NEAR Protocol: A Pioneer in the Integration of Web3 and AI

The NEAR protocol is rapidly becoming a leader in the integration of Web3 and AI, with a foundation deeper than many realize. Interestingly, NEAR was not originally envisioned as a blockchain project. When one of the co-founders, Illia Polosukhin, embarked on this journey, the initial goal was to create an AI-driven enterprise. Polosukhin is one of the eight researchers who introduced the revolutionary Transformer model, which provides key architectural support for today's popular AI tools like ChatGPT.

However, during the initial stages of the AI project, the team encountered significant challenges, particularly in motivating and coordinating different contributors to build AI models. This obstacle made them realize that blockchain technology could provide the perfect solution. By leveraging a high-performance blockchain integrated with encrypted payments, they could facilitate the seamless exchange of fundamental data, computation, and AI models — a key feature in building an excellent decentralized AI ecosystem. This insight prompted a crucial shift from AI to blockchain, ultimately giving rise to the current NEAR protocol.

What sets NEAR apart is its astonishing alignment with the hot topics in the current tech scene. Whether the focus of discussion is AI, chain abstraction, achieving modularity through data availability, or scaling through sharding, NEAR always manages to capture attention. This raises an interesting question: Is NEAR simply following the trends, or is it genuinely providing innovative products to enhance the blockchain experience?

To answer this question, we need to delve into the infrastructure of NEAR.

Solving Blockchain Scalability: NEAR's Approach

Scalability is a major challenge faced by blockchain networks, and various solutions are being explored to meet the demands for fast and efficient transactions. While some blockchains have implemented technologies such as Layer 2 scaling, sidechains, and state channels, these methods often make trade-offs in terms of interoperability, composability, and usability.

Nightshade Sharding 2.0: NEAR's scalable backbone

One of the main features of NEAR is its Nightshade sharding technology, which is at the core of the protocol's scalability strategy. The sharding technology divides the blockchain state into smaller, more manageable parts called "shards," each of which can independently process transactions. This design significantly increases network throughput without placing the responsibility of processing all transactions on a single node.

In the initial stage, NEAR divides each block into "chunks", with each chunk containing transactions specific to a particular shard. Block producers and validators are assigned to specific shards and only need to handle transactions related to their shard. This not only optimizes processing efficiency but also allows NEAR to achieve a throughput of approximately 3,000 transactions per second (TPS) with the initial setup of four shards.

NEAR is enhancing this system through stateless validation, allowing validators to verify transactions without storing the entire blockchain state. This innovation reduces hardware requirements, further enhances accessibility, and achieves decentralization of the network. Additionally, NEAR is exploring the integration of zk-proofs and dynamic re-sharding into its sharding design, which could further improve scalability by enabling faster and more secure transaction validation. NEAR plans to expand to 10 shards by the end of the year, increasing network capacity by 50% to meet the growing demand.

NEAR's Nightshade Sharding provides the scalability, speed, and interoperability needed for AI projects that require handling large datasets and executing transactions quickly. The network's fast finality ensures that AI-driven applications can run in real time, making NEAR an ideal platform for developers looking to innovate in the decentralized AI space.

NEAR's Blockchain Interoperability Full-Stack Modular Architecture

As the blockchain landscape becomes increasingly fragmented, the demand for interoperability and seamless cross-chain interactions is more important than ever. The NEAR protocol recognizes this challenge and builds its platform as a dominant force in creating a unified multi-chain ecosystem. By implementing a series of innovative technologies – such as fast data availability (DA) layer, multiparty computation (MPC) for secure cross-chain transactions, ultra-fast finality layer (SFFL), and chain abstraction – NEAR aims to provide a unified and user-friendly experience across multiple blockchains.

( Enhance cross-chain compatibility and connectivity

NEAR's commitment to interoperability is reflected in its integration with Ethereum and the broader blockchain ecosystem. Aurora is a smart contract on NEAR, which is an Ethereum-compatible blockchain and ecosystem. Aurora's engine runtime supports the seamless deployment of Solidity and Vyper smart contracts, enabling developers to leverage NEAR's powerful infrastructure while maintaining compatibility with Ethereum. NEAR is compatible with popular tools like Metamask through NEAR Snap, while the Rainbow Bridge facilitates the transfer of tokens and data between Ethereum, NEAR, and Aurora, highlighting the commitment to interoperability.

In addition to maintaining interoperability with other ecosystems, NEAR also offers assets for seamless cross-chain use through re-staking. Allstake allows cross-chain native re-staked assets, creating a trustless decentralized ecosystem that contributes to the security of AVS. By re-staking through Allstake built on the NEAR protocol, liquidity from multiple ecosystems can be utilized to create a seamless experience across blockchains.

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( The fastest data availability layer on the market

The DA layer of NEAR is managed by Nuffle Labs, ensuring that the blockchain can efficiently access and process vast amounts of data. With Nightshade, NEAR DA provides a powerful solution for Ethereum rollups and other high transaction volume projects. Unlike other DA solutions, NEAR's consensus mechanism maintains speed even in the face of large data inflows, ensuring quick publication and querying of data.

As more and more blockchains use zero-knowledge proofs to achieve unified security across chains, NEAR's DA provides easier and cheaper data querying and settlement for dApps from multiple networks. In addition, NEAR DA ensures that nodes remain synchronized even when operators are offline, adding a layer of reliability. This feature is beneficial not only for currently high-demand applications but also positions NEAR as a key player in future cross-chain settlements.

) uses ultra-fast finality layer to support other blockchain infrastructure.

According to the modular blockchain theory, NEAR has partnered with Eigenlayer to develop the ultra-fast final layer ###SFFL###. This innovative settlement layer significantly reduces transaction time and Rollup costs, while inheriting the security and finality of NEAR and Ethereum through Eigenlayer. SFFL relies on NEAR DA to obtain transaction data, allowing nodes to efficiently access and verify transactions.

Due to SFFL's support for cross-rollup transactions, it has boosted NEAR's trading volume, with 70% of transaction fees being burned, resulting in a deflationary effect on NEAR tokens. The collaboration with Swell further strengthens NEAR's position in the modular blockchain stack, as the latter has delegated a significant amount of ETH to SFFL, bringing the vision of chain abstraction closer to reality.

( The Unity of Blockchain: NEAR's Vision for Chain Abstraction

Modular blockchain architecture achieves scalability but also leads to fragmentation, resulting in a dispersion of liquidity, user experience, and interoperability. NEAR addresses these challenges by advancing chain abstraction—a concept aimed at providing users with a unified experience across multiple blockchains.

NEAR's FastAuth key management system allows users to manage NEAR accounts using their email addresses, simplifying account creation and recovery. The system also supports multiple keys for different functions, enhancing security and usability.

In addition, NEAR integrates MPC technology through chain signatures to ensure the security of cross-chain transactions, allowing users to interact with multiple blockchains without the need to manage different wallets and mnemonic phrases.

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The Appeal of NEAR

( Stablecoins and TVL growth

Since July 2023, the market capitalization of NEAR's stablecoins has remained relatively stable at around $75 million. However, the second quarter of 2024 marks a significant turning point, as the market capitalization of all stablecoins on NEAR has experienced substantial growth.

This growth is reflected in the total locked value of NEAR and its EVM-compatible Aurora, ) TVL ###. From July 2023 to now, the total TVL of NEAR and Aurora surged from approximately $55 million to $230 million, a year-on-year increase of 3 times in USD terms. After adjusting for the value of the native tokens, the TVL measured in NEAR has doubled, while the TVL measured in AURORA has decreased by 40%.

( DeFi on NEAR

The DeFi landscape on NEAR is currently dominated by two key platforms: Burrow and Ref Finance. The lending platform Burrow has seen a significant increase in activity due to its stablecoin incentive lending program. Similarly, the decentralized exchange )DEX### Ref Finance is also actively incentivizing its stablecoin mining pool, with recent total trading volume surpassing $7 billion. These incentive measures are primarily funded by NEAR token rewards, which may play a crucial role in the potential surge of stablecoin market value in 2024.

( NEAR emerging categories and trends in the ecosystem

Re-staking has become an emerging and growing category in the NEAR DeFi ecosystem, with platforms like Allstake contributing approximately $15 million to TVL. Although liquid staking is typically not included in the TVL metric, it remains the largest category, with a TVL exceeding $280 million.

In terms of Aurora, although there are several popular EVM DApps, the most widely used application remains Aurora Plus, which is a platform designed to enable free transactions and facilitate AURORA token staking.

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( NEAR's commitment to Web3 AI development

As part of a broader strategy to become a leading AI platform in the Web3 ecosystem, NEAR has made significant progress in developing and nurturing AI projects on its network. In addition to the efforts of the NEAR Research Lab, the protocol has also launched the NEAR AI x Horizon )HZN### incubation program, specifically designed to support groundbreaking projects at the intersection of AI and blockchain technology. Among the first batch of incubated projects, the program provides equity-free guidance, technical assistance, and innovative scaling support to six selected projects.

The non-equity model of NEAR HZN allows AI projects to fully focus on building and improving products without the pressure of giving up ownership. This supportive environment is crucial for fostering innovation and has proven to be successful, as evidenced by previous alumni who have raised over $20 million in external capital in total. The program starts a new round of financing every May, lasting three times a year, aiming to incubate a continuous stream of breakthrough AI projects.

The NEAR HZN plan currently supports six projects covering key areas of the AI x Web3 stack, including data, computing resources, model networks, and payment infrastructure. These plans complement NEAR's collaborations with other AI-focused projects that are building networks in areas such as AI consumer applications, agent infrastructure, etc., and are expanding AI through NEAR's data availability (DA) layer.

By addressing various aspects of AI architecture within the Web3 space, NEAR positions itself as the go-to blockchain for developing AI applications. Its comprehensive support system, ranging from incubation programs to cutting-edge technological infrastructure, demonstrates NEAR's commitment to fostering AI development on its platform, ultimately bridging the gap between AI and decentralized technologies.

Conclusion: NEAR's Strategic Positioning as a Leader in the Blockchain and AI Fields

The NEAR protocol not only aligns with the trend of popular narratives but also lays the foundation for the future of blockchain and AI through its innovative and extensive infrastructure. By integrating a powerful data availability layer, cutting-edge finality layer, and zero-knowledge technology, NEAR has become a vital component of the infrastructure, benefiting its ecosystem and the broader blockchain space.

NEAR is rooted in AI, and