The Evolution of NEAR Protocol: Pioneering the Future of Blockchain Technology and User-Owned AI

Introduction

As the cryptocurrency sector continues to evolve at a rapid pace, I believe that blockchain technology stands out as a key driver of innovation across multiple industries. Bitcoin and Ethereum are at the forefront of this revolution, commanding significant market capitalization and widespread user adoption. Bitcoin, with a market cap surpassing $600 billion, is widely recognized for its pioneering role in the cryptocurrency landscape. Ethereum led the way forads in facilitating programmable blockchains, supporting a diverse range of decentralized applications (dApps) and smart contracts that enhance its functional versatility.

Despite their substantial market presence, both platforms encounter critical challenges that restrict the broader adoption of blockchain technology. Scalability issues hamper their ability to manage a high volume of transactions efficiently, and the limited programmability of these networks hinders the development of complex applications. Additionally, the lack of comprehensive tools for developer engagement restricts the growth and innovation potential of blockchain ecosystems.

Enter NEAR Protocol

NEAR Protocol emerges as a platform designed to address these challenges head-on and advance the capabilities of blockchain technology. With a strong emphasis on scalability, ease of developer engagement, and user experience, NEAR Protocol introduces solutions that tackle the significant hurdles faced by current blockchain networks. By leveraging cutting-edge technologies and strategic initiatives, I believe that NEAR is poised to reshape the landscape of decentralized finance and applications.

Limitations

Bitcoin's rigidity and its energy-intensive Proof of Work (PoW) consensus mechanism render it inflexible and inefficient in processing a large number of transactions. Ethereum, despite its programmability, also grapples with scalability issues that result in high transaction fees and longer processing times. These limitations create barriers to widespread adoption and restrict the practical applications of blockchain technology.

Industry Trends

The industry is actively exploring scalable and flexible alternatives to address these limitations. Emerging technologies such as Proof of Stake (PoS), sharding, and Layer 2 solutions aim to enhance transaction throughput and reduce operational costs. NEAR Protocol distinguishes itself in this arena by implementing a unique Thresholded Proof of Stake (TPoS) system and Nightshade Sharding, both of which significantly improve scalability and decentralization. These advancements herald a new era in blockchain technology characterized by efficiency and user-friendliness.

Understanding Thresholded Proof of Stake and Nightshade Sharding

Thresholded Proof of Stake (TPoS) represents a sophisticated consensus mechanism adopted by NEAR Protocol to bolster security and decentralization. Unlike conventional Proof of Stake (PoS) systems, which often see a few large stakeholders dominating network operations, TPoS facilitates wider and more equitable participation by establishing a minimum staking threshold. Network participants, or witnesses, are selected through a pseudorandom process to validate transactions and secure the network. This approach mitigates the need for resource pooling, reduces centralization risks, and enhances overall network security by making it more difficult for any single entity to gain undue influence.

Nightshade Sharding is a scalability strategy that NEAR Protocol employs to boost transaction throughput and efficiency. Sharding divides the blockchain network into smaller, more manageable segments known as shards, each capable of processing transactions independently. Nightshade Sharding extends this concept by enabling these shards to operate in parallel, thereby significantly increasing the network's ability to handle high transaction volumes. This design ensures that the NEAR blockchain can scale dynamically to meet growing demand without sacrificing speed or security. It also lowers transaction costs and latency, making NEAR an ideal platform for high-frequency transactions and decentralized applications.

Progress and Milestones

Achievements

Since its establishment, NEAR Protocol has achieved remarkable milestones, integrating diverse projects and cultivating a robust ecosystem conducive to decentralized application development. One of the platform's notable achievements is the substantial growth of its Total Value Locked (TVL), which soared to $335 million by the end of the last quarter, marking an impressive 547% increase over six months. This rapid expansion underscores NEAR's increasing traction and the efficacy of its strategic initiatives.

Technological Upgrades

NEAR’s commitment to technological advancement has been pivotal to its success. The deployment of Nightshade Sharding has greatly enhanced the network's scalability, allowing it to process a higher volume of transactions with reduced latency. Additionally, NEAR's vision of Chain Abstraction, which seeks to simplify blockchain interactions for users and developers, has led to the development of features such as NEAR Accounts, Chain Signatures, and Intent Relayers. These advancements not only enhance the user experience but also broaden the scope for innovative applications, solidifying NEAR's position as a leading platform in the decentralized technology space.

Traction

Market Presence

NEAR Protocol has solidified its position as a leading blockchain platform, ranking high in terms of TVL and user engagement, with daily active addresses reaching 1.2 million—a 42% quarter-over-quarter increase and a 377% rise over six months. This robust growth is fueled by the success of applications like KAIKAINOW, Sweat, and the newly launched HOT Wallet, which have significantly expanded NEAR's user base. Since Q4 2023, the platform has seen transaction growth from approximately 35 million to over 220 million, monthly active user growth from 2.9 million to 15 million, and new user growth from 1.8 million to over 5 million, maintaining an average two-month retention rate of around 40%.

NEAR’s AI Stance

The NEAR Foundation emphasizes the importance of integrating artificial intelligence (AI) into the web3 ecosystem through an open and decentralized framework, ensuring that users maintain control over their data and assets. User-owned AI is intelligence tooling that optimizes for the well-being and success of individual users and their communities, rather than maximizing profit for the company building the model. They caution against developing AI in closed, profit-driven environments, which could lead to negative outcomes. Instead, they advocate for an open approach to foster transparency, collaboration, and fair governance. Putting the power and ownership in the hands of the user unlocks benefits such as higher productivity, better search results, more personalized experiences, and novel economic opportunities that are all privacy-first. By leveraging their expertise in AI and blockchain, NEAR aims to pioneer this intersection and maintain an accessible and equitable digital landscape, preventing monopolistic control by large tech companies.

In June, the NEAR Foundation launched an Incubation program to build infrastructure for User-Owned AI. The inaugural cohort features 6 teams: Mizu, Pond, Nevermined, Hyperbolic, Ringfence, and Exhibits. The AI incubation program is about contributing to a larger vision of a collaborative and user-owned AI ecosystem, one in which users and developers have access to pioneering AI solutions that are secure, decentralized, and empowering end users as well as researchers contributing to open source. ???????

Popular Projects/Integrations

• Sweat Wallet is a digital wallet designed for the Sweat Economy ecosystem, allowing users to send, receive, and store various digital assets. Each Sweat Wallet is automatically assigned a NEAR address, enabling seamless interaction with the NEAR ecosystem and NEP-141 tokens. The integration with NEAR not only provides a robust and secure platform for transactions but also ensures that users can easily manage their assets without needing an additional wallet.?
• HOT is a digital token on the NEAR Protocol, designed for easy and accessible mining through a Telegram-based wallet system. Users can create wallet addresses directly linked to their Telegram handles, making it convenient for interaction and transactions. The mining process for HOT tokens is straightforward, allowing users to collect tokens at regular intervals. Initially, transactions are free, with the option to pay fees in HOT tokens as users progress. This integration with NEAR Protocol provides a secure and efficient environment for managing and mining HOT tokens, appealing to users seeking a hassle-free entry into the crypto world without significant upfront investments.
• Frax Finance has partnered with NEAR Protocol to enhance the development of decentralized AI and programmable money within the blockchain ecosystem. This collaboration aims to leverage NEAR's advanced chain abstraction capabilities, which allow for scalable and flexible application development across multiple blockchains. This initiative builds on Frax Finance's success with Ethereum-based assets and aims to bring similar performance and innovation to the NEAR ecosystem. The synergy between Frax Finance and NEAR Protocol promises to drive the future of decentralized finance (DeFi) by integrating AI and innovative financial solutions, ultimately fostering a more user-centric and decentralized financial environment.
• Aurora, built on the NEAR Protocol, bridges Ethereum and NEAR, enhancing scalability and usability for Ethereum applications. Fully compatible with the Ethereum Virtual Machine (EVM), Aurora acts as a Layer 2 solution with low transaction fees and quick finality. Key features include the Aurora Engine for easy deployment of Ethereum smart contracts and the Aurora Bridge for seamless token and data transfer between Ethereum and Aurora. Utilizing NEAR’s sharding technology, Aurora ensures high performance and scalability, combining Ethereum's ecosystem benefits with NEAR's efficiency and lower costs.

Key Players and Their Contributions

The success of NEAR Protocol is driven by its co-founders, Illia Polosukhin and Alexander Skidanov. Polosukhin, a former Engineering Manager at Google Research, co-authored the influential paper "Attention Is All You Need," which introduced the Transformer architecture, and led key projects like TensorFlow. His expertise in AI has been critical in shaping NEAR’s innovative and scalable approach to blockchain technology. Skidanov, previously the Director of Engineering at MemSQL, has extensive experience in building scalable systems and leading engineering teams. His technical acumen has been vital in developing NEAR’s robust infrastructure. Together, their combined vision and expertise have propelled NEAR Protocol to the forefront of the blockchain industry, driving its rapid growth and innovation.

Conclusion

In conclusion, NEAR Protocol is making significant headway in addressing the major challenges faced by existing blockchain platforms. Through its innovative focus on scalability, user experience, and developer engagement, NEAR is well-positioned to lead the blockchain industry into a new era of financial innovation, bridging AI and decentralized applications. Looking ahead, NEAR Protocol's emphasis on chain abstraction and User-Owned AI digital self-sovereignty places it at the forefront of the future blockchain ecosystem. As the platform continues to evolve and expand, it is set to play a crucial role in shaping the future of decentralized finance and application development digital applications, broadening the reach and impact of blockchain technology in the age of AI.

- Paul Veradittakit