Interpreting NEAR: Following the hot narrative or leading the market?

Written by Geng Kai, Eric, DFG

NEAR quickly became a leader in the convergence of Web3 and AI, but its foundation in the AI field runs deeper than many realize. Interestingly, NEAR was not initially envisioned as a blockchain project. One of its co-founders, Illia Polosukhin, embarked on this journey with a different goal in mind: to create an AI-driven enterprise. Polosukhin, one of Google's eight researchers, introduced the revolutionary Transformer model (a key architecture supporting today's most popular AI tools, such as OpenAI's ChatGPT), and initially sought to advance AI in a different way.

NEAR founder Illia and Nvidia founder Jensen at NVIDIA GTC

However, the team encountered significant challenges, especially in incentivizing and coordinating the different contributors to build AI models when they first started their AI projects. It was this obstacle that made them realize that blockchain technology could provide the perfect solution. By leveraging a high-performance blockchain that integrates encryption payments, they can facilitate seamless exchange of fundamental data, computation, and AI models - a key feature in building an excellent Decentralization AI ecosystem. This insight prompted the crucial shift from AI to blockchain, ultimately giving birth to the NEAR protocol as we know it today.

However, what truly sets NEAR apart is its remarkable alignment with some of the most notable narratives in the tech industry today. Whether the focus is on AI, chain abstractions, modularity through data availability, or scaling through Sharding, NEAR's name always comes up. This raises an interesting question: is NEAR just following the trends, or are they truly offering innovative products that enhance the blockchain experience?

To answer this question, we must delve deeper into the infrastructure of NEAR.

Solving the scalability problem of Blockchains: NEAR's approach

Scalability is a challenge facing blockchain networks, and people are exploring various solutions to meet the rising demand for fast and efficient transactions. Although some blockchains have implemented technologies such as Layer 2 scaling, sidechains, and state channels, these methods often involve trade-offs in terms of interoperability, composability, and usability.

Nightshade Sharding 2.0: NEAR's Scalable Backbone

One of the key features of NEAR is its Nightshade Sharding technology, which is a core component of its scalability strategy. Sharding technology divides the blockchain state into smaller, more manageable parts called 'shards', and each shard can process transactions independently. This design significantly improves the network's throughput without burdening any single node with the responsibility of processing all transactions.

How does the NEAR Block split into chunks from each Sharding

In the initial stage, NEAR implemented a design that divides each Block into 'blocks', each block containing transactions specific to Sharding. Block producers and validators are assigned to specific Sharding, meaning they only need to process transactions related to their Sharding. This not only optimizes processing efficiency but also enables NEAR to achieve a throughput of approximately 3,000 transactions per second (TPS) with the initial setting of four Sharding.

In the process of continuous development, NEAR is enhancing this system through stateless validation, allowing validators to verify transactions without storing the entire blockchain state. This innovation drops hardware requirements, further enhances accessibility and achieves Decentralization of the network. In addition, NEAR is exploring the integration of zk-proofs (Zero-Knowledge Proof) and dynamic re-sharding into its Sharding design, which can further improve scalability by implementing faster and more secure transaction verification. NEAR will expand to 10 shards by the end of the year, increasing network capacity by 50% to meet the rising demand. 01928374656574839201

NEAR's Nightshade Sharding provides the scalability, speed, and interoperability needed to support AI projects that require processing large datasets and executing transactions quickly. The network's fast finality ensures that AI-driven applications can run in real time, making NEAR an ideal platform for developers looking to innovate in the field of Decentralization AI.

NEAR's Block chain interoperability full-stack modular architecture

As the Block chain landscape becomes increasingly decentralized, the demand for interoperability and seamless Cross-Chain Interaction is more important than ever. The NEAR protocol has recognized this challenge and has positioned its platform as a leading force in a unified multi-chain ecosystem. By implementing a series of innovative technologies - such as fast Data Availability (DA) layer, longer calculations (MPC) for secure Cross-Chain Interaction transactions, Super-Fast Finality Layer (SFFL), and chain abstraction - NEAR aims to provide a unified and user-friendly experience across multiple Block chains. Each of these components plays a crucial role in positioning NEAR as a top interoperable Block chain.

Enhance Cross-Chain Interaction Compatibility and Connectivity

NEAR's commitment to interoperability is further demonstrated through its integration with Ethereum and the broader blockchain ecosystem. Aurora is a smart contract on NEAR that is compatible with Ethereum's blockchain and ecosystem. Aurora's engine runtime supports seamless deployment of Solidity and Vyper smart contracts, enabling developers to leverage NEAR's powerful infrastructure while maintaining compatibility with Ethereum. NEAR is compatible with popular tools such as NEAR Snap and Metamask, while the Rainbow Bridge facilitates the transfer of tokens and data between ETH, NEAR, and Aurora, highlighting the commitment to interoperability.

In addition to maintaining interoperability with other ecosystems, NEAR also provides seamless use of assets through re-staking for Cross-Chain Interaction. Allstake allows for native re-staking of assets for Cross-Chain Interaction, thereby creating a trustless Decentralization ecosystem that contributes to the security of AVS. Re-staking through Allstake built on the NEAR protocol can leverage Liquidity from multiple ecosystems to create a seamless cross-chain experience.

The fastest data availability layer in the market

NEAR's DA layer is managed by Nuffle Labs, the backstage team behind NEAR's modular products, ensuring efficient access and processing of large amounts of data on the blockchain. With Nightshade, NEAR DA provides a powerful solution for ETH rollup and other high-volume projects. Unlike other DA solutions, NEAR's Consensus Mechanism maintains speed even when dealing with a large influx of data, ensuring fast data publishing and querying.

Overview of Popular DA Solutions:

| | NEAR DA | Celestia | Avail | EigenDA | | Consensus | Nightshade | Tendermint | GRANDPA + BABE | Committee-based | | Cost per Block | Very Low | Low | Low | TBD | | Throughput | 16mb/s | 6.67mb/s | - | 1.39mb/s | | Block时间 | 1s | 15s | 20s | NA | | Final Confirmed Time | 2s | 15s | 20s | 12min | | DA sampling | No | Yes | Yes | No |

With more and more blockchains using Zero-Knowledge Proof to achieve unified security of Cross-Chain Interaction, NEAR's DA provides dApps from multiple networks with easier and cheaper data queries and Settlement. In addition, NEAR DA ensures that even if the operator is offline, the Node can remain synchronized, thereby adding an extra layer of reliability. This functionality is beneficial not only for current high-demand applications, but also positions NEAR as a key participant in future Cross-Chain Interaction Settlement.

Providing support to other blockchain infrastructures with ultra-fast finality layer

According to the modular blockchain theory, NEAR collaborates with Eigenlayer to develop the Super-Fast Final Layer (SFFL). This innovative settlement layer significantly reduces transaction time and Rollup costs, while inheriting the security and finality of NEAR and Ethereum through Eigenlayer. SFFL relies on NEAR DA to obtain transaction data, enabling Nodes to efficiently access and verify transactions.

Due to SFFL supporting cross-rollup transactions, it has boosted the volume of NEAR, leading to a Deflation effect on NEAR Token as 70% of transaction fees are burned. The partnership with Swell further strengthens NEAR's position in the modular blockchain stack, with the latter having delegated a large amount of ETH to SFFL, bringing the vision of chain abstraction closer to reality.

The Unity of Blockchain: NEAR's Chain Abstraction Vision

The modular blockchain architecture achieves scalability but also leads to fragmentation, resulting in fragmentation of Liquidity, user experience, and interoperability. NEAR addresses these challenges by advancing chain abstraction - a concept aimed at providing users with a unified experience across multiple blockchains.

The goal of chain abstraction

NEAR's FastAuth Secret Key management system allows users to manage their NEAR accounts with an email address, simplifying account creation and recovery. The system also supports multiple Secret Keys for different functionalities, enhancing security and usability.

How Different Secret Keys Control Different Functions on a NEAR Account

In addition, NEAR integrates MPC technology through chain signatures to ensure the security of Cross-Chain Interaction transactions, allowing users to interact with multiple blockchains without managing different Wallets and seed phrases.

MPC signature process

The Attraction of NEAR

Stablecoins and TVL rise

This rise is reflected in the Total Value Locked (TVL) of NEAR and its EVM-compatible brother Aurora. From July 2023 to now, the total TVL of NEAR and Aurora has skyrocketed from about $55 million to $230 million, a threefold rise in USD terms. After adjusting for the value of native tokens, TVL calculated in NEAR has doubled, while TVL calculated in AURORA has decreased by 40%.

Decentralized Finance on NEAR

The landscape of Decentralized Finance on NEAR is currently dominated by two key platforms: Burrow and Ref Finance. The lending platform Burrow has seen a significant increase in activity due to the incentive lending program for Stable Coin. Similarly, the Decentralized exchange (DEX) Ref Finance has been actively incentivizing its Stable Coin Mining Pool, with the total volume recently surpassing 70 billion US dollars. These incentive measures are mainly funded by NEAR Token rewards, which may play a key role in the surge of Stable Coin Market Cap in 2024.

NEAR Emerging Categories and Trends

Restaking

Staking has become a new and rising category in the NEAR Decentralized Finance ecosystem, with platforms like Allstake contributing around $15 million to the Total Value Locked (TVL). Although Liquidity staking is not typically included in the TVL metric, it is still the largest category with a TVL exceeding $280 million.

In the case of Aurora, although there are several popular EVM DApps, the most widely used application is still Aurora Plus, which is a platform aimed at achieving free transactions and promoting AURORA Token stake.

NEAR's commitment to Web3 AI development

As part of its broader strategy to become a leading AI platform in the Web3 ecosystem, NEAR has made significant progress in developing and nurturing AI projects on its network. In addition to the efforts of the NEAR Research Lab, the protocol has launched the NEAR AI x Horizon (HZN) Incubation Program, which is specifically designed to support groundbreaking projects at the intersection of AI and blockchain technology. In the first batch of incubated projects, the program provides non-equity guidance, technical assistance, and guidance for scaling innovation to six selected projects.

The equity-free model of NEAR HZN allows AI projects to fully focus on building and improving their products without the pressure of giving up ownership. This supportive environment is crucial for fostering innovation and has proven to be successful, as demonstrated by previous alumni who have collectively raised over $20 million in external capital. The program starts a new round of funding in May each year, with three rounds per year, aiming to incubate a continuous stream of groundbreaking AI projects.

The NEAR HZN plan currently supports six projects covering key areas of the AI x Web3 stack, including data, computing resources, model networks, and payment infrastructure. These plans complement NEAR's collaboration with other AI-focused projects, which are building networks in areas such as AI consumer applications, agent infrastructure, and expanding AI through NEAR's Data Availability (DA) layer.

By addressing every aspect of AI architecture in the Web3 space, NEAR positions itself as the preferred blockchain for developing AI applications. Its comprehensive support system, from incubation programs to cutting-edge technical infrastructure, demonstrates NEAR's commitment to fostering the development of AI on its platform and ultimately bridging the gap between AI and Decentralization technologies.

Conclusion: NEAR's strategic positioning as a leader in blockchain and AI fields

The NEAR protocol not only follows the trend of popular narratives, but also lays the foundation for the future of blockchain and AI through its innovative and extensive infrastructure. By integrating powerful data availability layers, cutting-edge termination layers, and zero-knowledge technology, NEAR has become an important component of the infrastructure, benefiting its ecosystem and the broader blockchain field.

NEAR is rooted in AI and pivoting towards blockchain, indicating its deep understanding of both fields. Its scalable and reliable infrastructure allows NEAR to refocus on AI and have the necessary foundation for driving significant advancements that were previously unattainable. With features like chain abstraction, NEAR simplifies multi-chain interaction, making it an ideal platform for AI development that requires seamless access to various blockchains and fast transactions.

Even in a fiercely competitive environment, NEAR has always kept its promises. With the help of co-founders' leadership, strategic partnerships, and dedicated R&D labs, NEAR is positioning itself as a true leader at the intersection of blockchain and AI. This is not just about keeping up with the trend, but shaping the future of technology in a way that drives meaningful progress and adoption.