L1 Series — Overview of Near
TL;DR; Near Protocol is building a smart contract platform similar to Ethereum. NEAR consists of a single blockchain that is divided into shards.
This approach is different from e.g. Cosmos, Polkadot and Ethereum 2.0, which all have one main chain (Hub, Relay chain, Beacon chain) to which other sub-chains (Zones, Parachains, Shard chains) can connect to.
Sharding
‘Sharding’ refers to a database being divided into smaller parts (shards). Each shard has its own chain of transactions. This model improves scalability and speed, by splitting the load of transactions that have to be verified, proportional to the amount of shards.
NEAR’s sharding approach (Nightshade) increases the capacity of the network as additional nodes participate. The network is dynamically split into multiple shards when usage is high. The system will launch with 8 shards.
Network participants
Nightshade splits validators into two groups: i) Validators (block producers) and ii) Hidden validators.
i) Validators
Validators are staked full nodes that are responsible for securing and validating blocks. Validators are selected for a time period, and thus required to be online. Rewards are adjusted based on the amount of stake and participation (uptime).
ii) Hidden Validators
Hidden Validators are validators who are spread among all the shards and provide security for the system by keeping block producers (normal validators) in check. Hidden validators verify that blocks are produced correctly and that data is available.
iii) Fishermen
Fishermen are observing nodes who report bad behaviour. The system does not provide any rewards for operating a node as a Fisherman. Instead, participants who run a Fisherman node generally have outside motivations for maintaining the security of the network.
Token model
NEAR token is used for staking and fees. Validators are paid through newly minted tokens (currently capped at 5%). The inflation rate is set in order to target sufficient participation levels among available stakers.
In addition to transaction fees, the protocol also accumulates fees from storage. Each contract is charged per byte per block for storage (automatically deducted from the account). Currently, the storage price is fixed and can only be changed through a governance decision.
Delegation? Instead of defining rules for delegation, the basic tools by NEAR Studio include tooling for creating staking smart contracts.
NEAR provides developers a new way to monetize their infrastructure. When a contract is called, a portion of the fees are automatically allocated to an address specified in the contract. This means that developers can benefit from their creations without creating a token.
Governance
The protocol is initially governed by the NEAR Foundation. Currently, 10% of all system-wide rewards in NEAR go to the foundation (used to fund education, events or infrastructure projects). On-chain governance will (most likely) be implemented later on.
Mainnet is estimated to launch during 2020 and a growing number of projects are already being built on NEAR including:
i) Flux Market (prediction markets)
ii) OutPlay Games (gaming)
iii) ZeroPool Network (private transactions)
iv) Stardust (gaming)
v) ArTerra (prediction markets for esports)
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