EXECUTIVE SUMMARY

NEAR is a collective, a foundation, and a development platform built on a new Layer 1 blockchain. The NEAR Protocol is a sharded, Proof-of-Stake (PoS) Layer 1 blockchain aspiring to deliver a simple, scalable, and secure solution for users and developers to onboard a billion users. NEAR’s smart contracts are executed on a WebAssembly (WASM) Virtual Machine.

NEAR’s core team includes several ex-MemSQL engineers responsible for building sharding, cross-shard transactions, distributed technology infrastructure, and former Googlers with significant industry expertise in building distributed systems. The project has recently emerged as one of the fastest-growing developer ecosystems. 

At present, NEAR consists of an extended ecosystem of infrastructure projects, Go-to-Market enablers including the NEAR Foundation, and applications built across many verticals like DeFi, and the Creator Economy. 

NEAR Protocol is a combination of multiple foundational components. Nightshade, the sharding design, is its unique sharding approach to solving the blockchain scalability problem. Usually, a typical sharding design involves several shard chains and a beacon chain. Conversely, Nightshade models its system as a single blockchain, where shards produce chunks that are included in the main chain blocks. NEAR is a Proof-of-Stake blockchain with the NEAR token as its native token.

Since the launch of Mainnet in 2020, the project has reached notable milestones and continues to evolve.

Our researchers gave NEAR Protocol a final rating of AA. The rating scale is available at the end of this report.

 

PRODUCT & COMPANY DESCRIPTION

Introduction to Near Protocol

NEAR is a decentralized application platform built on top of NEAR Protocol, a Sharded Proof-of-Stake based Layer 1 blockchain launched in 2020. The work on the NEAR Protocol began as early as 2018. A group of programmers started building this new platform to cater to Open Finance and empower the emerging Open Web. The main requirements of the protocol to achieve this goal are transactions with higher volume, higher speed, and lower-cost, and usability (for both users and developers). NEAR’s goal is to bring one billion users to its platform.

NEAR Protocol is building the necessary infrastructure to help proliferate the Open Web. Like many other Layer 1 networks, NEAR wants to be a chain that offers several distinguishing features: Simplicity and Usability (for both end-user and developer), Security, and Scalability.

The NEAR ecosystem has been evolving and growing. The NEAR Protocol and the NEAR Foundation were the core pieces of the ecosystem at the beginning. Since then, several core pieces have emerged. Three main categories can be identified. 

  • Infrastructure: This category represents the pieces built around the NEAR Protocol. 
  • Go-to-Market: These are the enablers of the NEAR Protocol’s Go-to-Market strategy.   
  • Application Verticals: This category encompasses multiple applications built across different verticals such as DeFi, the Creator Economy, and Digital Cooperatives.

 

NEAR Ecosystem Development

Many different initiatives and funding arrangements contribute to the significant growth in the NEAR ecosystem. Some of these efforts are as follows: 

  • With Proximity Labs, NEAR announced $800 million in funding to support the ecosystem’s growth. Previously, NEAR disbursed $45 million across 120 projects.
  • The project has also implemented other internal initiatives to expand and improve the ecosystem, e.g., setting up Pagoda.
  • NEAR has nurtured many virtual communities, regional hubs, guilds, and global hackathons.

 

NEAR Ecosystem. Source: Town Hall June 2022

 

NEAR has a rich archive of research papers, research posts, documents, and material relating to its underlying technology or ideas that influenced the work behind the NEAR platform. The NEAR Whitepaper is also an easily understandable reference material for anyone researching the project. Some of NEAR’s important research papers are:

  • Nightshade: Near Protocol Sharding Design.
  • Doomslug: Novel consensus algorithm. 
  • Economics in a Sharded Blockchain.
  • Near Protocol Randomness Beacon (Deprecated).
  • ETH-NEAR Rainbow Bridge.
  • Fast Finality: Proof-of-Space-Time (Deprecated).

To find more reports, go to this page.

While NEAR keeps evolving, it has emerged as a notable player in the blockchain ecosystem. NEAR has achieved growth in two ways: 

  • Organic growth:  NEAR’s platform and ecosystem grew organically. Currently, numerous projects and teams are contributors and users of the NEAR platform. 
  • Cross-chain protocol deployments: NEAR’s growth in the ecosystem (e.g., Aurora) has facilitated cross-chain implementations and integrations. As a result, it is noticed that protocols from other networks easily integrate with the NEAR ecosystem, e.g., Balancer.

NEAR launched its Mainnet in April 2020. Since then, the network has delivered considerable growth numbers across many metrics. In Q4 2021, the network launched Simple Nightshade, phase 0, toward its fully sharded blockchain.

One of the main goals of NEAR is to onboard a billion users, and the current live accounts tally claims around 15.88 million. Interestingly, as a showcase of NEAR’s aim to be developer-friendly, it demonstrates notable achievements in developer numbers. Some key statistics are four times more full-time developers from December 2020 to 2021 and one of the fastest initial ecosystem growth rates among its peer group.

 

Emerging ecosystems with 50+ full-time devs. Source: Electric Capital Developer Report January – December 2021

 

NEAR Snapshot

 

 Source: NEAR Protocol Town Hall June 2022, Defilama, NEAR Explorer

 

As discussed, NEAR is an evolving platform on a carefully planned path to reach the intended goals. Therefore, it is multi-years behind reaching its potential, like many other experimental technologies in the industry.

Success Factors

Based on our understanding, there are several success factors for the project. These factors are listed below:

  • NEAR offers several attractive features. E.g., Dynamic Resharding, its performance (currently 3000 TPS with four shards and projected 100k one year from now, fast finality (2s), and relatively low transaction fees (<$0.01)), and its account model.
  • Growing and expansive ecosystem with cross-chain compatibilities (Aurora: Gasless EVM chain, Octopus Network: IBC-compatible Appchains, Trustless Rainbow Bridge).
  • User (UX) and developer (DX) focus — the tech stack is conducive and reduces technical barriers for developers. NEAR has Rust, JavaScript, and WASM compatibility.
  • Backed by strong VCs and a robust internal ecosystem treasury.

 

MARKET CONDITIONS AND COMPETITION

Market Conditions

Led by Ethereum and the explosive growth of its surrounding ecosystem, the Smart Contract Platforms (SCPs) sector witnessed a notable expansion over a short period. Over 60 SCPs strive to serve different market needs or position themselves as Ethereum competitors. However, with the increased realization that multi-chain is the future of the blockchain industry’s trajectory, a noticeable emergence of interoperability solutions facilitated co-existence.

The total market capitalization of the smart contract platform segment currently stands at around $233 billion as of 03 July 2021. As it stands presently, Ethereum remains the dominant chain accounting for about 55% of the total market capitalization. However, Ethereum’s dominance has dropped from as high as 60%. Further, it is noted that a significant amount of market capitalization is concentrated ten largest networks, which account for about 92% of the entire segment‘s market cap.

Competition

NEAR faces competition from many strong competitors. While most of them are well established, other newcomers are joining the fray. However, most notably, NEAR has entered the top 10 market capitalization list among smart contract platforms.

 

Sharded Blockchains

Only a few Layer 1 blockchains are taking the sharding path to scalability. The most well-known is Ethereum which has recently emphasized a rollup-centric approach to scalability. Zilliqa is considered one of the earliest networks to implement a blockchain sharding architecture. Harmony has recently emerged as a well-known smart contract blockchain that utilizes a random state sharding mechanism.

Interestingly, Kadena proposed Chainweb, a parallel chain Proof-of-Work (PoW), to solve the scalability issue and marketed it as the only sharded and scalable Layer 1 Proof-of-Work (PoW) network in production today. Although not known widely, Alephium is a Layer 1 Proof-of-Work blockchain implementing a sharding approach.

The other less well-known projects are Shardeum, and Liberdus, both using the technology developed by Shardus. Top Network claims to be the first full-state sharding public blockchain.

 

How is the project different from its competitors?

NEAR does not offer significant differentiators compared to other competitive Layer 1 smart contract platforms. However, the below points are notable:

  • NEAR is a highly performant blockchain compared to most other competing networks. E.g., lower gas fees, ~1 second block time, 3 seconds finality, and 2,500–3,000 TPS in the Simple Sharding phase. It also claims to be one of the few protocols to address the state validity and data availability problems in sharding.
  • Several other optimizations are built into the protocol. For instance, contract accounts earn part of transaction fees (30% at genesis), and automatic account redistribution among shards enables maximum throughput.
  • Developer friendliness due to supporting familiar languages that are not specific to the blockchain (AssemblyScript and Rust for contract writing).
  • NEAR’s account model offers subtle but attractive features to users. E.g., users can create and add new keys to the wallet just as one changes the password to a social media account. Consequently, the user does not have to transfer the assets in the wallet anywhere.
  • It consists of an ecosystem that provides EVM compatibility via Aurora (Run native ETH apps built-in Solidity), Cosmos IBC compatibility with Octopus Network, and direct interoperability with Ethereum through the Rainbow Bridge. Octopus Network is also a cheaper alternative for Appchains.

 

TECHNOLOGY REVIEW

Product

NEAR is an open-source project. From the project’s beginning, its development has been public on GitHub. Now, over 300 public repositories are available across three organizations, namely nearprotocol (deprecated), near, and nearexample encompassing tools and products to assist users and developers. Numerous ecosystem partners are users and contributors to the NEAR platform.

The project and its ecosystem partners strive to create an enabling space for builders, entrepreneurs, and founders to enter and thrive in the NEAR ecosystem. To this end, it provides support financially and non-financially (partnerships, technical support, and networking). A preview of the updated NEAR Docs is available here. NEAR also provides various tools for developers to build applications, as listed in the table below.

 

Updated User Interface of Timeswap. Source: Medium

 

Moreover, as discussed in the project’s ‘Road to Decentralization’ series, the NEAR Foundation has initiated several steps to make the project as much decentralized as possible.

 

The Rainbow Bridge

The Rainbow Bridge is a bi-directional bridge that connects the Ethereum and NEAR blockchains.

Blockchain

NEAR Protocol is a sharded blockchain, and its smart contracts are executed on a WebAssembly (WASM) Virtual Machine (VM). At present, 100 validators are participating in validating and securing the protocol. There are also 739 nodes online.

Nightshade Sharding and current status 

The NEAR Protocol is currently in phase 0, Simple Sharding; the network state is split into four shards. However, the processing is not split so that the blockchain is still validated by all the validators (all validators validate every shard, with no compromises on security guarantees). The shards are further split into multiple parts as a precursor to future dynamic resharding implementation. 

 

As discussed in the roadmap section, Phase 1 of sharding is scheduled to launch in September 2022. The key difference in this phase is the introduction of Chunk-Only Producers who only validate on one shard. Due to the reduced workload involved, Chunk-Only Producers run inexpensive hardware. These reduced entry barriers are expected to pave the way for more decentralization by increasing the number of validators to 200–400 (only a fraction of them running expensive hardware). Chunk-Only Producers can expect a minimum of 4.5% annual rewards. There are two ways to participate in the network as a Chunk-only Producer, i.e., Hardware Node and Software-as-a-Service Node. Anyone interested in being a NEAR Protocol Validator has to provide information by filling up an onboarding form, which is likely followed by email communications.

Phase 2 involves the implementation of the fully functional sharded Mainnet, when state and processing will be sharded. The key here is to implement the challenges to eliminate tracking of all shards by validators. Lastly, Phase 3 Dynamic Resharding enables the network to dynamically split and merge shards based on resource utilization.

NEAR also introduced the idea of private shards. This solution aims to give enterprises the ability to build private shards that have the option to connect to the public blockchain using the cross-shard routing mechanism. Calimera Network is a private shard that is on a mission to build infrastructure for the enterprise.

NEAR gas price is algorithmically controlled to limit shard congestion.

NEAR blockchain currently processes an average of 300k transactions per day. The network’s capacity utilization is also now about 13%. It is pointed out that for token transfers with one shard, the network can achieve 800–1,000 Transactions Per Second (TPS), while with four shards, it can handle a minimum of 2,500–3,000 TPS.

Consensus Mechanism

NEAR Protocol uses a Proof-of-Stake (PoS) consensus mechanism. In its PoS mechanism, NEAR uses a Threshold Proof-of-Stake (TPoS) to elect the nodes — a pool of participants called “witnesses” — that maintain the network. In this mechanism, nodes are elected in a deterministic way. The witnesses make decisions during a specific interval of time, i.e., one day. Witnesses receive block rewards and transaction fees by participating in block signing.

NEAR implements Doomslug, a fast block-producing gadget, and a finality gadget called Nightshade Finality Gadget, as discussed in the paper “Doomslug.” Doomslug enables practical finality after one round of communication as a block is produced, except when at least one participant is slashed. The Finality Gadget provides full Byzantine Fault Tolerant (BFT) finality after the second round of communication, except when at least one-third of the total stake is slashed. With this implementation, the Proof-of-Stake-Time fast finality design was deprecated.

Doomslug can produce and finalize blocks as long as over half of the participants are online and honest. In contrast, BFT consensus algorithms require two-thirds of the participants to be online and honest. However, note that the finality gadget requires at least two-thirds of the participants are online.

Doomslug has a lag between block production and finalizing. This lag makes it possible for forks to occur. NEAR can benefit from the fact that Doomslug’s predecessor already implemented the logic of handling forks.

The Beacon Chain is responsible for selecting validators for shard chains and cross-linking (taking snaps of shard chain states).

 

Shard Assignment based on VRF to not reveal the validators. Source: Bowen Wang Presentation

 

One foundational component proposed in NEAR Protocol was its randomness beacon. Like in any blockchain network, randomness is essential for selecting participants to exercise tasks in the protocol (and for dApps). NEAR’s approach to implementing randomness was presented in the paper “Near Protocol Randomness Beacon” (deprecated). The author Alex Skidanov explained this approach in simple terms in this blog post. The NEAR Protocol implements a simple randomness beacon based on a Verifiable Random Function (VRF) output. Although this randomness beacon is unpredictable, it could be biased. However, as discussed in this blog post, NEAR proposes to move to a randomness beacon approach based on Threshold Signatures, similar to what Dfinity implements. In the future, NEAR will replace current individual signatures with Elliptic Curve pairings as the proof mechanism. Understandably, this subject is an area that is evolving.

 

ROADMAP

NEAR’s currently available Protocol Development Roadmap was published in June 2021 and last updated in August 2021 (link to the Airtable – Gantt). According to the community discussion forum, the following would be the focus in the long term.

Gas price auction: This milestone aims at handling congestion by allowing the users to specify the maximum gas price they are willing to pay for a transaction. This task was scheduled to finish on 30th June 2022. 

Nightshade: This involves the long-term road to implementing the sharding mechanism described in the original paper. Accordingly, sharding Phase 1 is scheduled for launch in September 2022. 

 

Scaling for Web3: How NEAR’s sharding works. Source: Presentation by Bowen Wang, Head of Protocol @ Pagoda

 

Improvements for contract development: These steps aim to allow low-cost contract calls and better developer experience.

At the NEAR Town Hall in June 2022, the Co-Founder, Illia, highlighted the broader plans for the next year and beyond. 

  • Progressive security and Active custody.
  • Community Governed Artificial Intelligence (AI).
  • Holistic governance.
  • Privacy and Zero-Knowledge.
  • Synchronous Sharding.

 

TEAM

The initial development work of NEAR was steered by Illia Polosukhin (Co-Founder), Alex Skidanov (Co-Founder), and Erik Trautman. A group of other developers also joined them. They became known as NEAR Collective. The Co-Founders and other contributors to the network have held engineering and software roles with tech giants like Google, Microsoft, MemSQL, and Facebook. They have also contributed to multiple publications. At present, many developers are contributing to the development work of NEAR.   

The NEAR Foundation consists of professionals with top management experience across well-known entities.

Illia and Alex incorporated NEAR Inc. in the USA.

Illia Polosukhin, Co-Founder, was previously an Engineering Manager at Google Research and a Software Engineer at Salford Systems. He has co-authored papers and co-contributed to several projects like ProstoKSI, Escalibro, and Mafia & Yakitoria. Illia is also one of the three members of the NEAR Foundation Council. 

Alexander Skidanov, Co-Founder, left MemSQL as its Director of Engineering to join Illia as a Co-Founder. He has also worked for Microsoft as a Software Developer. Apart from that, Alex has co-authored several publications and contributed to four patents. He has won awards at ACM ICPC World Finals. 

Erik Trautman, Contributor, joined the two Co-Founders at the very early stages of the project. He functioned as the CEO of NEAR Foundation from 2019 to 2020. Earlier, Erik started the Odin Project and Viking Education, both of which became successful acquisition targets in 2017. He graduated from the University of Pennsylvania.

John Smith, CISO (NEAR Inc.), is also a Co-Founder at District Ventures. In the past, he has worked for Nielsen, Cylance Inc., and Symantec. Appointment announcement

Julie Bissinger, Chief Operating Officer (NEAR Inc.), worked for Facebook for over five years. LinkedIn  

Maksym Zavershynskyi, Vice President of Engineering (NEAR Inc.), has a Ph.D. in Computer Science. His previous work experience includes Software Engineer in Geo & Location at Google and Software Engineer at GlobalLogic.

 

NEAR Foundation

Marieke Flament, CEO, brings a wealth of experience as top-level management personnel for many reputed firms. Marieke worked as the CEO of Mettle and the CMO at Circle in the recent past. Some of her other employers in the past are Hotels.com, the Boston Consulting Group, and LVMH. Apart from that, she’s an Investor and an Advisor to Yayzy. 

Jack Collier, CMO.

Chris Ghent, Global Head of Brand Strategy & Partnerships.

Advisors

The project has not appointed any advisors. However, the NEAR Foundation is governed by a three-member Council. There is also a non-voting Advisor and Observer of the Council.

General Comments on the Team & Advisors

The executive team comprises individuals who have already made a name for themselves in their respective fields — fintech, software development, and engineering. As such, the founders understand the product and market very well.

During our review period, we did not find evidence that the team members have taken part in any previous or current illegal projects or projects that were controversial.

 

LEGAL AND COMPLIANCE SPECIFICS

Jurisdiction

NEAR is a decentralized ecosystem. Its “Road to Decentralization” series explores how to decentralize the network to the community. The Whitepaper and a Medium blog post discussed three levels of governance implemented, i.e., Community Governance, Technical Governance (via Reference Maintainer), and Resource Governance (handled by NEAR Foundation). 

However, the following entities are worth mentioning here.

 

The NEAR Foundation

The NEAR Foundation is an independent non-profit entity set up in Switzerland. The Foundation is the steward of NEAR’s broader purpose of “enabling community-driven innovation to benefit people around the world.” It plays the role of supporting and coordinating between the ecosystem players. The NEAR Foundation Council directs the activities of the Foundation. The Foundation also addresses four specific challenges in the NEAR ecosystem, Coordination, Allocation, Advocacy, and Governance. 

However, it is worth identifying that the Foundation does not get involved in the operation and governance of the network. It will not be actively running the protocol by operating nodes and does not participate in voting with tokens under its direct or indirect control.

The Swiss Federal Supervisory Board for Foundations is the national supervisory authority.

 

NEAR Inc.

Near Inc did much of the project’s early research and development work. The entity continues to contribute to the NEAR ecosystem. According to SEC Filings, Near Inc has raised ~$11.77 in total funding. Note: It is understood that these funds were raised via convertible notes, which have now been converted to NEAR tokens.

NEAR Technology GmbH is an entity registered in Germany that deals with processing information obtained under its Privacy Policy.

Partnerships

NEAR has established numerous partnerships through the NEAR Foundation and other ecosystem participants. 

  • Elliptic: NEAR Foundation partnered with Elliptic to enhance security and on-chain forensics. Now, NEAR Blockchain and NEAR tokens will access Elliptic’s services.
  • Consensys: With this partnership, products like MetaMask, Infura, and Codefi can be brought to the NEAR exosystem. 
  • MoonPay: MoonPay customers can buy NEAR tokens directly through its platform, providing an easy on-ramp.
  • KYVE: Developers building on NEAR can use KYVE as a storage and validation solution for their data streams. NEAR has invested in KYVE. 
  • Cypher Accelerator: Wharton School of the University of Pennsylvania’s initiative helps startups. Startups in the NEAR ecosystem can benefit from this partnership. 
  • WOO Network: NEAR and WOO Network conducted a $5 million token swap as part of an agreement for WOO to become a builder on the NEAR Protocol and for both parties to create value for tokens.

NEAR also announced other partnerships with Orange DAO, Panther, Ardana, Alchemy Pay, Travala, Keyko, SailGP, and Ceramic.

NEAR Protocol has raised over $500 million in several funding rounds from an expansive group of institutional investors.

Legal Advisors

The project has not appointed legal advisors. However, Sonja Prstec functions as the Head of Legal at NEAR Foundation. Sonja has been working in the blockchain industry since 2017. She was the Chief Legal Officer Bitnation, Senior Legal Counsel at Status.im, and Legal Counsel for Web3 Foundation.

NEAR Inc has Mya Shofany as its Regulatory Specialist. She’s worked in the crypto industry, occupying legal and compliance roles since 2017. She left Binance.US as the Head of Institutional Onboarding to join NEAR. Before that, she was Compliance and Legal Team Lead at Crypto (Defunct) and Compliance Associate at Gemini. She graduated from the University of San Diego School of Law.

KYC & AML

The NEAR token public sale was conducted in 2020 on the CoinList platform. The participants were subject to Know Your Customer/Anti-Money Laundering (KYC/AML) checks. The token sale was also restricted to several jurisdictions, including the United States.

NEAR Foundation functions as the responsible entity concerning the project website at near.org. The website carries a Privacy Policy and a Terms and Conditions Statement governing the use of the website and any other related agreement or legal relationship with the owner, and a Cookies Policy.

Token Classification

The project’s whitepaper explicitly mentions the NEAR token as a utility token. NEAR Network’s native token NEAR performs several utilities in its ecosystem.

  • Staking and Delegating: Validators participating in the NEAR Protocol PoS are required to stake NEAR tokens. Token holders could also delegate their tokens to any validator of their preference.  
  • Payments for network use: NEAR follows a gas model to pay for transaction costs. Further, NEAR is required to pay for storing data on the network and providing bandwidth.
  • Governance: In the future, the token holders can participate in NEAR Platform governance. The NEAR Foundation is still exploring decentralization from different perspectives, as discussed in the “Road to Decentralization” series.

TOKEN OFFERING

The public sale of NEAR tokens was successfully concluded in 2020. The total NEAR token supply at genesis was 1 billion. The total token supply of NEAR is not capped. Currently, the total token supply is ~1.09 billion, and the current circulating supply is 738.9 million tokens. There is an annual inflation rate of 5%.

Each NEAR token is divisible into 10²⁴ yocto.

NEAR has received funding in multiple rounds since 2017. Recently, the project raised ~$500 million in two funding rounds, bringing the aggregate to ~$565.9 million. As depicted in the table, the project publicly disclosed most of the details of its prior fundraisings (except the most recent funding rounds).

 

Prior fundraises. Source: NEAR Blog

 

The core team had a four-year lockup and a 12-month cliff after launch. After that, their tokens are released over a 48-month period.

NEAR token is already listed on multiple centralized and decentralized trading venues. NEAR token is currently the 25th largest token by market capitalization and a highly liquid token with significant global volumes traded daily. 

 

NEAR Token Price Volume chart (as of 18 July 2022). Course: Footprint Analytics

 

TOKENOMICS

The NEAR token supply is not finite. The token has a built-in inflationary — block reward of 5% annually — and deflationary mechanism — via transaction fee burn.

 

Allocation of Genesis Tokens. Source: NEAR Blog

 

A significant amount of tokens is allocated for different ecosystem and program purposes to help grow adoption. Across Early Ecosystem, Operations Grants, and Community Grants and Programs, 41.8% of the genesis token supply was allocated. The project has announced significant allocations for ecosystem building.

There are several ways in which NEAR tokens are burnt in the network. 

  • Transaction fees: 70% of the transaction fees in the NEAR Protocol are burnt. The remaining 30% rebates to the developers whose contracts are touched by the transactions executed.
  • Proceeds from Account Name Auction: Users acquire short account names in an auction process. The naming contract burns the proceeds from the auctions.
  • Slashing: Misbehavior in the NEAR Protocol is punished with stake slashing. As discussed in the whitepaper, the slashed NEAR tokens are burnt. Note: The blog post “Economics in a Sharded Blockchain” shows that the tokens slashed by the protocol are re-distributed among nodes that reported the misbehavior.

Supply and Demand Dynamics

Token Emission/epoch rewards

NEAR tokens are inflationary due to the 5% epoch reward (staking reward). The reward is split between the validators (4.5%) and the Foundation treasury (0.5%). However, like Ethereum, 70% of the transaction fees are burnt. As a result, when the adoption grows, there is a likelihood that the net emission could be negative (making the token supply deflationary).

 

Token unlock and vesting

The graph below shows that the total genesis supply of tokens is unlocked and vested over 60 months. Therefore, this period will continuously add tokens to the circulating supply. This supply of tokens can add inflationary pressure, especially when unfavorable market conditions prevail.  

 

Five-year circulation Schedule by Buckets. Source: NEAR Blog

 

Validator demand and delegation

Validators demand NEAR tokens to participate in securing the network. Similarly, token holders can delegate their tokens to any validator of their preference. Currently, 39% of the total supply of tokens (424.8 million) is staked on the network. Higher demand for network participation could act as a deflationary factor. However, demand can be directly proportional to rewards’ annual percentage return (APR). It can also be expected that as the multiple phases of sharding are rolled out, there will be more demand generated from Chunk-Only Producers as well.

 

SOCIAL MEDIA AND VIRALITY

NEAR is highly active across many social media channels, and the project has relatively significant social mentions. NEAR Protocol‘s verified Twitter handle has 575k followers currently, an 8.2% growth from the end of May.  Many other community-run and NEAR ecosystem project-run Twitter channels are also contributing to the social mentions of the NEAR Protocol.

Telegram (59.6k members, flat growth over the last two months) and Discord (53.6k members, ~5% growth since end-May) are usual channels for community discussions. Compared to other Layer 1 networks’ Telegram and Discord channels (e.g., Polkadot and Avalanche), NEAR shows higher membership on its channels. There are alternative Telegram channels for announcements, validators, developers, and creators. A dozen international groups are also in operation, the largest of which are the Indian, Indonesian, Chinese (including WeChat), German, and Korean groups.

Unlike many projects, NEAR is quite active on LinkedIn. The channel has 6.3k followers (around 20% growth from June).

The project’s YouTube Channel is an excellent source of knowledge for anyone interested in the NEAR ecosystem. It contains many videos covering multiple topics relating to the project. The channel has 14.6k subscribers and a total view count of ~642k. 

Several third-party YouTube channels have discussed NEAR Protocol. Some of those videos have gathered more than 150k views.

In addition to the mainstream social channels, the project is also active on several other platforms. It uses Zulip for semi-synchronous technical discussions, a Discourse Forum for non-technical discussion, and on the overall direction of the project.

 

RISKS TO THE PROJECT

We have identified the following list of risks, which does not intend to be exhaustive. Furthermore, some of these risks may or may not materialize:

  • Industry Risks: The blockchain and crypto industry is still working on experimental technology. As an industry, it faces numerous headwinds. Therefore, every project in the industry faces known and unknown risks, uncertainties, and other factors that could negatively affect progress. NEAR is also subject to this risk, making it difficult to realize its vision. 
  • Regulatory/Legal Risks: The occurrence of regulatory inquiries or regulatory actions could restrict or limit the project’s progress. Moreover, evolving laws and regulations worldwide may negatively affect the project. The project’s ability to comply or not comply with these new laws or regulations could have financial or reputational risks involved. Any investor lawsuits involving the project or its core team could harm the project’s future.
  • Technological challenges/security risks: NEAR’s technology is evolving and involves multiple complex implementations. In its journey, NEAR blockchain could suffer from malfunctioning, breaking down, unexpected or unintended functioning, and various attacks. For example, the Pagoda team recently had to hard-fork the ShardNet Network to fix issues. Similarly, the developers resolved another critical bug in NEAR Protocol’s runtime. Some risks may be derived from NEAR’s ecosystem as well. For instance, in the aftermath of the collapse of Terra, people have expressed skepticism around the NEAR native stablecoin USN. Interestingly, USN revealed a security incident soon after its launch of v2.0.
  • Exposure risk: This is the risk that the project relies on a dominant client that is a significant contributor to network activity (similar to single-party exposure in traditional institutions).

 

RATINGS

Everything you see in this report is the aggregate result of an extensive research process carried out by a distributed team of researchers and crypto enthusiasts around the world. The process consists of 60 questions divided into three phases. Researchers are called to answer these questions about a project, while providing links or screenshots as evidence to support their answers. For every answer, they also provide a rating from zero to ten. The average of their ratings is detailed below.

 

Our researchers gave NEAR Protocol a final rating of AA.

 

 

 

DISCLAIMER

This Report is for informational purposes only and/or all or any of its content thereof, should not, may not and will not be taken to constitute, either as a whole or in part, any investment advice or recommendation or similar, regulated, or authorized advice, and D-Core by producing, disseminating, giving away, or making available this Report does not, should not, may not and will not be taken to advise on investments, or carry out any similar activity, or any regulated activity or any other authorized activity. D-Core is not authorized by the Financial Conduct Authority or by any other competent EU or elsewhere or otherwise competent authority to carry out any regulated activities and/or any activities within the scope of these authorities’ competence. 

D-Core excludes and disclaims all liability and/or responsibility whatsoever and/or howsoever caused, arising out of any actions, or omissions taken, or made by any authorized and/or other recipient of this Report in reliance on, or arising out of, or in connection with any or all content of this Report. Any authorized and/or other recipient of this Report acknowledges, accepts and agrees that they carry out their own independent research and act in their own sole risk in reading or using any or all information contained in this Report. In any event, recipients of this Report are urged to seek professional advice before making any potential investment decision in relation to the project described herein. Any authorized and/or other recipient of this Report accepts this Disclaimer in full. For the avoidance of doubt, this Disclaimer is binding against any recipient of this Report whatsoever.

 

REFERENCES