Welcome to the NEAR Retrospective! It’s been quite a year for NEAR Foundation, Near Inc., and, of course, all the incredible projects and community members that make all of this possible. 

So we thought it was high time to look back at some of the highlights from 2021: everything from protocol upgrades, ecosystem funding, community developments, and new projects launching on NEAR mainnet. 

We’ll also be giving a sneak peek at what’s to come in 2022 in a separate post, so keep a lookout for that. 

NEAR Protocol’s Origin and Purpose

NEAR’s founders are Alexander Skidanov and Illia Polosukhin, who hail from Ukraine and were educated in computer science and mathematics. They have been working on NEAR Protocol since 2017 after contributing to Ethereum’s open-source code. NEAR mainnet came online in August 2020.

Polosukhin also worked on Tensor Flow, an open source machine learning library. They based the company in San Francisco, which is typical for most developers pushing the software envelope. Skidanov and Polosukhin aimed to create a better Ethereum, without relying on Layer 2 scalability.

In contrast, NEAR Protocol relies on making the mainchain (Layer 1) scalable. As such, it offers enterprise-grade performance from the get-go, offering up to 100,000 transactions per second once it’s fully upgraded. As a result, it has gained popularity across all continents to mainstream dApp/Web3 deployment, attracting 1,700 monthly active developers.

Venture capitalists backed NEAR to the tune of $566M so far, led by Andreessen Horowitz, DCG, Coinbase Ventures, Tiger Global, Accomplice, Pantera Capital, Electric Capital, Blockchange, Dragonfly Capital, Blockchain.com, and others.

 What is Rainbow bridge near?

The Rainbow Bridge allows any information that is cryptographically provable on NEAR to be usable in Ethereum contracts and vice versa — including the ability to read the state and schedule calls with callbacks on the other chain.

The NEAR Rainbow Bridge is unique in crypto as the only permissionless, trustless bridge to Ethereum. In this article, we’re going to demystify how it works!

The NEAR Protocol created the Rainbow Bridge—something that’s both unique and valuable in the crypto space, a fully “trustless” bridge for transferring tokens between Ethereum and NEAR—and ultimately, Aurora. While there are technical descriptions of the bridge out there, this article will explain how it works in a way hopefully understandable by anyone with a basic familiarity with crypto.

The concept

Let’s start by just imagining that I want to transfer 20 DAI from Ethereum to NEAR. Since physical transfer of tokens isn’t possible between networks, this means we need to take 20 DAI out of circulation on Ethereum, and put 20 DAI into circulation on NEAR, so that the global supply of DAI doesn’t change.

Here’s how I could do that in a trustless, permissionless way:

1. I tell the Ethereum network that I want to transfer 20 DAI somewhere else.
2. The Ethereum network locks my 20 DAI in a vault (a smart contract), so that they are taken out of circulation.
3. Once I’m certain those 20 DAI have been locked on Ethereum, I then tell NEAR to create 20 new DAI for me there.
4. NEAR doesn’t trust me, of course, and so it asks me to prove that I’ve locked 20 DAI on Ethereum.
5. I provide NEAR with proof that I’ve locked those DAI on Ethereum.
6. NEAR independently verifies my proof, and then creates 20 new DAI for me to use on NEAR.

The Rainbow Bridge Allows Ethereum Applications to Scale

From the Ethereum side of the bridge, the Rainbow bridge is a gamechanger for fixing one of the largest bottlenecks that currently exist for Ethereum applications: High gas fees, and the inability to scale. With the Rainbow Bridge, NEAR effectively becomes a collaborative Layer 2 solution for existing applications and assets deployed on Ethereum. With the impending launch of the EVM on NEAR, Ethereum developers can bridge their assets across to NEAR, run their solution for a fraction of the cost, and still keep all of their contracts and infrastructure on Ethereum!

The Rainbow Bridge Is a New Standard of Permissionless and Open Innovation in Crypto

While developers and entrepreneurs may jump on the possibility of using the bridge to access new assets and liquidity for their project, there is a larger — more theoretical — value proposition of the bridge that will only grow in importance as time goes on: The Rainbow Bridge is fully permissionless and decentralized. Unlike most bridges today in the crypto-sphere (that are centrally handled via a proof of authority consensus) the NEAR — ETH Rainbow bridge is not controlled by any single entity.

As a future guarantee towards the integration of the NEAR and ETH blockchain, there is no single actor capable of halting or removing assets that flow between the two ecosystems. The bridge is open — for anyone and everyone — at any time and for any ERC20 or NEP-21 asset!

What Can We Expect In The Future from the NEAR — ETH Rainbow Bridge?

The bridge is in many ways only the very beginning of the rise and development of the NEAR Ecosystem. In combination with the EVM currently preparing for launch on NEAR, the bridge will provide a seamless and permissionless flow of assets between protocols: Expect new DeFi solutions on NEAR, a host of ERC20 assets moving between chains, and a storm of new projects and developers eager to scale their existing Ethereum applications!

What Is TVL?

TVL represents the total value of cryptocurrency that is “locked”, or stored, in a DeFi application or smart contract. For most DeFi platforms, especially those related to lending or swaps, TVL is an important metric as it can directly affect the yields and usability of these applications for end users.

How does NEAR protocol work?

NEAR Protocol is a Proof of Stake (PoS) that helps startups and enterprises with sharding solutions for their scaling.

Let’s have a look at the sharding solutions that NEAR Protocol provides and how NEAR Protocols work:

Nightshade:

Sharding is a blockchain structure that allows each participating node to store a small subset of the platform’s data. It allows a blockchain to scale more fluently and enables higher transactions throughput per second while reducing the transaction cost. Nightshade allows NEAR to maintain a singular chain of data. The nodes handle the computing required to maintain these data into ‘chunks.’ The nodes process the data and additional information to the main blockchain network. One of the benefits of Nightshade is that its architecture provides fewer chances of failures when it comes to security, as the participating nodes are only responsible for maintaining smaller segments of the blockchain.

Rainbow Bridge:

NEAR Protocol has an application called the Rainbow bridge that allows the network participants to transfer Ethereum tokens back and forth between Ethereum and NEAR. To move tokens from Ethereum to NEAR, a participant must deposit Ethereum tokens in the Ethereum smart contract. These tokens are then locked on the Ethereum ecosystem, and new tokens are minted on NEAR’s platform, representing the original Ethereum tokens. Since the original funds are stored through the smart contract, we can reverse this procedure if users wish to retrieve their original tokens.

Aurora:

Aurora is a layer 2 scaling solution built on a NEAR protocol for developers to help them launch their Ethereum decentralized applications on NEAR’s ecosystem. Aurora is built using the idea of the Ethereum Virtual Machine (EVM) that enables developers to link their Ethereum Smart contracts and assets seamlessly.

What is stake farming?

To stake NEAR tokens, users must get their NEAR Protocol wallet account. Setting up a NEAR wallet is not a tedious task. It requires the completion of a few initial steps of setting up an account and confirmation of personal details. Note that the NEAR wallet can be funded with a minimum of three NEAR tokens. These three tokens cover the cost of creating the NEAR wallet and the new account ID.

Hence, there is no minimum amount needed to stake on the blockchain network (excluding the three NEAR tokens required to create the NEAR wallet). However, there are two primary ways of NEAR Protocol staking with different roles and rewards depending on the responsibility assumed within the network. The two primary ways of NEAR Protocol Staking are as follows ;

Validator Staking

The Proof–of Stake (PoS) requires the validators to stake a minimum threshold of a certain amount of tokens. This amount is dynamic and can fluctuate with the number of NEAR tokens staked by other validators. These tokens have often been used as collateral to prevent unethical activities on the network, and any bad actors on the network will get their collateral stake dropped.

The validators are responsible for validating blocks in the network and receiving transaction fees and rewards every epoch (Approximately 12 hours). An Epoch is an era of time within the blockchain network, and Validators can choose not to stake their collateral any time they wish to. In that scenario, the funds will remain locked for three Epochs before it is released.

What are the prominent use cases of NEAR protocol?

As NEAR Protocol provides infrastructure for Web 3, it distinguishes itself from the other third-generation blockchains through its developer-friendly features. NEAR Protocol empowers millions around the globe to invent and explore new businesses and communities for a sustainable and more inclusive future. So let’s take a look at some of the prominent use cases of NEAR Protocol :

1. Decentralized Finance: DeFi or Decentralized Finance is critical for building an open web. Its rise in recent times results from success on Ethereum, super-changing experimentation with blockchain-based financial institutions. Actions that used to take weeks in traditional finance systems can now be done within seconds because of the primitives of the DeFi. The same gush of experimentation and interest that has provided numerous opportunities for DeFi users has made it harder for new potential earners to gain entry into the DeFi platform. Network congestion, the skyrocketing price of gas, and the evergrowing prices of the tokens make the entry of new builders and creators difficult with the barriers. But now, NEAR is making DeFi more accessible for everyone, especially those just starting to explore the crypto space. With the launch of Rainbow Bridge, DeFi is now live on NEAR Protocol and is unlocked for creators and users worldwide. All the assets that originate in Ethereum are now fully functional and usable on NEAR Protocol-based dApps.
2. Non Fungible Tokens: NFT can be considered digital containers that can hold Internet Protocol, but when it is liberated to be owned and traded, creators worldwide can have new ways to produce, distribute, and monetize content. The most important concept of NFTs is that after years of sharing creative output in the web world, there is digital scarcity resulting in that now it can prove in the digital space that a single person uniquely owns a file or piece of data. NFT is a unique digital certificate registered on a Blockchain (Digital Ledger). It records the immutable ownership of any asset, whether digital or physical. The NFTs allow ownership over Digital Assets. The NEAR Protocol is a better platform for NFTs as it is significantly faster than generation 2 blockchains.
3. Decentralized Autonomous Organization: A DAO is a decentralized autonomous organization owned and managed by a formalized community instead of a CEO or the board of directors. Every member in the DAO can participate in the platform’s governance and take important decisions through voting to build sustainable models for the respective organization. Near protocol leverage DAO to end the bureaucracy in their organization and provide the token holders with more advanced accounts that can help them store tokens, NFTs, and other assets on the platform.

First action post bridging interactions by contract/group of contracts

In this section we’re looking at the top 30 contracts, some grouped, others not, that users interacted within their first transaction post bridging into the Near ecosystem from Ethereum via the Rainbow Bridge. What we can see is that Ref Finance the biggest DeFi protocol on Near - it is the number one place for users to visit, and we have seen in the previous round of this tournament how Ref Finance is doing in general. Then it’s the wNear (wrapped NEAR) token as well as the Bridge, potentially for users to go to Aurora. Further down the line we can see Burrow, another DeFi application that users tend to interact with alongside the Aurora token.

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In terms of market share, Ref Finance is the most interacted with contract, with ~28% of first user actions post bridging into the ecosystem. One could say that Ref Finance is driving the ecosystem the same way Aave and Uniswap are driving ecosystems like Ethereum, Polygon, Avalanche and others - which really is something! 🏆

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Looking at each contract specifically gives us a good idea of what users are doing - but what about a more general view, which would allow us to look at actions per category?

First action post bridging interactions by category

In this section we’re looking at the most popular contracts grouped by category, that users interacted within their first transaction post bridging into the Near ecosystem from Ethereum via the Rainbow Bridge. What we can see here is that DeFi is the core driver for users to bridge over. This is no surprise as high APYs and liquidity incentives are definitely a way to make people interested in bridging over to get some free $. The next biggest category is Tokens, that is also expected as transfers, swaps, staking/unstaking and other related actions would show up under Tokens. The third biggest one is Bridge or rather bridging events; these events could be back to Ethereum or just going to Aurora to enjoy the ecosystem there with even lower fees. Play to Earn and NFTs have yet to pick up steam for newcomers it seems - although the decrease in the Arts District could be caused by the Bear market, and we can be hopeful that the popularity of NFTs for newcomers to Near will increase once the world stabilises a little bit more.

When looking at the daily chart, we can see that there’s confluence in at least the transaction volume post-bridging around the Apr 9-26th dates, but we can see that some users transacted first, post bridging, a lot later ~ around May, as the date that is being truncated here is the date at which the first transaction took place, post-bridging from Ethereum into Near (and not what we see in the earlier section).

Key insights:

• It’s great to see that Near still onboards new users on a daily basis, even if this increase is not as rapid as it was earlier on. We can see that the number of active users stayed pretty constant in the past few weeks, which means that certain users are staying in the ecosystem and are using it quite frequently.
• The cumulative chart tells us how active Near users are - we can see that a huge number of users have been active for only 1 day, but we can also see users who are active for more than a week, or more than 50 days. There are even some users (almost 700 at the time of writing), who have stayed with Near for over 200 days!

Smart Contract Based Staking​

Delegation on NEAR is not implemented on the protocol level, which allows each validator to create or customize their own contract that they use to attract delegators. If validators want to accept delegated stake, they must deploy a staking pool contract, which defines commission fees and reward distribution split, and advertise that contract as the destination to delegate.

Unlike other PoS networks, NEAR uses a staking pool factory with a whitelisted staking smart contract to ensure delegators’ funds are safe. Therefore, in order to run a validator node on NEAR, a staking pool must be deployed to a NEAR account and integrated into a NEAR validator node.

Transactions

NEAR is asynchronous by design. While it opens a wide range of possibilities for smart contracts implementations, it may also add to confusion among beginners and newcomers from other blockchain platforms. Transactions in NEAR may contain actions that do asynchronous work, in such cases keep in mind the possible outcomes of success or failure of the transaction. For example, if a transaction contains a cross-contract call, it may be marked as successful, but the other contract execution might fail. This article covers possible scenarios for this.

A transaction is the smallest unit of work that can be assigned to the network. "Work" in this case means compute (executing a function) or storage (reading/writing data). A transaction is composed of one or more Actions. A transaction with more than one action is referred to as a "batch transaction". Since transactions are the smallest units of work, they are also atomic, but again, asynchronous actions do not necessarily cascade their success or failure the whole transaction.

For one, NEAR is incredibly fast. It's able to process somewhere in the order of 100,000 transactions per second (tps) and achieves transaction finality near-instantly thanks to a 1-second block cadence.

How is the NEAR token doing in 2022?

The first few months of 2022 looked very encouraging for Near Protocol. Analysts noted rapid growth in the volume of applications developed on the network and intensifying interest from major investors. The NEAR token roughly doubled in value to more than $17 between March and April. The protocol raised $400 million in funding in just the first four months of the year.

By May 2022, the outlook had started to sour for the wider crypto space. Near made a play to capitalize on the collapse of the terraUSD (UST) stablecoin by publishing an open invitation to the Terra community. It noted synergies including the fact that both networks used the same language, Rust, to write smart contracts.

But that could not protect Near from the harrowing summer that was about to hit the sector. By July, the NEAR token's value had dropped to less than $4.

The Local Government

A good government is another fundamental pillar of a well-established society - whether it is a physical government or a decentralised collection of validator nodes. Near’s government takes the form of the second kind, and in this dashboard, we will analyse the state of governance provided by Near.

Get ready to tackle the following aspects of Near’s governance:

The daily and the total number of users who delegate and UNdelegate their assets to Near validators.

The daily and the total number of delegation and UNdelegation transactions to Near validators.

The daily and the total amount of Near delegated per validator, as well as the UNdelegated amounts and the net of delegation per validator.

Methodology

I initially hoped to asses particular proposals and deep dive into what users are voting for and at what frequency, however, I came to the realisation that the Meta Vote has not launched yet, meaning that there is no way to access on-chain governance - I was unable to find any direct votes to proposals on Nearscan. Therefore

Conclusion

This dashboard has looked into the staking and unstacking behaviours of NEAR’s citizens. We have seen which validators have seen the most popularity among NEAR’s citizens; which validators have had the most staking transactions and the most amount of NEAR delegated. We have also looked at the same metrics for the undeleagtion-related behaviour of NEAR’s citizens. By the looks of it, it seems that NEAR is on a very good path to a well-established decentralised government - there are a lot of active validators that continue to see a big number of staking transactions by many stackers on a daily basis. If NEAR picks up the growth in terms of validators and these continue to be supported by average users, the hope for an even more excellent governance stands strong!

NEAR Protocol is one of the most innovative and technically advanced protocols available in the blockchain ecosystem. NEAR Protocol is equally focused on developing decentralized applications (dApp) as it uses sharding technology to achieve scalability.

To accommodate this mission, NEAR Protocol has incorporated features like human-readable account names instead of cryptographic wallet addresses and made it considerably easier for the dApp users to interact with the blockchain network and the smart contracts.

Our team at LeewayHertz helps startups and enterprises build their blockchain solutions and dApps on NEAR blockchain to leverage the full advantage of NEAR’s ecosystem, including its high speed, scalability, sharding solutions, and interoperability and low fees.