NEAR Blockchain Overview

[https://near.org/]

This article is a digest of an official NEAR white-paper: https://near.org/papers/the-official-near-white-paper/

NEAR is a Proof-of-Stake Blockchain and a smart contract platform designed to run distributed applications.

NEAR Key Features:

• End-User Usability — Easy user onboarding with Single Sign-On (SSO) functionality, easy subscriptions and predictable resource pricing.
• Developer usability — Run Web Assembly (WASM) smart contract code written in Rust or AssemblyScript, robust tools and predictable pricing.
• Scalability — NEAR Protocol uses sharding approach to increase network capacity.
• Efficient development and evolution — Very strong technical core team behind NEAR Protocol working on its evolution.
• Real decentralization — Supported by many independent validators who stake enough NEAR to earn a validator seat.

NEAR Economics

NEAR economic model is designed to provide proper incentive system for developers and users to sustain network security and ecosystem development:

• Thresholded Proof of Stake: Validators stake sufficient amount of NEAR tokens (currently around 3M) and provide computational resources for earn validator rewards. Any malicious validator who tries to cheat system in any way will have his staked NEAR tokens slashed.
• Epoch Rewards: All node operators (validators) are earning rewards in NEAR tokens of about 4.5% of annualized from total tokens supply in order to secure network. Each validator reward is scaled based on its performance metrics.
• Protocol treasury: Treasury receives 0.5% from total tokens supply annually to reinvest into ecosystem development.
• Transaction costs: Each transaction consumes network and computation resources, which are paid in predictable cost per transaction fee paid in NEAR tokens.
• Storage costs: Storage is a long term cost for storing data on each network node. Storage costs are paid by staking enough tokens on account using storage and paid indirectly through inflation on total stake.
• Inflation: Total max annual inflation if 5% of total token supply. As more transaction fees are burned this number will go down and with enough transactions can even go negative.
• Scaling and security thresholds: network will scale with growing load is economic in nature.

Economic stakeholders:

• Validators: Provide the computational resource and security for the network by running nodes.
• Developers: Create the applications which run atop the network
• Token Holders: Accounts or applications which maintain token balances
• NEAR Foundation: An independent entity which coordinates the governance and technical evolution efforts of the network participants.
• Third Party Observers: The observers of the chain who provide extra fraud and bad behavior protection.
• Users: Users of applications on the network who do not maintain token balances.

NEAR Technology

The key elements of NEAR’s technology are:

• Sharding: The system is designed to scale horizontally and near-infinitely by distributing computation across multiple parallelized shards.
• Consensus: Consensus is achieved across all of the nodes which make up the network operators across all of the shards using the new Nightshade algorithm.
• Staking Selection and Game Theory: To participate in the validation process, stakers are selected using a secure randomized process which optimally distributes seats across parties and provides incentives for them to operate with good behavior.
• Randomness: NEAR’s randomness approach is unbiasable, unpredictable and can tolerate up to 1/3 of malicious actors before liveness is affected and 2/3 of malicious actors before any one can actually influence its output.

Cross-chain and cross-shard communication

There are 3 approaches for validating cross-chain transactions:

1. Dual Validation: Have the validators for the receiving chain also validate on the sending chain.
2. Trust the Transaction: Assume that if a transaction has been received, it must be valid.
3. Beacon Chain w/ Rollback: A beacon chain verifies the state transitions all of the other chains using a small subset of validators and, if a problem is detected, all chains are rolled back. To achieve atomicity, this reversion should happen, though it should happen only rarely and should be immediately detected.

NEAR focuses on the 3rd approach. With the assumption that an adaptive adversary cannot corrupt the validators of a shard within a day, validators of each shard can be rotated daily to help add a layer of security.

NEAR is using Nightshade sharding protocol:

Nightshade modifies the typical sharding abstraction and assumes that all of the shards combine together to produce a single block. This block is produced with a regular cadence regardless of whether each individual shard has produced its “chunk” for that specific block height. So every chunk for each shard will either be present or not.
More about Nightshade: https://near.org/papers/nightshade/

More on NEAR design principles and sharding mechanism: https://near.org/papers/the-official-near-white-paper/#design-principles

Governance

NEAR’s governance is designed to provide for efficient improvement of the protocol while allowing the community sufficient voice and oversight in order to ensure the protocol maintains its independence.

Technical Governance
As a decentralized network, no single entity can ever force changes to the full NEAR network. Any changes made to the reference code base by its core contributors must be individually accepted by the nodes who are running the network.

NEAR’s governance defines a Reference Maintainer, which is an entity responsible for technical upgrades to the NEAR network. This entity has been selected to maintain the Reference Implementation and continue to suggest improvements on the specification. All major releases will be protected with community discussion and a veto process (a 2 week challenge period), while smaller bug fixes can be rolled out fast and delivered to node operators.

Initially, the Maintainer is selected by the Foundation Board and serves until the board votes to replace them. Over time, oversight of the Maintainer will be performed through a community-representing election process.

Resource Governance
Resources provided by the network itself to the Protocol Treasury are governed and distributed by the NEAR Foundation. This foundation operates independently and will provide structured and transparent funding for projects and activities that are deemed to be most helpful to the ongoing health of the protocol’s ecosystem.

More resources and references:

• NEAR Site: https://near.org/
• NEAR Whitepaper: https://near.org/papers/the-official-near-white-paper/#abstract
• NEAR Explorer: https://explorer.near.org/
• NEAR Web Wallet: https://wallet.near.org/
• NEAR on Discord: https://discord.gg/u8j7FDXG
• NEAR Price: https://coinmarketcap.com/currencies/near-protocol/