Table of Contents

🤔 What is Near Protocol ?

Near Protocol is a super-fast smart contract compatible blockchain that uses delegated proof of stake consensus mechanism(Doomslug) along with a special sharding mechanism(Nightshade) to achieve over 100,000 transactions per second.

It aims to overcome Etherium’s limitations(scalability trilemma).

Scalability trilemma was first described by Vitalik Buterin, the co-founder of Ethereum. It states that it is very difficult to develop a blockchain that has all the three features:

  • Scalability
  • Security
  • Decentralization

A developer can choose a maximum of 2 of the desired qualities.

Near protocol aims to solve the scalability trilemma becoming secure, decentralized and scalable.

Bitcoin introduced the first generation of blockchain, which could be used as a shared ledger. Etherium enhanced the functionality of blockchains by making them programmable by introducing smart contracts. 

Near protocol aims to further extend the functionality of second-generation blockchains by making them more scalable and faster without compromising decentralization and security.

💡 What role does NEAR token play ?

NEAR is the native cryptocurrency of Near blockchain. It is used for:

  • Transaction fee: Users pay NEAR tokens as transactions fees to include their transactions on the Near blockchain.
  • Delegation: Users can delegate their tokens with validators to participate in the process of validating blocks.
  • Validator rewards: Validators receive NEAR tokens as rewards for building blocks.
  • Governance: NEAR token holders propose and vote on updates to Near protocol.

📝 Origin of Near Protocol

  • Illia Polosukhin and Alexander Skidanov started in early 2017 as a machine learning project.
  • Named after the science fiction novel “The Singularity Is Near”, Near project drew from Illia’s work as a lead contributor for TensorFlow at Google and Alexander’s as the lead engineer at MemSQL.
  • Researching program synthesis led the team to explore programmable smart contract platforms and crypto payments in late 2017 and early 2018.
  • As they explored the solution space and tried out a variety of blockchain protocols, they realized the current state of tech didn’t meet their needs and began to design a blockchain that could.
  • Illia and Alex gathered a team of engineers and formally started building NEAR Protocol in August 2018. The founding vision for the NEAR platform was to offer developers an easy path for building decentralized applications that can scale for mass usage.
  • The first phase of Near’s multi-stage mainnet was rolled out on Apr. 22, 2020. The network featured a Proof of Authority (PoA) consensus system in which the Near Foundation(the non-profit organization supporting Near protocol development) operated the only nodes.
  • The second stage of Near’s main net rolled out in Sep 2020. Near started onboarding third-party validators in this phase.
  • Next phase was rolled out in Oct 2020. In this phase, Near protocol governance responsibilities were handed over to the community. This stage also unlocked token transfers and protocol rewards.
  • Bridge to connect Etherium and Near(Rainbow bridge) was launched in April 2021.

👴🏻 Founders

Alex Skidanov

  • 2005: ACM ICPC World Finals 2005 Bronze Medal.
  • 2008: ACM ICPC World Finals 2008 Gold Medal.
  • 2009-2011: Worked as software developer at Microsoft.
  • 2011-2016: Worked as director of engineering at MemSQL.
  • 2017: Cofounded Near in 2017.

Illia Poloskhin

  • 2007-2013: Studied applied maths and computer science(Masters) from National Technical University “Kharkiv Polytechnic Institute”.
  • 2014-2017: Worked as engineering manager at Google.
  • 2017: Cofounded Near.

😌 What problems does it solve ?

  • Private blockchains: Developers can deploy private shards on Near blockchain. This is a useful option for businesses where privacy is important. Companies using private shards can selectively share data with other companies on a need-to-know basis.
  • Live now, no future promises: Decentralized apps can easily migrate to Near protocol with minimal effort and changes to enjoy super-fast transactions and cheap fees.
  • No downtime: Thousands of node operators running 24 X 7 ensure the network is always online.
  • Cheap: Transaction fee on Near protocol is several times cheaper than Etherium.
  • Speed: Near protocol finalizes blocks in 4 seconds, whereas it takes 5 minutes for a block to be considered final on Etherium.
  • Scalability: Near protocol can perform 100,000 transactions per second.
  • No trusted third party: Users do not have to trust Near protocol team. The code is open source, anyone can see and verify how the code works.
  • Near protocol is run by thousands of decentralized nodes spread all over the world. It is not possible for the governments to control/ regulate Near protocol.
  • Efficiency gains: Projects building on Near protocol do not have to run servers and hire an army of network engineers.

🤖 How does it work ?

Dynamic resharding

Near protocol uses sharding, which is a type of horizontal scaling technique.

Sharding is an approach for scaling databases and involves spreading computing and storage capacity across multiple servers.

In the world of blockchains, sharding involves partitioning a blockchain across subgroups of nodes and distributing computation across multiple parallelized sub-chains (“shards”).

Once sharding goes live on Near, the network intends to regularly adjust the number of shards based on user demand ie “Dynamic re-sharding.”


Doomslug is Near Protocol’s block production technique.

It enables the network to achieve practical finality after one round of communication, with a finality gadget providing BFT finality after the second round.

Doomslug allows the network to continue producing and finalizing blocks as long as over half of the validator set are online and honest, although the finality gadget will stall if less than two-thirds of participants are online.

Night shade

The consensus mechanism implemented on Near is called Nightshade.

The list of all the transactions in each block is split into physical chunks, one chunk per shard. The chunks are validated by the nodes that maintain the state of the shard.

Logical block contains all the transactions for all the shards. However, since transmitting a logical block across the network would be prohibitively expensive, it is never initiated. Instead, each network participant maintains the state that corresponds to the shards that they validate and any additional shards that they want to track.

The consensus is based on the heaviest chain consensus. The weight of a block is the cumulative stake of all the signers whose signatures are included in the block. The weight of a chain is the sum of the block weights.


Aurora is an Ethereum Virtual Machine (EVM) on the Near Protocol blockchain. Aurora provides Ethereum 1.0 development experience, with speed and scalability of Near Protocol.

It consists of two core components:

  • Aurora Engine runtime: This allows for the seamless deployment of Solidity and Vyper smart contracts.
  • Aurora Bridge (based on the Rainbow Bridge technology): Providing permissionless transfer of tokens and data between Ethereum and Aurora.

Developers can use Etherium tools like Truffle and Hardhat to develop apps on Aurora.

Rainbow bridges

The Rainbow Bridge allows any information that is cryptographically provable on Near to be shared with Ethereum contracts and vice versa — including the ability to read the state and schedule calls with callbacks.

🏛️ Governance model

Near has a Reference Maintainer, which is an entity responsible for technical upgrades to the Near network.

This entity has been selected to maintain the reference implementation and continue to suggest improvements on the specification.

All major releases will be protected with community discussion and a veto process (a 2 week challenge period), while smaller bug fixes can be rolled out fast and delivered to node operators.

Initially, the Maintainer is selected by the Foundation Board and serves until the board votes to replace them.

Over time, oversight of the Maintainer will be performed through a community-representing election process.


  • Tezos

and many more.

🤑 How much money does the project have for future development ?

  • The project raised:
    • $12.55 million in 4 private sale rounds from 2017 to 2019.
    • $21.6 million in Mar 2020.
    • $ 10 million in public token sale in Aug 2020.
  • Approx 40% of the token supply is available to fund future development.
  • .5% of yearly inflation will goes to Near treasury.

👍 Tailwinds

  • Sustainable model: Most crypto projects raise huge amounts of money one time, at the start of the project during initial coin offering. They do not have any recurring source of income to fund their treasury. Near protocol team has long-term vision and a way to fund it.
  • Switching cost: It will be very difficult for apps built on Near protocol to migrate to other blockchain solutions with their community and ecosystem.
  • Network effects:
    • New apps can use the functionality of existing apps to build new features.
    • More apps will attract more users. As more users interact with apps, new apps will decide to build on Near protocol.
    • Number of Near protocol developers will increase as more users and apps join the ecosystem. As more developers learn to code on Near protocol: more apps will be built.

😨 Risks and challenges

  • Near protocol and projects built on it are a direct threat to the current banking, government and legal system. Governments will resist and  fight the change
  • Competition: There are many crypto projects that are in direct competition with Near protocol.

💰 Tokenomics

1,000,000,000 NEAR tokens were created at Genesis on April 22, 2020. They were distributed as follows:

These tokens will be released as follows:

Token Inflation

  • Inflation: The network pays out rewards at the rate of 5% per year:
    • 4.5% goes to the validators for securing the network.
    • .5% goes to Near treasury.
  • Deflation: 70% of the transaction fees is burned.

Real inflation (rewards – fees burned) could be less than 5%(even negative) depending on the level of network activity.

Demand pressure

Token’s price increases due to demand pressure.

Demand pressure on NEAR will come from:

  • Governance: Users will acquire NEAR tokens to participate in the governance process.
  • Transaction fees: Users will acquire and pay NEAR tokens as transaction fees to include their transactions in Near blockchain.
  • Block validation: Users will also acquire NEAR tokens to participate in the process of block validation.
  • Speculators: They will acquire NEAR tokens for future price appreciation.

🧐 Indicators to watch out for

  • YouTube channel is growing:
  • Twitter account is growing:
  • Number of daily transactions is growing:
  • Number of new accounts created daily are growing:
  • Daily active contracts are growing:

👋Final remarks

The project is doing valuable research in Blockchain development. NEAR token has favorable economics, whose supply should reduce as the network usage increases, increasing price of the token.

It will be interesting to see how Near protocol performs once Etherium 2 is rolled out and other scaling solutions like Cardano, Polkadot, etc have been developed.

😊 Do further research