NEAR Protocol: Smart Contracts with Smart Sharding!

NEAR Protocol: Smart Contracts with Smart Sharding!

By Orageux101 | Ad-hoc posts | 15 Jun 2021

What is NEAR Protocol?

NEAR Protocol is a blockchain with smart contract functionality (similar to Ethereum, Cardano and the likes). As most of you will already know, the aims of these blockchains are to provide an environment for other applications to be built and deployed on.

NEAR Protocol’s unique solution to scalability involves dynamic resharding. Each epoch, the Protocol will calculate the optimum number of shards, by considering number and size of transactions per account and adjust without having to shut down the operating system. In practice, it is significantly more complicated than this and the team at NEAR Protocol have written a paper discussing the mechanisms of their sharded blockchain which you can read on

As well as scalability, NEAR Protocol has been built with interoperability at its core with simple access to the Ethereum blockchain allowing users to both move Ethereum assets and launch Ethereum apps on NEAR Protocol.

The solutions created by NEAR Protocol have enabled a transaction finality of 2 seconds, while transactions cost on average $0.01.

NEAR Protocol has been designed to support all individuals that use the blockchain, regardless of their experience. Starting with public addresses that are in the form of readable IDs instead of a public key hash. For example, iwanttoretire.near could be an example of an address made by an individual. It would be significantly more easy for an individual to transact with this address as opposed to the usual string of characters we are used to.

This has continued with SDKs built to support developers in building applications as well as the desire to create “plug-and-play” capabilities to further simplify development.

Who is in NEAR Protocol’s team?

Alexander Skidanov is the co-founder of NEAR Protocol. Alex started his professional career at Microsoft in 2009 as a Software Developer and then joined memSQL in 2011 where he progressed from Senior Software Developer to Director of Engineering. Alex is also a two-times ICPC medallist, first winning a bronze medal in 2005 and later winning a gold medal in 2008.

Although Alex hasn’t posted on Medium ( for a long time, reading his thoughts on sharding within blockchain has been great to read where he discusses the need for sharding, the challenges it faces and how they can be addressed – all the way back in 2018!

Illia Polosukhin is a co-founder of NEAR Protocol. Illia has more than ten years of industry experience, including three years at Google where he was a major TensorFlow contributor, author of multiple impactful research papers and a manager of the team building question answering capabilities for the core Google search.

Evgeny Kapun is a senior developer at NEAR Protocol. Evgeny has been working in the blockchain industry for more than seven years. He has achieved top awards in ICPC, Google Code Jam, and other programming competitions.

There are a number of other team members with various accolades including regional and international accolades for programming achievements. More information on the team can be found on

What is the function of the NEAR Token?

NEAR is the native cryptocurrency used on the NEAR Protocol and has a number of uses similar to those seen in other smart contract platforms. Its primary functions are:

  • Security of the Network: NEAR Protocol is a proof-of-stake network. Individuals stake NEAR to validators who take part in the consensus mechanism to produce and verify blocks. Note that staking rewards are currently 10.79% APY. NEAR Protocol’s staking model is user-friendly with a maximum unbonding period of 48 hours and automatic compounding of rewards; and
  • Network Usage Fees: Applications built on NEAR Protocol require NEAR to store and change application data stored on the Network. Note that 70% of NEAR obtained from transaction fees are burned. Therefore, increasing transactions on the blockchain will result in greater token burn).

The NEAR token also provides utility by way of being a medium of exchange for individuals.

How are the tokenomics of the NEAR Token shaped?

At Genesis of NEAR Protocol, there were 1,000,000,000 NEAR tokens created. There is also a fixed issuance of c.5.0% of the total supply each year of which 90% goes to validators (and the remainder goes to the protocol treasury. Note that as mentioned above, the majority of transaction fees incurred on the network are burned and therefore as the network grows, it has the potential to become a deflationary network.

The network has approximated inflation levels at various transaction levels and it is expected that at 1bn transactions per day, inflation will equal c.1.4% and at 1.5bn transactions per day, inflation will become negative at c.-0.48%. I do not imagine this to be a target for the near future but rather a milestone that will happen when widespread adoption occurs. Daily transactions on NEAR Protocol are currently just above 65,000 (and as a comparison, Ethereum achieves just over 1.5m daily transactions).

NEAR Protocol’s genesis token distribution saw the majority of tokens subject to long-term vesting periods. By the end of Year 5 (since Genesis), all tokens that were created at Genesis will have been unlocked. Some key stakeholders include:

  • Prior Backers (24%): Tokens were sold to long-term oriented partners including Pantera Captital, Arrington XRP Capital and Coinbase Ventures. No backer purchased more than 3.5% of the initial supply.’s report notes total funding in excess of $60m with almost the entire funding having minimum two-year vesting periods;
  • Core Team (14%): All members of the team have a four-year vesting period with an initial one-year cliff; and
  • Funding for parties supporting the adoption of NEAR Protocol including operational and community grants as well as the NEAR Foundation.

What are NEAR Protocol’s major releases to date?

Subsequent to the Mainnet launch of NEAR Protocol, there have been two significant releases that have provided greater interoperability to individuals within the ecosystem.

The Rainbow Bridge enables token transfers from the NEAR blockchain to Ethereum and vice versa. It went live in April 2021 and currently has assets worth c.$900k bridged. Although this in itself is not something new to the blockchain landscape, the Rainbow Bridge is both trustless and permissionless. Anyone can deploy a new bridge, use an existing bridge, or join the maintenance of an existing bridge without getting approval from anyone else.

Aurora is the most decentralised Layer 2 Ethereum solution available so far that also supports sharding. Users can directly use DApps on Aurora with MetaMask, paying gas in Ether. This would provide a far greater experience for individuals relative to other Layer 2 solutions that exist which require gas to be paid in the solution’s native token. There is also value add here for NEAR Protocol stakeholders as NEAR shall be burned equivalent to the amount of Ether required for the transaction. This gives transactions a two second finality and transaction fees of c.$0.01.

What applications have been built on NEAR Protocol so far?

As a young smart contract platform, it shouldn’t be a surprise that NEAR Protocol hasn’t got the breadth and depth of applications as that built on Ethereum. However, it has seen notable growth in some of their early applications including:

  • NEARCrowd: An application that provides individuals with tasks that are completed in return for NEAR. Current tasksets are largely images that require describing. The application has seen over 800,000 transactions in the last fortnight;
  • Ref Finance: The first protocol in their DeFi suite is an AMM. It is currently in beta and is in DappRadar’s Top 20 decentralised exchanges by users. It has had over 85,000 transactions in the last fortnight; and
  • Berry Club: A yield farming application that allows users to earn NEAR whilst creating pieces of art.

What does NEAR Protocol have in plan for the future?

There are a number of objectives that have been proposed for the future of NEAR Protocol. Note that users can find updates and OKRs (Objectives and Key Results) by the team at I have noted some of the most interesting objectives that have been proposed for 2Q21. These are:

  • NEAR Protocol look to increase the sharding capacity by deploying “simple Nightshade” with eight shards which will allow NEAR Protocol to enable 4,000 transactions per second;
  • Desire to improve single-shard performance resulting in 20% - 50% gas reduction;
  • Continued development of Aurora to provide greater user experience to individuals;
  • Continued business development of Aurora to increase Ethereum-based partners;
  • Research and development into the future of sharding (synchronous sharding vs asynchronous sharding); and
  • Increase simplicity of building on NEAR Protocol with “plug-and-play” capabilities for NFT Standards and Storage Management.


As a smart contract platform, NEAR Protocol is focussing on scalability (via sharding) and interoperability to create adoption. The developers are world renowned with multiple championship level competitive coders.

Venture Capital sentiment of NEAR Protocol appears to be high as they received more than $60m in funding in the middle of a cryptocurrency bear market.

The inflation mechanism issues a fixed amount to validators whilst burning the majority of transaction fees to ensure that validators remain motivated (and creating the potential of deflation when widespread adoption occurs).

The developers aim to continue upgrading NEAR Protocol with increased sharding capabilities, improved user experience and simple development tools.

The potential of NEAR Protocol is incredible, especially with interoperability being a significant focus for a number of existing protocols. Already being interoperable with Ethereum in a manner that is 70x faster and over 1000x cheaper will likely lead to adoption by a number of Ethereum applications.

Whitepaper: Report:

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