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NEAR Protocol: One of the Most Undervalued Blockchains?

Lincoln Murr

Summary: The previous bull market was dominated by alternative layer one blockchains like Solana, Avalanche, and Fantom. However, one protocol with great technology stayed under the radar: NEAR Protocol. Let’s look at what NEAR is, how its technology stands out from other chains, and if it could be poised to thrive in the next bull market. ...

The previous bull market was dominated by alternative layer one blockchains like Solana, Avalanche, and Fantom. However, one protocol with great technology stayed under the radar: NEAR Protocol. Let’s look at what NEAR is, how its technology stands out from other chains, and if it could be poised to thrive in the next bull market.

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The NEAR blockchain was released in 2020 by the NEAR Foundation and founders Illia Polosukhin and Alexander Skidanov. Its goal is to be a scalable blockchain that is simple for developers and users. It utilizes a sharding technology called Nightshade for scaling. Essentially, this allows for multiple different blockchain instances to be run in parallel and brought to consensus together, which could help the protocol scale to 100,000 transactions per second. Each of NEAR’s shards can have a unique architecture, which provides flexibility and modularity for development and use. There are currently two primary shards: Aurora and NEAR. The Aurora chain is EVM compatible, meaning it can support all of the same applications and smart contracts as Ethereum with the scalability benefits of NEAR. 

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It also has a governance token, AURORA, used to govern the Aurora DAO and vote on how the treasury should be used. NEAR’s native blockchain employs an architecture called WASM, which uses the Rust programming language like Solana. In the future, NEAR can expand to support other new architecture types or paradigms.

NEAR boasts some of the most unique features of any currently released Layer 1. For example, all of their wallets are contract-based, which means that any operation or action done to a smart contract can also be executed on a wallet. This could include preventing more than a certain amount of funds from leaving the wallet on any given day, native multi-signature authentication support, and more seamless transaction execution. Additionally, NEAR uses a much more user-friendly naming convention for addresses than other chains - every address can be in an addressName.near format. Moreover, developers receive 30% of the transaction fees generated by their smart contracts to incentivize development. This native mechanism ensures that the long-term stability of applications does not have to be sacrificed to generate value for smart contract developers. This model could significantly improve the efficiency of DeFi applications. 

Even with these technological advantages, the chain suffered a massive loss in TVL in this bear market and has yet to see many significant applications built within the ecosystem. Aurora fell from a high of $1.3 billion in total value to $76 million today, and the NEAR chain dropped from around half a billion to $80 million. This puts Aurora and NEAR’s combined TVL at around $150 million, which is unexpectedly low. The blame for the TVL loss partially falls on the USN token, which was NEAR’s attempt at creating a decentralized stablecoin. After it lost its peg, the project was abandoned, and along with it went $120 million in TVL.

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In 2022, near raised $500 million from venture capital firms, led by Tiger Global and alongside Dragonfly Capital and A16z, among others. Unfortunately, three of their investors, namely Three Arrows Capital, FTX Ventures, and Alameda, dissolved since their raise, but this has not negatively impacted NEAR. With this massive treasury, NEAR hopes to fix its most problematic issue related to a lack of activity through token incentives and ecosystem support. 

The layer one market is fiercely competitive, and several new projects threaten to overtake NEAR, like Aptos and Sui. If NEAR cannot capitalize on its massive treasury, existing relationships, and robust technology, then it may become the next chain in a line of many that did not live up to its potential. That being said, given NEAR’s prior track record with delivering on their technology, there is no reason to believe they will fail at bringing new developers and applications to their ecosystem, possibly making NEAR the blockchain of choice for the next bull market.

By Lincoln Murr

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