 24-month vesting schedule
Considering that the token was trading at ~ $20 in January 2022 and ~ $3.5, the early investors must have made a killing by procuring them for cents. As per the supply schedule from Messari, it is estimated that we will have close to 1.45 billion Near tokens by 2027.
Utility of Near Coins
Near protocol has ~ 800 nodes online and although there is no minimum stake, the stake threshold to become a validator is extremely high with one seat of the 100 seats costing in millions worth of NEAR coins. Luckily delegation is possible and can be done using NEAR protocolâ€™s web wallet with no minimum delegation. The staking rewards are around ~ 4% - 6% for both validators and delegators with one day lock up. Besides staking, the NEAR coins are used to pay transaction fees. All transaction fees on Near protocol are burnt unless any modifications on smart contracts to redirect a portion towards the owner of the contract.
Is Near ready to rally
According to DeFi Llama, Near Protocol has $273.6 million of total value locked across 9 projects across lending, Dexs, Liquid Staking and Algo Stables. The circulating supply of NEAR increasing over the years and the vesting of early invested tokens are subject to linearly releasing lockups. Because of NEARâ€™s account model, tokens can be staked or delegated even while they are locked. This implies that the early investors are earning more tokens while waiting for their stake to get unlocked and start selling them once the lock up period is over, due to increased selling pressure.
On the other hand, transactions on the block chain are also on a decreasing slope over the past couple of weeks from 900,000 to 550,000 currently. These fundamentals along with macro tailwind are reflected in the NEAR coinâ€™s recent price actions and suggests that the road to their ATH price levels is quite long. Nonetheless, with an impressive roadmap, the Near collective is ready to weather the storm and keep building the next-gen internet.
Disclaimer: This article was authored by Giottus Crypto Exchange as a part of a paid partnership with The News Minute. Crypto-asset or cryptocurrency investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.