Battle of the Blockchain Platforms — How NEAR is superior to Ethereum and EOS
— by Crypto Tribe, March 2021
It has almost been three years since two young entrepreneurs launched a new blockchain project, called NEAR Blockchain. Last summer, their hard work delivered the first major milestone when NEAR came out with the restricted version of the MainNet. Then the team successfully launched the Community Governed MainNet at the end of last year. This young bright star on the sky of the blockchain solutions has the raw power to outshine even its biggest competitors, so let’s see how it can compete with two incumbent players in the field: Ethereum and EOS. In the analysis, we will focus mainly on the technical aspects of the platform, but some important business-related features will be highlighted as well.
NEAR is a decentralized development platform built on top of the NEAR Protocol with smart contract functionality. The project was launched in 2018 by Alexander Skidanov and Illia Polosukhin, two young computer scientists, who previously worked for big tech companies such as Microsoft and Google.
NEAR is the next-generation proof-of-stake (PoS) blockchain protocol, which utilizes the sharding algorithm called “Nightshade” for the segmentation of transaction computation load and maintenance of full decentralization. This implementation provides flexibility, scalability and user-friendliness for developers to create decentralized apps on top of it. As a base-layer blockchain, it offers the same infrastructure as projects like Ethereum and EOS, hence dApps and smart contracts can be quickly introduced to the general public via the NEAR blockchain.
The Near protocol is maintained by Near Collective, a group of active developers located globally around the world. Based on Github, the protocol core has 42 active contributors, who have performed 2,298 commits since its inception. The code is written mainly in Rust (88.8%) and smaller part in Python (10.1%), which resulted in 123 releases. Its latest release was deployed in January 2021, which contains some block structure upgrades and addresses some memory leak issues.
Compared to the EOS, NEAR’s activity level on GitHub is lower with less commits and contributors. EOS has 213 contributors, who’ve carried out more than 15,730 commits in 153 releases. The latest one was issued on 25th of February 2021. EOS smart contracts are coded mainly in C++, but developers can use any programming language that has a compiler that converts its bytecode to web assembly. The developer community is organized around block.one, whose members are also the founders of the blockchain.
It is quite difficult to compare those two blockchains with Ethereum as it has a huge community with several branches and implementations. The main development work is done by Ethereum Foundation led by Vitalik Buterin, dedicated to supporting Ethereum and related technologies. On GitHub it has several main repositories, such as Go, EIPs and Solidity.
The Go is the official implementation of the Ethereum protocol written in Go code. It has 584 contributors, who created 12,258 commits in 180 releases. The smart contracts created for Ethereum are written mainly in Solidity. On Github, it has more than 19,591 commits, which are deployed in 101 releases.
Performance and usability
One of the biggest bottlenecks to be solved in blockchain technologies is the scalability and speed of transaction processing. Out of the two main aspects of decentralization, scalability and security, you can only solve one, so trade-offs are almost inevitable.
Due to the nature of the Proof-of-Work consensus mechanism, Ethereum is able to process fifteen transactions per second which makes it inefficient to compete with payment systems such as Visa or Mastercard. Besides the speed, the other disadvantage is that the mining process requires a lot of energy, making its operation expensive. The Ethereum community recognized those huge issues and initiated the Beacon Chain, which reforms the consensus model from Proof of Work to Proof of Stake. The upgrade process is in progress, and the big merge between ETH 1.0 and 2.0 (Serenity) will be finalized sometime in 2022. This will enable the blockchain to process 1000s of transactions per second and make applications faster and cheaper to use. Until then, we are stuck with expensive and slow Ethereum transactions.
EOS delegated Proof-of-Stake mechanism is an example of a leader-based algorithm, wherein certain members are selected from the entire network who oversee the consensus protocol and the general well-being of the network. Only twenty-one nodes (therefore susceptible to centralization given the small number of nodes) are responsible for producing new blocks, and users must wait for fifteen of the twenty-one total nodes to reach consensus. This makes EOS very scalable and able to perform exponentially more transactions per second. The average time taken by the node to confirm a block of transactions on the EOS network is just 1.5–3 seconds, so its throughput is around 4000 transactions per second.
NEAR’s scalability is based on a mechanism where validators are staking reputation rather than the amount of cryptocurrency. Sharding a PoS network means that transactions do not have to be validated by every single node. Rather, the workload is distributed, so nodes are responsible only for a portion of the workload. Hence this implementation is much faster and more scalable. This feature means that the entire code run on the blockchain is segmented into chunks, with each chunk being run on a single node parallel to each other. Due to the sharding mechanism called Nightshade, the blockchain can process over 100 000 transactions per second. It means this blockchain provides one of the biggest throughput in the crypto sector. Additionally, the NEAR platform has no scalability limits due to the unique ability of code fragmentation and distribution to a larger number of nodes.
The developer community introduced a unique feature — The Rainbow Bridge, which connects the Ethereum and NEAR blockchains. This trustless bridge supports ERC20, ERC721, and remains fully decentralized and adaptable to any future protocol changes on either side. It allows users to transfer assets like ERC20 tokens and NFT’s between Ethereum and NEAR. Developers can also write Ethereum contracts that use the state of a contract or validator from NEAR. The Bridge has the power to accelerate community development as it allows ETH users immediate access to apps built on NEAR.
To process transactions on blockchain, computation power is utilized to execute complex calculations which incur some cost. The recent bullish environment on the markets generated not only extraordinary coin prices, but it also increased the cost of transaction. The average Ethereum transaction fee has passed $20 for the first time in February, so it was very costly to make any low amount transactions on the Ethereum network.
Contrary to Ethereum, on EOS blockchain transaction costs are non-existent. Instead of paying gas, users lease their tokens to cover bandwidth to pay for a transaction. So, the protocol requires EOS to use resources like RAM, CPU, and network bandwidth. It also rewards the entities that run the network periodically with new EOS, effectively substituting inflation for transaction fees.
Similar to EOS, NEAR is also charging its user for the above-mentioned resources. However, the pricing on NEAR is slowly adjusted based on system usage, rather than being fully auction-based. This means that a developer can more predictably know the cost of running transactions or maintaining their storage. As an outcome, gas prices are very low on the NEAR platform.
The NEAR’s blockchain native cryptocurrency is NEAR token (aka $NEAR), which is listed on two major crypto exchanges: Binance and Huobi. According to Coingecko, its market capitalization is more than 978 million USD, which ranks 67th in the crypto sector. Its more established competitors obviously achieved better ranking due to their bigger market caps. For comparison, the EOS market cap is more than 3.5 billion USD, so 3.5 times bigger than the NEAR market cap. As of today, we cannot compare neither EOS nor NEAR with Ethereum, the second biggest coin in the crypto segment with a more than 180 billion market cap.
Ethereum price just recently hit ATH, when the coin climbed above 2,000 USD this February. The strong bull run helped the financial performance of both NEAR and EOS. By mid-February EOS price hit 5.5 USD, which was the highest price in the last 12 months. However, it is far behind from its ATH, which EOS achieved in May 2018, when the price was above 20 USD.
The trade of NEAR token started in October last year, after the blockchain’s Restricted MainNet was launched. On 14th February, the token hit its all-time high with 4.80 USD. Since then, the token price declined, and now it trades around 4.20 USD. However, we can state that NEAR delivered a solid performance since its inception. If the blockchain can prove itself, this achievement will be reflected in the token price as well, and the NEAR token will be placed into the center of trader’s hearts.
Comparing the three smart contract platforms is not really fair, as Ethereum and EOS are big league players with strong market presence and quite a long history. However, if we strike out this factor, we can conclude that NEAR is likely to have a big impact on the entire ecosystem and prove itself as a strong competitor, especially to EOS. NEAR has a well-established developer community that has already built a blockchain improving many issues such as transaction speed, security and scalability. With the capability to process more than 100,000 transactions per second, it is now one of the fastest decentralized platforms in the crypto sector. The biggest advantage is the high transaction processing speed on relatively very low cost. In addition, its Rainbow Bridge feature has the power to accelerate community development as it allows ETH users immediate access to apps built on NEAR.
Final words: NEAR is a super-fast smart contract compatible blockchain which enables interoperability between Ethereum and NEAR.
@ Crypto Tribe, March 2021, https://cryptotribe.io