Scalability Through Sharding: NEAR Protocol

Asset Spotlight: 

Near Protocol is a proof-of-stake (PoS) layer 1 blockchain network that leverages sharding for building decentralized applications. Its technology is called Nightshade, which enables faster transactions, lower costs, and higher transaction volume. The network distributes computational workload by splitting the blockchain into smaller sub-chains, each with its own validator to process transactions more efficiently. It also focuses on user-friendliness with its human-readable account names and support for programming languages like JavaScript. NEAR is the native token of the ecosystem.

Market Performance: 

The NEAR token currently trades at $4.54, 77% down from its all-time high of $20.44, achieved in January 2022. It is up 23% for the year. The total supply of NEAR is 1.18 billion, out of which 1.1 billion are in circulation. The project's current market capitalization is $5 billion, and the last 24-hour trading volume is $378 million.

Onchain Metrics:

Near Protocol today has a Total Value Locked (TVL) of $228 million; the all-time high for TVL was $465 million in March 2022. The protocol processes about 5.5 million transactions daily and generates fees of more than $15,000 daily. The all-time high for daily transactions was close to 13.9 million in December 2023, and the highest single-day fees were $212,800 in December 2023. 

Near Protocol generates fees primarily through transaction fees (gas fees), where a portion is burned, reducing token supply, and another part is passed on to smart contract developers to incentivize activity on the network. Further, revenue for the ecosystem also comes from staking rewards, where validators earn NEAR for securing the network, and storage staking, requiring users to stake NEAR for the storage they use. With low transaction costs and developer incentives, this unique fee structure enables faster adoption rather than maximizing immediate revenue, aligning with Near Protocol’s vision for a scalable, user-friendly blockchain.

Sector Overview:

The layer 1 blockchain sector is witnessing fierce competition in 2024, focusing on scalability, interoperability, and real-world utility. Near Protocol is one of the top ten layer 1 blockchain networks behind other smart contract blockchains like Ethereum, Solana, Tron, and Avalanche. The total market cap of the layer 1 blockchain sector is a whopping $1.74 trillion.  

New entrants are developing unique features such as sharding and cross-chain functionalities to solve the blockchain trilemma of scalability, security, and decentralization. The sector is a mix of established giants and newcomers, with a growing emphasis on integrating with real-world assets and systems for broader adoption. 

Outlook:

Near Protocol is well positioned for greater adoption, given its focus on scalability through sharding and developer-friendly features. The network’s focus on user-friendliness and real-world utility could drive its growth with applications beyond DeFi. Of course, the sector has tough competition from bigger players like Ethereum and their layer 2 focused roadmap or Solana, which also provides low-cost, fast transactions. The sector overall is poised for growth, given increasing integration with traditional systems and broader acceptance of cryptocurrencies by institutions.