NEAR Protocol
Cryptocurrencies have their own development platform for developers to write program. The protocol defines how the programs are written. Actually, the protocol defines how to build the system, and hence indirectly defines how programs are written. In NEAR, it's called the NEAR Protocol.
As of writing, NEAR isn't the most dominated marketplace cryptocurrency. Ethereum is. Hence, when we are trying to persuade people to build upon the NEAR Protocol rather than Ethereum's, we want to compare their differences.
The most prominent reason being Ethereum has high gas fee. Due to scalability problem, when more and more people performs transaction in Ethereum, traffic congested, and gas fee escalates. And by expensive it can means a few dollars per transaction, or even more, depending on the traffic.
Furthermore, Ethereum only have limited amount of "transaction per second" (tps). Bitcoin have 3 - 7 tps, Ethereum about 15-25 tps. However, compared to PayPal of 115 tps and Visa of 1,700 tps, this is very little. You can imagine your game gets congested because transaction is queuing up. Some of these transactions might take several minutes to even hours. If you set a threshold and wait for gas fee to reach certain acceptable limit (that is too low from average), you might never even have transaction at all, as gas fee stays above your acceptable limit almost all the time.
For more on transaction speed, check out this article.
And NEAR solves the scalability issue using sharding. This allows the gas fee per transaction to stay few cents per transaction, without scalability issues. The actual gas fee depends on the program, and how well the developers have done their work to reduce the gas fee required to operate their smart contracts.
Read more about Doomslug, the block generation mechanism by NEAR, here.
Sharding
Sharding is the horizontal partition of your database into smaller, more manageable tables. The reason we partition it horizontally because users are store as a single entity horizontally. If you had it vertically partitioned, to fetch a single user data, you need to query several shards to finally gather then total data. However, with horizontal partitioning, just querying one shard fetches the whole user data.
Every single unique account is in one shard, and the accounts in that shard will only transact with the other accounts in the same shard.
Of course, the Nightshade, which is what the sharding technology is based on, also have cross-shard transaction capability.
Also, Nightshade is the consensus mechanism on NEAR. Consensus protocols are used to reach agreement on a single value between multiple participants in the system.
To learn more about Nightshade, you can read its paper here.
Proof of Stake (PoS)
It should be clear that NEAR are running on the Proof-of-Stake (PoS) consensus mechanism; while previous generation like Bitcoin and Ethereum are running on Proof-of-Work (PoW) consensus algorithm. PoS see validators chosen algorithmically to provide security to the platform. PoW requires computer to mine (via mining) costly, difficult, time-consuming equations to produce something that's easy to verify and satisfies certain requirements.
PoW rewards in the mining process: rewards in mining is proportional to the fractional of hash power that you have and hash power requires committing real world resources to the problem (electricity), burned to produce a block. PoS reward in the validation and issuance of new coins, rewards proportional to the fraction of supply you owned. If you own 50% of the supply, you get 50% of the reward. PoS is cleaner as you don't need to burn anything, just show you had a certain fraction of coins.
Check this out for full explanation: https://www.coincarp.com/learn/what-is-the-difference-between-pow-and-pos/
What can you do on the NEAR Ecosystem
Well, you can do lots of stuffs. You can create NFT on Mintbase and sell them. NFT are non-fungible token, which we'll discuss them later on in this chapter. For now, just know that NFT could be music, art, images, or anything you see on the market. Paras is another marketplace you could go to buying/selling NFTs.
How NEAR Blockchain works
Blockchain can safely store transaction records on a peer to peer (p2p) network than storing in a single location. Independent servers around the world, called nodes, make up the network that operates the blockchain.
Decentralization is an important concept in blockchain technology. With decentralization, no control from a single party like the government could stop you from deploying your app. Also, user benefits from the transparency of decentralized apps, with open source code, and how personal information are used.
DeFi
DeFi means Decentralized Finance, which means the utilization of blockchain to create an open-source, permissionless, and decentralized financial system to operate independently of any third party or central governing authority.
In NEAR, there's the Rainbow Bridge to allow bridging from NEAR to Ethereum (and back again). This allow you to have compatibility with Ethereum, the most popular trading cryptocurrency in the market. There might be some support for other cryptocurrencies in the future that doesn't built on Ethereum. You might want to search up on that.
DAO
DAO stands for Decentralized Autonomous Organization. To understand this, imagine the large conglomerate we have today. Let's just use Facebook. Most of the decisions come from the top tiers in Facebook company, passed down in hierarchy their thoughts and how execution should go. In contrast, holders of the governance cryptocurrencies in DAO can voice their concerns on how the future of the company will go. Hence, conglomerate operates in centralization, where you have a few top tiers decide the stuffs; while DAO future depends on their people that participate in DAO governance.
We'll talk more about DAO in the upcoming chapter.
Aurora
Aurora provides Ethereum Level-2 Experience on NEAR Protocol. This allows developers to reach out to additional market (on Ethereum) while taking advantage of NEAR Protocol gas fee remuneration and sharding. The bullet points that frequently explains Aurora's advantages are:
- The ability to process thousands of transactions per second, 50x increase over Ethereum.
- Block finality time is 2 seconds, compared to 13 seconds on Ethereum.
- EVM (Etereum Virtual Machine) can scale horizontally with NEAR's sharding approach.
- Fees on Aurora are 1000x lower than on Ethereum.
- Aurora offers uncompromising compatibility with Ethereum over NEAR Protocol.
Looking from the higher perspective
Previously we spoke about NEAR Protocol, but what knows, NEAR Protocol is just one of the few projects developed by a higher level entity, called the NEAR Collective.
According to this article, the NEAR Collective are a group of people (developers, etc) trying to figure out how to build the new internet called Web 3.0.
NEAR Collective is the team that aims to bring the project to life. Each group focus on different things, such as one on NEAR Protocol, others focus on Aurora, etc.
Smart contract
Basically, a smart contract is just... a contract. Just like a usual contract that fulfills certain requirements, a smart contract does the same. Except that it is smart. "Smart" here, one hypothesize, means digital. Nothing too fancy.
Referring to this website, it explains smart contract as a
A self-executing contract with the terms of the agreement between buyer and seller being directly written into lines of code.
References
- https://learnnear.club/what-is-near-protocol/
- https://near.org/blog/the-beginners-guide-to-the-near-blockchain/
- https://learnnear.club/what-is-near-protocol/
- https://www.whatbitcoindid.com/wbd190-nic-carter