NEAR Protocol, a cutting-edge layer-1 blockchain, was introduced in 2020 with the aim to support decentralized applications (DApps) on a scalable and secure cloud infrastructure. Utilizing Nightshade, an innovative sharding technology, NEAR Protocol strives to accomplish unparalleled scalability, while also offering cross-chain interoperability through the Rainbow Bridge and a layer 2 solution named Aurora.
The native token of the NEAR Protocol, NEAR, serves various purposes such as covering transaction and data storage fees. Additionally, token holders have the opportunity to stake NEAR tokens within the NEAR wallet, earning rewards in return. The tokens also play a crucial role in governance as they can be used by holders to vote on proposals, thereby contributing to the growth and development of the protocol.
Introduction
Developers and users have always faced scalability challenges when using blockchain technology, primarily in networks like Bitcoin and Ethereum. The increasing popularity of decentralized applications (dApps) and non-fungible tokens (NFTs) exacerbates these issues, particularly on the Ethereum blockchain. High gas prices and transaction costs can discourage many from utilizing the platform.
NEAR Protocol (NEAR) tackles these limitations through sharding, providing a development platform for efficient onboarding and smooth operation. Managed by the NEAR Foundation and founded by Alexander Skidanov, NEAR also supports Rust programming, facilitating machine learning integration within the ecosystem. This approach aims to meet the growing demands of users and developers, making the blockchain experience seamless and accessible.
What is NEAR Protocol?
NEAR Protocol is a layer 1 blockchain designed to offer scalability through sharding technology. It employs smart contracts and a proof-of-stake (PoS) consensus mechanism to ensure network security. Established by Alex Skidanov and Illia Polosukhin in 2020, the NEAR Collective has developed this blockchain platform as a community-driven cloud infrastructure for hosting decentralized applications (DApps).
The NEAR platform offers a variety of programming tools, languages, and cross-chain functionality through smart contracts, empowering developers to build DApps efficiently. It simplifies onboarding processes and features human-readable account names, offering a user-friendly experience compared to traditional cryptographic wallet addresses. Through NEAR Protocol, developers can create various applications including non-fungible tokens (NFTs), further expanding the possibilities within the blockchain space.
How NEAR Protocol Operates
NEAR Protocol employs a proof-of-stake consensus mechanism, leveraging features like smart contracts to enhance performance in its layer 1 blockchain ecosystem.
Nightshade Sharding
Nightshade is a vital component of the NEAR blockchain platform that enhances its efficiency and capability. As a sharding mechanism, it divides transaction processing tasks across multiple validator nodes. Consequently, each node manages only a portion of the network's transactions, significantly increasing the overall transactions per second (TPS).
With Nightshade, the NEAR protocol enables block producers and validators to simultaneously process transaction data across different shards. Each of these shards contributes a part of the upcoming block, known as a chunk. After processing, these chunks are stored on the NEAR blockchain, finalizing the transactions they hold.
In optimal conditions, Nightshade can potentially handle millions of TPS without affecting the network's performance. It can dynamically adapt to network traffic and resource usage by splitting and merging shards accordingly. Increased network capacity leads to a rise in the number of nodes, ensuring efficiency and maintaining low transaction fees.
NEAR differs from other Proof of Stake (PoS) networks as validators are not selected based on their stake size. Instead, it uses a Thresholded Proof of Stake (TPoS) election mechanism. TPoS operates akin to an auction, where a pool of potential validators specifies the amount of NEAR token they are willing to stake through a signed transaction. TPoS then establishes the minimum threshold for validator selection within each epoch, typically lasting 12 hours. Validators that stake above the threshold are assigned proportional chances of selection based on their stakes.
Rainbow Bridge
The Rainbow Bridge is an application within the NEAR ecosystem that enables the transfer of various digital assets such as ERC-20 tokens, stablecoins, wrapped tokens, and NFTs between the Ethereum and NEAR blockchains. This functionality allows users and developers to leverage the high throughput and low fees offered by the NEAR Protocol.
This bridge operates in a fully decentralized and permissionless manner. Users can easily send their assets directly from their MetaMask or other Web3 wallets to the NEAR Wallet and vice versa. To initiate the bridging process, users must first deposit their tokens into an Ethereum smart contract. As direct token transfer is not feasible between networks, the original tokens on Ethereum are locked and taken out of circulation. Corresponding tokens are then generated on the NEAR side, ensuring that the total circulating supply remains constant across both blockchains.
Transactions on the NEAR Protocol typically confirm within 1-2 seconds and cost under $1. However, if users wish to move their tokens back to Ethereum, the process may incur higher costs and longer processing times, depending on the current Ethereum network traffic and gas prices.
Aurora

Aurora, a layer 2 solution on the NEAR Protocol blockchain, aims to provide an Ethereum-compatible platform for developers to expand their applications with minimal transaction costs. Boasting thousands of transactions per second and a mere 2-second block confirmation time, Aurora offers an efficient and scalable environment for decentralized applications.
The Aurora ecosystem consists of two main components: the Aurora Engine and the Aurora Bridge. The Aurora Engine is an Ethereum Virtual Machine (EVM) implementation on the NEAR Protocol, ensuring compatibility with Ethereum and supporting all tools within the Ethereum ecosystem. This compatibility allows developers to effortlessly work on NEAR without needing to rewrite their decentralized applications or familiarize themselves with new development tools.
Meanwhile, the Aurora Bridge employs the same technology as the Rainbow Bridge, enabling seamless bridging of smart contracts and ERC-20 tokens between Ethereum and NEAR Protocol blockchains. This feature offers added convenience for users, who can even pay transaction fees with ETH on Aurora.
What is the NEAR token?
The NEAR token is the native digital asset of the NEAR ecosystem, an ERC-20 token with a maximum supply of 1 billion. Operating within the NEAR network, this versatile token serves various purposes. It covers transaction and storage fees, and smart contract creators can also obtain a share of the fees their contracts generate. To maintain its value, the remaining transaction fees will be burned.
Owners of NEAR tokens can stake them in the NEAR Wallet to receive rewards. By staking NEAR, individuals have the opportunity to run validating nodes and earn monetary incentives up to 4.5% of the total NEAR supply. Additionally, token holders actively contribute to the governance of the NEAR network by participating in voting and submitting proposals regarding the platform and its products.
The Future of Near Protocol
The expanding blockchain sector will benefit significantly from platforms delivering reduced transaction fees and enhanced throughput, paving the way for wider adoption. NEAR's scalability solutions have the potential to draw developers keen on creating more streamlined DeFi products and decentralized applications (DApps). Their roadmap envisions further advancements in sharding, as well as layer-2 cross-chain approaches, aimed at broadening NEAR's blockchain capabilities to ultimately benefit both developers and users.