NEAR Protocol: Everything to Know

By  Beluga Research August 14, 2023

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  • The NEAR protocol is a scalable layer 1 blockchain that allows developers to build decentralized applications (dapps)
  • NEAR crypto is the native coin of the blockchain
  • It utilizes sharding, a database partitioning technique, to enhance scalability
  • NEAR employs a proof-of-stake (PoS) consensus mechanism to discourage bad actors from taking over the validation


The NEAR protocol is a scalable layer 1 blockchain that allows developers to build decentralized applications (dapps). Alexander Skidanov and Illia Polosukhin developed the NEAR protocol in 2018. The protocol addresses the scalability and usability challenges of existing blockchain networks such Bitcoin and Ethereum. The NEAR protocol utilizes sharding and a consensus algorithm called Nightshade to achieve high throughput and low latency. The NEAR protocol aims to make it easy for users to access and interact with the network. This promotes blockchain technology to a wide audience.

A Brief History

Polosukhin and Skidanov started to explore program synthesis in 2017. When trying to pay contributors through Ethereum, they found that network demonstrated concerns. The pair resolved the concern by launching the NEAR protocol in 2018. The NEAR protocol gained popularity in the crypto community because it was more scalable and easier to use than existing blockchains.

The NEAR protocol launched its mainnet in 2020. Since that point, the NEAR protocol has continued to evolve and attract users and developers. There is now a thriving ecosystem of applications and projects based on the platform.

NEAR protocol: Everything to Know

  • Scalability and Sharding: The NEAR protocol employs a sharding mechanism to scale its blockchain network. Sharding involves dividing the network into smaller pieces called shards. These allow for parallel processing of transactions and smart contracts. The approach significantly increases the network's capacity to handle a large number of transactions simultaneously. This feature increases scalability.
  • Nightshade Consensus Algorithm: The NEAR protocol's Nightshade consensus algorithm is designed to ensure fast finality and high throughput. It combines the best features of proof-of-stake (PoS) and proof-of-authority (PoA) consensus mechanisms. Nightshade enables block confirmation and reduces the risk of forks. Nightshade leverages a dynamic validator set. Validators are selected based on their stake and reputation within the network.
  • User-Friendly Experience: The NEAR protocol prioritizes user experience by offering a developer-friendly environment and intuitive tools. Its developer platform provides comprehensive documentation, software development kits (SDKs), and application program interfaces (APIs), empowering developers to build and deploy dapps without complications. The NEAR Wallet simplifies the onboarding process for users. This wallet makes it easy to create and manage accounts, interact with dapps, and securely store digital assets.
  • Interoperability: The NEAR protocol aims to foster interoperability with other blockchain networks. Its Rainbow Bridge technology allows assets to be transferred between the NEAR protocol and Ethereum, opening up possibilities for cross-chain compatibility. The Rainbow Bridge also allows an easy exchange of tokens. Interoperability expands the potential use cases and enhances the overall ecosystem for the NEAR protocol.
  • Ecosystem and Applications: The NEAR protocol has witnessed significant growth in its ecosystem. It has developers and projects from various domains. Over time, the NEAR protocol has become a hub for decentralized finance (DeFi) applications, gaming platforms, and decentralized social networks. Notable projects built on the NEAR Protocol include Mintbase, a marketplace for non-fungible tokens (NFTs) and Paras, a platform for digital art creation and trading.

Getting Started

  • Create an account on the network by generating a NEAR wallet. The NEAR wallet allows users to securely store their NEAR tokens and interact with dapps built on the NEAR platform.
  • Participate in the NEAR ecosystem. Send and receive tokens, interact with smart contracts, and engage with various dapps.

Unique Aspects

  • Sharding mechanism. The NEAR protocol's sharding mechanism makes it possible for the network to scale horizontally by dividing the workload across multiple shards or sub-networks. This approach improves transaction throughput and reduces latency. As a result, the NEAR protocol is more efficient and capable of handling a larger number of transactions than many traditional blockchain networks.
  • Nightshade. Nightshade combines the benefits of both PoS and PoA mechanisms to achieve fast block finality and increased security. Nightshade utilizes a dynamic validator set and rotates consensus groups, The NEAR protocol ensures that transactions are confirmed quickly and that the network remains secure and resilient against attacks.
  • NEAR SDK. The NEAR Software Development Kit offers a comprehensive set of tools and libraries. These simplify the process of building dapps on the NEAR platform. Developers can leverage familiar programming languages like Rust and AssemblyScript. They use these to write smart contracts and create innovative dapps. The dapps can benefit from the scalability and performance advantages of the NEAR protocol.
  • Account model that eliminates the need for users to pay gas fees for transaction execution. Instead, developers can subsidize the transaction costs for their users. This model encourages the adoption of dapps by removing the barrier of entry associated with high transaction fees. The feature makes the NEAR protocol an attractive platform for developers and users.


  • Scalability - The NEAR protocol utilizes a unique sharding mechanism called Nightshade, which allows the network to divide and process transactions in parallel. This approach significantly improves scalability. It helps the network run more smoothly and quickly.
  • User-Friendly Experience - The NEAR protocol prioritizes user experience by providing developers with familiar programming languages. This makes it easier for developers to build dapps on the platform. It also lowers the barrier to entry for new developers.
  • Low Transaction Fees - The NEAR protocol employs a fee model that separates the cost of computation from the cost of storage. Then developers can optimize their dapps for efficiency. The setup reduces transaction fees for end-users. This makes the platform accessible and cost-effective.
  • Fast Finality - The NEAR protocol utilizes a consensus mechanism called proof-of-stake (PoS), which allows for faster block confirmation times compared to traditional proof-of-work (PoW) systems. This ensures quick finality of transactions. It reduces the risk of double-spending and improves overall transaction speed.
  • Interoperability - The NEAR protocol is designed to be interoperable with other blockchain networks. The protocol allows for easy integration and communication between different dapps and protocols. As a result, developers can leverage the strengths of multiple networks and create complex, powerful applications.


  • Centralization Risks - Although the NEAR protocol aims to be decentralized, it relies on a limited number of validators to secure the network. This concentration of power could potentially introduce centralization risks. These increase if a small group of validators colludes or becomes compromised.
  • Early Stage Development - As a relatively new blockchain platform, the NEAR protocol is still in its early stages of development. Limitations, bugs, or security vulnerabilities may develop. Users and developers should exercise caution when utilizing the platform for critical applications.
  • Competition - The blockchain space is highly competitive. Numerous platforms hope to increase their rates of adoption and developer interaction. The NEAR protocol faces competition from well-established platforms like Ethereum and newer entrants, including Polkadot and Solana. The competitive landscape poses a challenge for the NEAR protocol to differentiate itself and maintain a significant user base.
  • Governance Challenges - As many blockchain projects, the NEAR protocol faces governance challenges in decision-making processes and protocol upgrades. Ensuring a fair and inclusive governance system that aligns with the interests of all stakeholders can be complex. The process will require ongoing improvements and community engagement.