Near Protocol status update

• main content
• Performance analysis
• Financial overview
• Network overview
• Ecosystem development in Q3
• DeFi
• Gaming
• Developer Activity
• Aurora
• Octopus Network
• Rainbow Bridge
• Decentralization and Staking
• Qualitative analysis
• Nightsharding
• Epilogue

main content

• Near has raised over 1 billion USD to accelerate the development of the Near Protocol ecosystem
• In Q3, the number of active accounts on Near Protocol established an all-time high of 3 million accounts. The increase is mainly due to the launch of the project move to earn – Sweat Economy.
• Near protocol ended Q3 with TVL reaching 343 million USD, up 10 times compared to the beginning of 2022.
• Phase 1 of Nightshade went live on mainnet allowing full allocation (data + processing) to a new subset of NEAR validators. The update improved decentralization by reducing hardware requirements and tripling the network's validator capacity.

Performance analysis

Financial overview

The second quarter saw NEAR lose 74% of its value by market capitalization. Near Protocol's market capitalization recovered in Q3 with a 14% quarter-on-quarter increase from $2.47 billion to $2.82 billion. Even so, the project's market capitalization is still down 70% from its all-time high of $9.6 billion on December 27, 2021.

Revenue fell 82% from Q2 to $220,000. The drop in revenue was due to a 35% drop in transactions and a conversion fee of just one cent lower. For comparison, Polygon had sales of $4.2 million (-26% QoQ) with a transaction fee of $0.09 and Avalanche had revenue of $2.3 million (-94% QoQ) with fees average transaction of 0.14 USD.

NEAR is the native token of Near Protocol. NEAR is used to secure the network through staking, use as transaction fees and storage fees. Unlike Ethereum's auction-style mechanism, NEAR transaction fees adjust according to network computation and bandwidth. Storage fees, considered long-term costs for resources, are payments made by accounts and smart contracts for the use of storage space on the Near Network.

NEAR has no fixed supply and uses both inflationary and deflationary mechanisms. There is a fixed annual inflation rate of 5%, of which 90% is given to the validator and the remaining 10% goes to the protocol treasury. The NEAR Treasury is controlled by the NEAR Foundation. At the end of Q3, the treasury had a balance of 10 million NEAR ($36 million). Of the total transaction fees, 70% is burned and the remaining 30% is transferred to the contract that the transaction started on. NEAR ended Q3 with approximately 800 million NEARs in circulation and the project continues on its 5-year distribution roadmap.

Network overview

During Q3, the number of active addresses on the Near protocol skyrocketed 130% compared to Q2 to set an all-time high of 3 million accounts. The spike in active addresses was mainly due to the launch of Sweat Economy . Meanwhile, the statistics on the number of new addresses decreased by 55% QoQ to only 4.7 million and the number of transactions decreased by 35% compared to Q2 to 40 million.

In April, a new partnership with Sweatcoin was announced by Near Protocol. Sweatcoin is a London-based technology company that encourages people to move a lot. The project was ahead of its time using a Web2 reward system, where users could accumulate tokens on the go and exchange them for rewards. Naturally, Sweatcoin made the move to Web3.

At the end of July, Sweatcoin launched on Near Protocol as Sweat Economy. This project has more than 3.5 million registered active users since its launch, 15 million unique wallets, ranked as the most used application in the crypto space. Not only that, this project is also ranked as the top financial application in 51 countries.

Ecosystem development in Q3

The statistics below give us an overview of the ecosystem and the development of Near Protocol in Q3. In the next section, we will analyze each piece of this ecosystem.

DeFi

Near ended Q3 with a TVL of around $513 million, up 10x y/y but down 30% qoq. Ref Finance – a DEX on Near accounted for 45% of the TVL of the entire ecosystem. Ref Finance is already the flagship app on Near Protocol and boasts blue chip investors including Alameda, Dragonfly and Jump. Aurora, an EVM platform accounts for 33% of TVL or $170 million. Aurora is an important piece of the Near Ecosystem, which will be covered in more depth later in this article. To compare with some other Layer 1, Avalanche ended Q3 with TVL reaching $1.9 billion. Meanwhile, this figure of and Solana is $ 6.6 billion and $ 2.1 billion, respectively.

In Q3, Near Protocol saw sales of 16,000 NFT (68% Q2 down) and 20,000 active wallets (66% QoQ) with an even split between NFT buyers and NFT sellers. NFT's activity on Near Protocol is governed by Paras Marketplace , an NFT Marketplace for digital tokens. In addition, there are many NFT projects across various use cases recently launched or in development, including Mintbase, DAO Records, Raiz, Naksh, NEARxPublish and Endemic.

Gaming

Near protocol has a primitive game ecosystem. However, many companies are developing games or services for the blockchain developer and gaming community including:

• ARterra Labs – Web3 fan engagement infrastructure platform for eSports and gaming market.
• Atlantis World – The base platform for metaverse connectivity features including audio, video, and text, and offers developer-friendly features such as a no-code tool for building in the metaverse.
• OP GAMES – A blockchain game development company that makes it easy for Web2 game developers to migrate to Web3 using an SDK. 
• Vorto Gaming – A blockchain game development company with an NFT marketplace. The first game to launch on Vorto was Hash Rush, a massively multiplayer online strategy game that uses game mechanics to earn money.
• Play Ember – A Web3 game platform using Near wallet.

Developer Activity

NEAR prioritizes being a developer-friendly blockchain, and the blockchain's smart contract programming language plays a big role in its ability to attract application developers. Previously, developers on NEAR were able to use Rust, AssemblyScript, and Solidity (via Aurora). In August, NEAR released the JavaScript SDK, allowing developers to build smart contracts on NEAR in one of the world's most popular languages. Overall, NEAR has signed up a total of more than 5,000 unique contracts since the project's inception.

Aurora

Aurora is an EVM deployed as a smart contract on Near Protocol. It combines the user and developer familiarity of EVM with the scalability and security of Near. Former Near Protocol members created Aurora, and EVM went live in mid-2021. Since then, Aurora has been one of the top applications on Near and its own ecosystem has even rivaled it. Near Protocol on TVL parameters.

In early September, Aurora released an upgrade that includes a new cross-contract calling feature. This feature connects Aurora's synchronous and asynchronous runtimes of NEAR, allowing the Aurora smart contract to communicate with any other smart contract on NEAR in a single transaction and without any which bridge. This further connects the two ecosystems, opening up new possibilities for Aurora applications such as a DEX aggregator that can mine liquidity on both Aurora and NEAR.

Octopus Network

The Octopus Network is an EVM-compatible, substrate-based network of blockchains built as a collection of smart contracts on top of NEAR. Like Polkadot, app-chains must register and pass a vote by holders of Octopus' native token, OCT, before joining the network. There are now five app-chains on the mainnet.

Rainbow Bridge

Rainbow Bridge is a permissionless and trustless bridge connecting Ethereum, Near and Aurora. The goal is when switching to Ethereum, use an optimistic design to save more gas. 

Rainbow Bridge's architecture has been successfully tested twice this year, first in May and more recently in August. 

Total assets bridged over Rainbow Bridge is nearly 3 billion USD. In Q3, bridging assets fell 90% from $1.5 billion to $145,000. The decline was further exacerbated by the suspension of the bridge for about two weeks to wait for The Merge event.

Decentralization and Staking

Near uses the Thresholded Proof of Stake (PoS) consensus algorithm to execute transactions. The network algorithmically sets a minimum validator participation threshold within which validators bid to participate. 

Overall, Near ended Q3 with 483 million NEAR staking, up 13% from Q2, equal to 60% of circulating supply. Near protocol has 118 validators with a Nakamoto coefficient of 9. NEAR has increased the number of active validators quarterly, indicating that the network is slowly decentralizing. The Nakamoto coefficient of 9 puts Near in the middle of the crypto space.

Qualitative analysis

Nightsharding

NEAR is built upon horizontal scaling with a unique sharding design called Nightshade, which is being worked on in four phases. Starting with Phase 0, launching in Q4 2021, it splits the network into four data shards. Validators are required to store only the state of their specified shard but still have to validate (process and execute) transactions from all shards.

At the end of September, Phase 1 was released on mainnet. Phase 1 triples the network's validating capacity, adding up to 200 chunk-only producers to 100 block producers. Through chunk-only producers, phase 1 brings some of the full features (data and processing) to Near Protocol. However, block producers still have to confirm all shards.

Nightshade has two more phases planned before it's fully deployed. Phase 2 will remove the requirement for block producers to confirm all shards. Therefore, Near will have full data and sharding processing. Phase 3 will bring dynamic resharding, allowing the network to automatically add and exclude shards based on network usage.

Epilogue

In Q3, the NEAR protocol yielded mixed results. NEAR's finances recover from a historically bad second quarter. 

During the negative phases of the market, the ecosystem of Near Protocol continues to grow. Not only that, the indicators related to decentralization and staking are generally positive. Additionally, in Q3 Near raised over US$1 billion to accelerate ecosystem development. Although Near faces stiff competition in other Layer 1 layers, its massive fundraising, developer focus, and unique scaling plan can help this project set itself apart. .

• Lido surpasses MakerDAO and now has the highest TVL in DeFi
• Billionaire Do Kwon is empty-handed because of cryptocurrency