Introduction to NEAR Protocol (NEAR)

By Zacharias | RekTimes | 18 Apr 2022


12 April 2022: NEAR Protocol is a community-run decentralized application (dApp) platform.  NEAR Protocol is a public Proof-of-Stake blockchain that aims to use novel advancements in Web3 technology to become a powerful base for the construction of the metaverse and a thriving marketplace.

NEAR Protocol focuses on:

  • Usability
  • Efficiency
  • Scalability
  • Decentralization

In this article, we will explore the basics of the NEAR Protocol and take a look at the focus and technology that are driving the development of NEAR and the web3 space as a whole.

Top Things to Know:

  • NEAR is a decentralized application platform that uses smart contracts to assist in the transaction process and incentivize development


  • Blockchain validation roles are assigned dynamically to minimize required stake and maximize the number of validators


  • The Nightshade project aims to increase scalability and answer two common trilemmas in blockchain development with novel technology and implementation



NEAR Protocol acts as a virtual marketplace where developers and end users can interact and trade currency for goods and services. NEAR enables the use of smart contracts - contracts that self execute when the terms set by the buyer and seller are met. 

These contracts are traceable and irreversible. The use of smart contracts allows for developers and customers to safely buy or sell goods and services without the need for a central authority or external enforcement. 

Contract rewards are paid out to all developers whose contracts were used during a transaction, with the payment being received based on rules specified in the contract. This reward is currently set at a minimum of 30% of the transaction fee and developers can specify additional fees paid by the buyer in the contract. 

Developers pay for the storage of contracts by being required to maintain a certain amount of tokens based on a fixed tokens per byte value that can only be altered through major governance decisions. This fee currently requires developers to maintain a balance of 1 NEAR per 10 kilobytes of storage used, although this is expected to change as platform usage increases.

NEAR Cryptocurrency

The protocol has its own native cryptocurrency (NEAR) that is used to pay for transaction fees and storage; as well as for the purchase of goods and services being sold on the NEAR protocol. There are currently 674 million coins in circulation with a maximum supply of 1 billion.



NEAR has a market cap of just over 11 billion dollars, with each coin being valued at USD 16.46. The rate of inflation is limited to a mining rate of  5% per annum. 

In order to reduce inflation all transaction fees that are not paid out as contract rewards are burned, reducing the overall supply. If transaction fees are reliably exceeding token generation, the system will become deflationary overall.

NEAR also supports the usage of a variety of other cryptocurrencies, the creation of new cryptocurrencies atop the NEAR platform, and the storage, movement, and transfer of digital assets (NFTs).

Blockchain Validation

NEAR tokens may be staked in order to take up an additional role as a validator, consisting of three types: block producer, chunk producer, and hidden validator. 

The required number of tokens that must be staked to become a validator is dynamically determined based on the total number of tokens being staked by all validators, with this formula determining the minimum stake per seat and number of seats held by each validator.



Payment for acting as a validator is based on a target number of NEAR every epoch (½ day) and is paid out on a per seat basis. The target payout is 4.5% of the total supply to all validators on an annualized basis. 

In addition to this, 0.5% of the total supply is paid to the treasury, currently managed by the NEAR foundation for reinvestment and maintenance of the platform.


Technology Behind NEAR Protocol

NEAR’s technology is designed to maximize the platform’s usability, scalability, and decentralization. What this means is that the platform is designed with the least security obligations possible for user interaction while still being trustworthy.

This allows the platform to scale infinitely and the required stake for validation will be kept as low as possible to maintain the community’s ability to participate and allow for a large number of validators. Obviously, this comes with compromises in overall blockchain security due to the blockchain trilemma.

The most important part of NEAR for ensuring usability is the allowance of smart contracts and contract rewards for developers. The use of smart contracts allows a greater flexibility of creation for developers; theoretically a transaction of any type or size will be able to be completed on the platform. 

Usability is further promoted for developers by providing browser-based debugging, familiar programming languages (like AssemblyScript and Rust), and contract rewards to encourage continuous development and innovation.

Nightshade Project

Scalability is achieved through a process called sharding, which NEAR is implementing through the Nightshade project. Sharding distributes computational stress by partitioning the total network into pieces, or shards. 

This removes the requirement of all nodes verifying each transaction, requiring transactions in each shard only be verified by the nodes in the shard. NEAR will dynamically create and merge shards based on the computational load of each shard or the whole system to address overload and underuse automatically. 

This allows a theoretically infinite amount of scalability while maintaining efficiency and decentralization. NEAR estimates each shard should be capable of processing 400-2000 transactions per second for simple financial transactions.


Comparison between Beacon Chain & Nightshade

The sharding implemented in the Nightshade project and NEAR’s attempt to keep the required stake for validators at a minimum helps address, theoretically, the blockchain trilemma

Sharding ensures scalability while the theoretically large number of possible validators maintains decentralization while minimizing the loss of security. 

Another common trilemma is the CAP theorem, stating a system must make a tradeoff that sacrifices at least one of consistency, availability, and partition tolerance. NEAR prioritizes partition tolerance and uses an availability model based on Bitcoin, whereby if the system splits in two and is then merged one half’s operations are destroyed in favor of the other half. 

In an attempt to mitigate this loss users can choose to not accept blocks that have less than a 50% signature threshold, allowing for local consistency.



The NEAR platform is designed to answer many of the common problems found in blockchain projects’ expansion. The Nightshade project and NEAR’s unique formula to dynamically determine the required stake and number of validators are designed to maximize the scalability, efficiency, and usability of the platform while minimizing effects to security, consistency, and decentralization. 

Due to the commonality of these trilemmas throughout the web3 space, NEAR is a very interesting project to watch as it may indicate the future direction and technology employed in successful blockchain platforms. Economically, NEAR’s native token (NEAR) and employment of smart contracts incentive investment and development of the platform. 

NEAR rewards developers and combats inflation through smart contract payouts from transaction fees and burning the remaining funds. The combination of these systems should make NEAR economically viable in the long term.

Important Resources



Nightshade Paper

NEAR Foundation






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