Flux is a fast growing open-prediction market protocol built on NEAR. In essence, Flux is a platform for developers and market creators to offer decentralized prediction services relating to both digital and real-world events. Whether the services offered are in the form of a betting platform, a forecasting event, a data marketplace for insurance data, or a market for weather derivatives, Flux is built to scalably manage between 100 and 80,000 transactions per second, at a cost of less than $0.01 cents per transaction!
At the center of the Flux Ecosystem, is the Flux Token – $FLUX. Like any other cryptocurrency based protocol, the Flux Crypto-Economic model is important in understanding the full scope of opportunities presented by the Flux Ecosystem. As a general primer on Flux tokens, this blog focuses on outlining not only what Flux tokens can be used for, but also why that is important in the context of emerging prediction markets on the Open Web.
Name: Flux Token
Total Supply: 1,000,000,000 tokens
As a utility token on the NEAR platform, FLUX is used for five primary purposes:
(1) Resolution of Market Outcomes
(2) Market Validity Bonds
(3) Dispute Bonds
(4) Fee Setting and Governance
Resolution refers to the role of validators in ‘resolving’ market outcomes honestly. FLUX must be staked by a validator in order to receive ‘vote tickets’. Vote tickets in turn are used to resolve market outcomes and earn nDAI for their initial resolution activity. According to basic validator dynamics more FLUX must be staked by a given validator, in order for that validator to have more resolution capacity (i.e. more votes on more markets). At scale, this means that a significant portion of all FLUX in circulation will be locked up in pursuit of ‘resolution’ rewards.
Market Validity Bonds
In order to create a new market, a market validity bond must be posted by the market creator. Flux tokens are the currency used by a market creator to post this bond. Ideally, if the market is a valid market – meaning the outcome stemming from trades is acceptable, then the market creator will recover these tokens. However, in the event that the market is invalid – meaning there is no valid outcome from the potential trade, then the posted bond will be distributed to the validators responsible for validating that market. As a bond, the Flux Token is used as collateral for every and any market that is created on Flux.
Note: While Market Validity Bonds must be posted in Flux, the Market Creation Fee is paid in DAI.
Disputes arise when market resolutions are contested by one or more of the market participants. In the event of a dispute, the disputing party must use FLUX to post a bond for the dispute being made. This bond will increase in cost proportional to the number of validators required to validate the market. In the event that the dispute is accepted, then their bond is returned to them. In the event that the dispute is denied, then their bond is confiscated by the validators involved in resolving the dispute. Once again, FLUX token is used as collateral for every and any market on Flux in which a dispute must be resolved.
Fee Setting / Governance
Governance of Flux protocol is performed by Flux Token holders. Collaboratively, these token holders vote on the adjustments of key constants for different activities that can be performed on Flux. These constants are crucial in determining:
The Fee for Creating a Market
Market Creation Costs
Cost of the Market Validity Bond
The number of tokens required to become a validator
$FLUX is also used to denominate the value captured from open-interest locked in escrow. In simple terms, all markets denominate nDAI on Flux. This nDAI can be swapped into CDAI or DAI Savings automatically. Revenue via interest can thus be generated from nDAI in escrow, which, in turn, is claimed in the form of Flux tokens.
What Flux Tokens Are Not Used For:
Importantly, there are a couple of activities on the Flux platform that are not denominated through the Flux Token.
Trading in open marketplaces is all done in nDAI. This is to ensure stability in the value offered in the market.
All Market Creator Fees are paid in nDAI so as to ensure consistent and low creation costs.
Rewards to validators for the correct resolution of markets is also paid in nDAI.
Connecting the Dots:
The Flux Token is the fundamental value imbued into the creation, management, and validation of markets on Flux Protocol. As Flux protocol grows, demand for the Flux token will naturally increase, as more Flux will be required for different market activities. In context, the total available market (TAM) that Flux is disrupting is estimated to be valued at close to $12 trillion dollars. However, because Flux Protocol offers open-market access of any valid market to any participant, it is likely that the total market size will increase over time, as 1) New participants are able to access open-markets through Flux, and 2) New Open Markets can be created by enterprises and other stakeholders who have previously not participated in prediction markets before. As this process unfolds, it is important to remember that there will never be more than 1 billion Flux tokens available, with a sizable portion of those tokens either locked up among validators or used for liquidity purposes.
The Crypto-Economic design is thorough, insofar as Flux will remain in high demand for creating and validating markets, while the markets themselves will operate in nDAI. As such, the risk of volatility for prospective market participants is non-existent, while incentives for ensuring the infrastructure of the protocol remain high.
General disclaimer: None of the following should be considered financial or investment advice – please consult a financial professional before engaging in investment related activities.
Decentralized Finance (DeFi) has taken the crypto world by storm in recent months. Used to refer to the decentralized management of exchanges, lending platforms, marketplaces and tokenized assets, DeFi holds the promise of re-imagining finance in a more private, decentralized, and market-based manner.
Flux Protocol, a rising DeFi project in its own right, has recently launched their Main Net on NEAR Protocol. As a followup to this announcement, Flux CEO Peter Mitchell also released an exclusive look into the liquidity incentives on Flux and the value proposition of using Flux as a market maker, validator, and trader. Here are the most important takeaways from that announcement:
There is a Huge Opportunity to Earn Flux Tokens By Locking Up nDAI: Flux CEO Peter Mitchell explains it best in the example he provided in his exclusive series, Flux Behind the Scenes:
What this example demonstrates is the means by which Flux intends to guarantee liquidity for its markets from the very beginning: ¼ of all Flux tokens (25%) will be allocated to network participants who provide liquidity in the form of nDAI and other ERC20 stable coins and assets. Flux tokens are issued to specific markets via community vote, and liquidity providers receive such rewards based on the amount of nDAI they lock up as well as the amount of time they lock it up for. All in all, this is a HUGE opportunity to earn Flux at the launch and early stages of the protocol.
Open-Interest is Correlated with Validator Rewards: Second, Peter revealed that open-interest on the platform is correlated with validator rewards via the relationship between open-interest and the total market capitalization of Flux.
Increasing Rewards: If the market cap is less than 5x the total open-interest across markets, then validator fees (i.e. rewards for resolving markets) are increased via community vote.
Decreasing Rewards: If the market cap is more than 5x the total open-interest across markets, then validator fees (i.e. rewards for resolving markets) are decreased via community vote.
Putting one and one together, it’s easy to see that the incentive to provide liquidity in the form of open-interest will not only result in yielding Flux to liquidity providers, but it will also most likely result in increasing rewards for Flux Protocol validators. As such, there is a direct incentive to not only yield Flux but to also hold it and stake it on the network. These two upward pressures suggest a high growth in both open-interest and market cap of Flux shortly after the launch of the protocol.
The Flux Flywheel Is a Win-Win-Win: The ‘Flux Flywheel’ is the process by which mutually reinforcing activities result in positive cyclical growth for the core tenets of the Flux platform:
It starts (1) with liquidity providers earning a yield with Flux and fees from active markets.
This, as described above (2) increases the validator incentive for holding Flux and resolving market outcomes.
In turn, (3) developers and entrepreneurs looking to build verticals, are incentivized to build more solutions on markets that already have significant amounts of liquidity.
Finally, (4) a spike in the number of solutions leads to a vast collection of open-markets that will attract traders, and bolster the overall development of the protocol and all of the pieces involved therein.
As a unique win-win-win, this mutually reinforcing process will continue to expand over time, as more Flux markets become more liquid, with more validators, more verticals, and more traders.
Over Time Flux Protocol Will Continue to Expand Making Early Participation Especially Rewarding: When we put all of these considerations together, we find that Flux is not only a serious long-term project that will only continue to grow overtime (Note: The Total Addressable Market for Flux is valued at over $12 trillion dollars.) But that for those who are active from the beginning – be it as liquidity providers, early validators, developers and entrepreneurs, and those participating in the social incentive program – stand to serious benefit from the rapid rise and growth of the entire protocol.
About 4NTS: 4NTS Guild is a rising NEAR Guild focused on connecting and communicating NEAR, its different projects, and the tremendous opportunity for entrepreneurs, contributors and other Guilds. Feel free to drop us a line at m@4NTS.com.
Since the creation of Bitcoin in 2009, the past decade has witnessed the emergence of public computing platforms built around cryptocurrencies: From new currencies, to utility tokens, to security tokens, to non-fungible tokens the area of ‘Crypto-Economics’ has emerged alongside public permissionless blockchain ecosystems. This introduction explains the basics of the NEAR Protocol Crypto-Economic Model in context, and outlines future components of the model that will be discussed in subsequent posts of the series.
Section 1 provides a general introduction to crypto-economics: Why they matter, and their long-term significance for the health of any Blockchain Ecosystem. Section 2, introduces the general outline of the NEAR Crypto-Economic Model and the various incentives contained within it for different Network Stakeholders. To conclude, an outline for future articles in the series is put forward.
Section 1: Understanding Crypto-Economics
Crypto-Economic models are a natural result of public computing platforms and subsets of game theory dynamics such as mechanism design. In essence, they represent an economic system in which self-executing software and digital representations of quantifiable value are transacted between self-interested and uncooperative stakeholders. All crypto-economic models are built upon certain core presuppositions, that increase the resilience and durability of the system in spite of unknown circumstances. These assumptions largely center upon incentives amongst the different stakeholders involved:
Stakeholders such as network validators, users, and protocol developers are assumed to be non-cooperative and self-interested. This means that the design of any crypto-economic model must direct the self-interested incentives of all stakeholders towards the security and functionality of the network.
No single entity can or should be able to leverage a disproportionate amount of control over consensus on the distributed network. This means that of all of the stakeholders involved, the flow of value must be such that no single actor can monopolize or jeopardize the overall network state.
Rewards are allocated to network participants in proportion to the degree from which they support the security of the network. Penalties are enacted against network participants in proportion to the degree with which they jeopardize the security of the network. Because of this, there is a direct incentive to strengthen the network and avoid penalties, because each stakeholder involved is assumed to be fully self-interested.
Value is created within the network, from the incentives and interests of the stakeholders transacting upon it. This value is imbued in the representation of a digital token or coin. Digital tokens or currencies are the language of value on a distributed network. This means that what makes a crypto-economic system valuable is the use that it provides to interested stakeholders: end-users sending or receiving money, companies storing data, or gamers purchasing items. In any and all of such examples, value is accrued to the overall network and distributed out to the self-interested stakeholders contributing to the networks’ security.
When taken together, these dynamics create the foundation for the Internet of Value: An global cloud environment, in which distributed computing provides the basis of valuable services to self-interested and uncooperative stakeholders, without any single entity or individual controlling the marketplace as a whole.
Crypto-Economic Design Over Time
There is one small caveat for launching crypto-economies of scale. Time. Transactions and commerce across a distributed network are the building blocks for network growth and user-interaction: As more value is transacted on a distributed network over time, the overall value of the network itself increases, just as the incentive to participate in securing the network increases. However, until a network has grown to such a point the underlying incentives for network stakeholders can often be misaligned.
As a result, crypto-economic ecosystems almost always require some type of governing body or distributed autonomous organization (DAO) to direct the network in its infancy and then slowly remove itself over time as the network scales, and more stakeholders and commerce accrues. The responsibilities of such groups include:
Managing initial stakeholder relationships on the network to incentivize network participation.
Designing and implementing the crypto-economic model of the Ecosystem itself according to the proposed function of the network. This specifically refers to how transaction fees are set and managed, whether the system is inflationary or deflationary in nature, and if special rewards are allocated to developers, early adopters, or entrepreneurs.
Establishing a time frame for growing and scaling the network until such a point arrives that the network is self-sustaining without the guidance of the said organization.
Importantly, such organizations are not companies per se: They are often designed as Foundations, or Non-Profit Organizations who simply provide guidance, decision-making power, and structure to the distributed ecosystem.
Altogether, it would be fair to say the following about most Crypto-economic Ecosystems:
They are designed around a distributed computing platform, where value is tied to a digital token or currency.
They presuppose that all network actors are uncooperative and self-interested.
The design is such that stakeholders are incentivized to enhance the network via a consensus structure, and penalized for harming the network.
Until a given crypto-economic grounded ecosystem is self-sustaining a governance body of sorts, designs and directs the network’s development and the rules underlying its crypto-economic model.
Section 2: NEAR Protocol Crypto-Economics – the Macro View
NEAR Protocol is a Thresholded Proof-of-Stake Blockchain, in which value is tied to the NEAR Token. Stakeholders on NEAR Protocol are incentivized to participate in validating ‘chunks’ or entire ‘shards’ of the blockchain, by setting up and operating a validator node on the network. To do this, a participant must either lock up NEAR tokens in a smart contract; or alternatively, delegate NEAR tokens via smart contract to an already existing validator on the network. In line with other game theory designs, if a validator succeeds in validating their chunk or shard, they are rewarded:
If validators fail or intentionally sabotage the network they fail, and a portion of their stake is slashed.
While Validators are responsible for validating transactions and maintaining security on the Network, NEAR’s crypto-economic model is also comprised of other key features that work to ultimately create a robust and enduring crypto-economy. For each feature discussed below, a specific blog post in the future will delve into the exact details of the system:
Token Supply, Inflation, and Deflation
Most crypto-economic models begin with a fixed number of tokens in circulation (circulating supply), with clear designs for how many tokens remain to be issued, or when certain tokens might be burned. NEAR’s monetary structure consists of both inflationary and deflationary dynamics, based upon a total supply of 1 billion NEAR tokens. The initial circulating supply is set at roughly 57,500,000.
Importantly, not all NEAR tokens are issued into circulation all at once: Instead, NEAR tokens are added progressively to the network over time in the form of base rewards for validator nodes, and other aspects of the ecosystem.
More specifically, each year there is a set inflation rate of 5% more tokens minted into circulating supply, with 90% of such tokens going to validators. The remaining 10% of the tokens are sent to the protocol treasury (0.5% of inflation each year).
As a counter-balance to these inflationary dynamics, NEAR’s design incorporates certain deflationary mechanisms as well. Rather than using transaction fees to reward validators (as done in many other networks), NEAR allocated 30% of each transaction fee back to the contracts that transaction has touched, after which the remaining 70% is burned. Developers of such contracts can then decide how such fees are to be used, while 70% of all transactions on the network are effectively burned. In this manner, a natural deflationary mechanism is built into the design of the network. Overall, these crypto-economic features indicate that the NEAR Ecosystem will be inflationary in nature at the beginning as it scales and grows, with the opportunity to become primarily deflationary as network usage and transaction fees are burned from the network.
10% of all inflationary rewards are sent to the NEAR Protocol Treasury. In context, these rewards are used to ‘sponsor protocol and ecosystem development’. While the Protocol Treasury is initially managed by the NEAR Foundation, its design is such that over time it can be managed by a decentralized governance process.
While the full significance of this will be outlined in a future blog, the underlying value of the protocol treasury is that it provides a mechanism for sustainable ecosystem development into the future. As the ecosystem strengthens and becomes more used, support for projects from the treasury will naturally increase to equally strengthen future development on the network.
The Long Term View: dApps and other Tokens
While certain crypto-economic features provide a framework for growing and scaling NEAR Protocol, the prospect of open-source ecosystem development is perhaps the most important long-term indicator of the network’s success. NEAR is designed such that future applications, solutions, and industry verticals built on top of the platform are directly correlated to the demand of NEAR tokens and the payment of transactions on the blockchain (and therefore, deflationary counterbalances). As such, when new dApps launch, new protocols are developed, and other decentralized marketplaces and platforms build on top of NEAR the entire Ecosystem as a whole grows. In this manner NEAR is best understood as a modern hub for digital commerce amongst decentralized applications: As more solutions and dApps are built, more stakeholders are brought onto the network, more tokens are used, and more value is accumulated. In tandem, protocol treasury rewards strengthen over time, and more projects can be funded to bring in more stakeholders and so forth. A virtuous cycle of positive Ecosystem development is built into the very core of NEAR’s crypto-economic model.
Conclusion: 4NTS Crypto-Economic Series on NEAR
4NTS is a recently launched NEAR Guild created to help grow the Ecosystem by outreach, communication, analysis and education. In the up-and-coming NEAR Crypto-Economics blog series, we will be discussing the context, details, and Macro outlook for the following topics relating to the NEAR Crypto Economy:
Flux is an Open-Market Protocol that has been in the works for the last 18 months. As the first project to launch on the NEAR Blockchain, there are a number of unique advantages of the Flux platform as a truly decentralized, user-friendly, scalable, and secure protocol for the future of open markets, decentralized finance, and data-driven applications.
Flux Has Launched: We Hope You Are Ready.
What is Flux? Understanding in Context
Flux challenges existing prediction markets, while also pioneering the future of decentralized finance (DeFi). On Flux, an ecosystem of stakeholders maintains the creation, resolution, disputation, and conclusion of data-based marketplaces connected to events and people in the real world. As a decentralized protocol, Flux offers any individual, developer, enterprise, and entrepreneur the unique opportunity of building a decentralized application, opening up a new prediction market, trading on existing prediction markets, or participating as a validator in resolving market outcomes in exchange for rewards.
There are two separate trends that Flux launches on the forefront of:
The continued rise and existing dominance of internet-based prediction markets.
The Emergence of Decentralized Finance in the Cryptocurrency Industry.
Internet Based Prediction Markets:
Internet based prediction markets, also known as ‘decision markets’ refer to online platforms from which any individual can set a price on the realization of a future event. Extensive in scope, these markets encompass well-known recreational activities – from sports betting, to predicting the next viral meme – to more advanced predictions from economists and macro traders on future events including black swans, pandemics, revolutions, and military events. As Slate explains, even DARPA has been interested in the development of these markets for national security purposes:
For the average user or trader, a prediction market is an opportunity to make a profit off of the behavior of an event or asset. Today, the Total Addressable Market (TAM) for prediction markets is valued at close to $12.3 TRILLION Dollars. Here are the primary verticals where they currently stack up:
Betting: With a value close to $53.7 billion dollars.
E-Sports: With a value close to $14 billion dollars and rising.
Global Futures Markets: Estimated value of $12.1 Trillion across a multitude of Assets.
Social Markets: With a value close to $43 Billion dollars.
Sports Markets: With an addressable value of roughly $104 billion dollars.
To date, these markets are highly centralized: Gatekeepers, in the form of exchanges, online betting platforms, or applications have complete control over what markets are offered to users as well as which bets can be made. These same centralized platforms also have the capacity to charge transaction rates for each bet, at a price of their choosing.
Emerging Markets: DeFi and Superforcasting
While existing prediction markets are highly popular, two of the most notable emerging trends in both fintech and decision markets include Decentralized Finance (DeFi) as well as Superforcasting. Both are important contextual markers for understanding the full potential of Flux.
The Rise of Decentralized Finance (DeFi):
Decentralized finance, as written by Forbes’ Jeff Kauflin refers to “the notion that crypto entrepreneurs can recreate traditional financial instruments in a decentralized architecture, outside of companies’ and governments’ control.” In its current form, DeFi plays are primarily built around marketplaces for decentralized lending, assets, exchanges, and derivatives.
For Flux Markets, assets and derivatives are especially relevant: As Defirate writes, the traditionally centralized markets for these products are some of the largest markets in the world (in the Trillions of dollars for derivates), while the decentralized replica’s remain extremely underdeveloped and small:
“The traditional derivatives space is absolutely massive. We’re talking hundreds of trillions or even quadrillions of dollars in market size. DeFi-based derivatives are nowhere near this size and given the potential size in the existing market, there is a substantial amount of room for this sector to grow. As such, derivatives from projects such as Synthetix and Augur have only aggregated $49M in TVL as of writing in September 2019.”
As such, the potential market that Flux intends to disrupt is perfectly positioned for innovation.
Less well known, yet still increasingly relevant, is a more analytical and professional niche of decision markets known as ‘Superforcasting’. Pioneered by Dr. Philip Tetlock from the University of Pennsylvania. In essence, what companies like The Good Judgement Projectdemonstrate, is that there is also professional interest – from large corporations, to government agencies like DARPA, in the usage and monitoring of decision marketplaces. These practices, largely based on probability and statistics, is an emerging industry for policymakers, entrepreneurs, and military organizations.
The Flux Revolution:
In the early days of prediction markets, Flux is positioned as an all-encompassing, decentralized platform, at the forefront of both existing and emerging prediction marketplaces. From E-Sports Betting, to Superforcasting black swan events, to using the Flux Platform for decentralized insurance applications, there is no doubt that Flux is building the future of open markets.
Importantly, there are a number of additional features that Flux incorporates that make it entrenched for the long term:
Flux is building on NEAR Protocol. Flux is the first project launching in the NEAR Ecosystem. That is important for a couple of reasons: Flux is going to be supported by the NEAR Foundation and the community at NEAR. NEAR is debatably one of the most robust blockchain ecosystems to date, in large part due to Nightshade and dynamic sharding. In addition, the NEAR ← → ETH Rainbow bridge recently launched, meaning assets, data, and cross-chain calls can be integrated into Flux from Ethereum.
Flux is Launching With A Selection of Live Products and Tools: The Flux SDK, the Flux App, and the Flux Oracle, are all essential components that help the ecosystem hit the ground running. Additional tooling and incentives, including the Flux Automated Market Mirror, as well as Flux Mechanics, the Flux Beta Program and Flux Liquidity Incentives all provide structure and easy access to prospective developers and liquidity providers. In short: The platform can run at full speed upon launch.
dApps are Already Building on Flux: To date, 10 teams are already building the future of prediction markets on Flux. While the details of each project will be released in time, it is known that these projects range from E-Sports Betting, to Prediction Exchanges, to News Derivatives, to Social Sports Betting. In essence, a small flow of early adopters ahead of the trillions of dollars looking for cheap and accessible markets in the future! As a beginning, the experiences and success of these teams, will largely affect the speed of development upon the platform.
No Competitor is Remotely Comparable To Flux: Across the three most important criteria for any open market, Flux dominates the competition: The Flux platform can handle between 100 – 80,000 transactions per second, with a minimum resolution time of 30 minutes, and cost per transaction of less than $0.01 cent.
The Time To Get Involved in Flux is Now:
Flux is in its early stages of development. Interested developers, entrepreneurs, and validators can begin their journey with Flux Protocol by Signing Up for the Flux Social Incentives Program. As markets mature, and the decentralized web continues to grow, there is little doubt that Flux will remain on the cutting edge of decision markets and the innovative applications built therein.
About 4NTS: 4NTS Guild is a rising NEAR Guild focused on connecting and communicating NEAR, its different projects, and the tremendous opportunity for entrepreneurs, contributors and other Guilds. Feel free to drop us a line at m@4NTS.com
General disclaimer: None of the following should be considered financial or investment advice – please consult a financial professional before engaging in investment related activities.
This is a report for anyone interested in NEAR and the long-term value proposition provided by the NEAR Ecosystem. The goal of this report is to put in context the significance of NEAR protocol and to explain why it is uniquely positioned to thrive in the coming years. A general two-page summary of this argument can be found here.
Table of Contents:
Section 1: Context
Section 2: Funding and Team
Section 3: Proof of Stake
Section 4: Building On Top of NEAR
Section 5: Token Functionality:
Section 6: Conclusion
Section 1: Context
The best place to begin discussing NEAR, is the general environment it is launching within. NEAR has been building its platform for the past two years as the cryptocurrency market has consolidated and blockchain has continued to become more familiar to both businesses and individuals. NEAR is a third generation blockchain project: it originally launched towards the end of the last crypto bull market in 2018, and is now publicly launching on the brink of what is expected to be the next crypto bull market.
NEAR is a blockchain ecosystem that provides similar services to that of Ethereum, Cosmos, Solana, and Polkadot: A fully decentralized cloud platform for quickly building and scaling decentralized applications. In context, however, NEAR is challenging these existing blockchain protocols with its unique technical design: Nightshade. The Nightshade algorithm is used for dynamic sharding, and implementing other developer and user friendly features for managing accounts and building applications.
NEAR is one of the first projects building the Internet of Value, but with a lot of the tools and interfaces from the Internet of Information. It is bridging the gap between new digital models of governance, value, and decentralization, with familiar management interfaces that we normally use on Facebook and Google. NEAR is appealing to the next generation of entrepreneurs and developers – who grew up during the rise of the internet, and are now looking for a new frontier – The Open Web.
The context of the Open Web is strongly linked to two separate processes: 1) The Rise of Surveillance Capitalism and 2) The Fourth Industrial Revolution.
Shoshana Zuboffwrote The Age of Surveillance Capitalism in 2017, as an epic description of how centralized tech companies have monopolized the internet, collected data for their own financial profit, and created environments of dependency between users and companies that are exploitative and addictive.
In tandem, Shaping The Fourth Industrial Revolution by Klaus Schwab was written as a vision of the largest industrial revolution since the first Industrial Revolution in the late 18th century. Its premise is that the digital, physical, and biological domains will be increasingly interconnected with new technologies, platforms and value-models sprouting around this innovation. The integration of technologies like Artificial Intelligence, the Internet of Things, Nanotechnology, and Blockchain will create completely new business models and value propositions for both businesses and consumers.
This is the context from which the full significance of NEAR protocol can be understood: NEAR is building a decentralized platform that not only holds the promise of creating a more equal, censorship resistant, and Open Web (in contrary to the woes of Surveillance Capitalism), but also one that is perfectly positioned to operate as a foundation for the largest industrial revolution in 200 years. This is a HUGE project with HUGE ambitions.
Main Takeaways from Section 1:
NEAR is a public permissionless blockchain ecosystem that incorporates dynamic sharding via the Nightshade algorithm to scalably provide the foundation for decentralized applications and the Internet of Value.
NEAR is launching at a time when blockchain is maturing as a technology and becoming more familiar to businesses, entrepreneurs, and enterprises.
NEAR is a HUGE project that is positioned to attract young talent disenchanted with surveillance capitalism, while also providing a scalable platform that can handle the opportunity and promise of the Fourth Industrial Revolution.
Section 2: Funding and Team
Everyone in Crypto will tell you to look at the team behind a project and to do your due diligence before thinking about investing in it or working with it. As such, it is important to understand the depth that accompanies the NEAR project and the NEAR team.
Finally, and most recently, in August of 2020, NEAR launched a public token sale to investors around the world (with certain country omissions due to legal reasons). This token sale concluded with $30 million dollars in commitments made to prospective token holders, from a pool of $152 million dollars in allocation requests.
NEAR Protocol is funded by both private venture capital, as well as global crypto investors. Since 2019 they have raised close to $63.7 million dollars from more than 40 different firms and 1500 individual investors.
The NEAR Team is made up of 40 full time employees, many of whom are ICPC finalists and medalists. Experience from Facebook, Google, Wikipedia, Mozilla, Wall Street, and Silicon Valley is common among many of these members.
Section 3: Proof of Stake
NEAR describes itself as a “Sharded Proof of Stake Blockchain”. The exact design of the proof of stake consensus mechanism is known as Thresholded Proof of Stake. Generally, this means that validators are rewarded in proportion to the amount of NEAR that is staked through their seat on the network. In Very Plain Terms: NEAR validators and token holders can collaboratively secure the network in return for consistent and reliable coinbase rewards. That is to say, ‘passive income’ is earned for locking up NEAR tokens on the Network.
The significance of this feature is a key consideration in evaluating the long term value proposition of NEAR for an individual or firm: Token supply, while inflationary for the next five years, will be limited from circulation by the fact that many token holders will be locking up their NEAR on the network.
Token holders and validators have the opportunity to stake NEAR over the long term – from the very beginning, and earn consistent rewards, while also witnessing the massive growth of the ecosystem and interest in the project, as well as the many projects on top of NEAR. This growth is expected to appreciate the value of the NEAR token.
This means, very plainly, that NEAR can be expected to perform like many other Staking coins such as (XTZ), (EOS), (NEO), (ATOM), (VET), and, perhaps, (ETH 2.0): The design of the network is such that demand will increase as popularity of the network increases. This is because not only will more dApps and protocols be built on NEAR, but also more token holders will be looking to lock up their tokens on the network and earn a passive return on their investment. This is a pattern that many other PoS tokens have followed before.
Notably, the window of opportunity on PoS tokens narrows as time goes on and the network becomes more popular: Opening up a position in NEAR now, for example, has the benefit of appreciating with the growth of the Ecosystem over time, as opposed to opening up a position in two to three years. Playing the long-term game is crucial with Proof of Stake tokens.
Main Takeaways From Section 3:
NEAR Protocol operates according to a Thresholded Proof of Stake Consensus Mechanism, in which NEAR tokens are locked onto the Network through Network Validators.
As a Proof of Stake Token, NEAR will continue to be locked into the network over time, in spite of other token functions including storage, transactions, and trading.
In line with other Proof of Stake tokens, NEAR token holders can learn from other networks such as ATOM, XTZ, and EOS insofar as long-term hodling of a position is more beneficial in the long run as opposed to short term token flipping.
Section 4: Building on NEAR
With an understanding so far of the context, team, and key value proposition to NEAR token holders, we can now look at the actual product offered by the NEAR Platform: An Ecosystem for Decentralized Applications. Decentralized applications have the potential to (1) Transform existing industries, while also (2) creating entirely new industries. .
For Enterprises, recent data strongly suggests changing attitudes towards blockchain adoption across industries. Here is what Deloitte’s 2020 Global Blockchain Survey finds on the importance of blockchain for companies around the globe:
More specifically, the following diagram outlines where a platform like NEAR would integrate with existing industries across the global economy:
Creating Entirely New Industries and Business Models:
Like other blockchain protocols, NEAR protocol has the capacity to offer entirely new decentralized services accompanied by their unique business models: From DeFi (Decentralized Finance), to Asset Management, the Tokenization of Products via Non-Fungible Tokens, as well as cryptocurrency based marketplaces for data.
These services are important, because all of these future projects, protocols, exchanges, and marketplaces are going to be built on NEAR: the NEAR token will ultimately operate as the base value for managing data across the system, and interfacing with other tokens and sources of value.
Existing projects already building on NEAR include (among others):
Last but not least, the opportunities available for building on NEAR are numerous, and the team has done a solid job of providing developers with the opportunity to quickly and easily build apps using common programming languages like Rust and AssemblyScript.
Additionally, there are three specific features built into the design of NEAR that suggest it will be easier to not only use and build on top of, but also disseminate to the masses:
Senders Only Pay For Gas That is Used: In light of much talk about exploding Ethereum Gas Fees, NEAR resolves this problem quite nicely by only charging the user accounts for the amount of gas they use: In this manner any extra fee paid for gas is returned to the user.
Human Readable Account ID’s Take the Place of Hashes: When sending NEAR, it is simple and easy to designate a username (much like an email address). If the user does not exist NEAR cannot be sent. In this manner the platform is much more forgiving than other platforms where a wrong letter or number means lost funds forever.
User Friendly Technical Designs: This refers to the fact that (1) Developers can pre-pay gas for first time users so that first-time users do not need to worry about purchasing crypto per se. (2) Function-Call Limited Permission means that a new user can use a dApp or a contract on-chain without having to have a wallet themselves. These two features make it painless for non-crypto audiences to interact with dApps built on NEAR.
With Nightshade at its core, NEAR Protocol is designed for builders to create the industries of the future while offering easy access to enterprises looking to innovate within their existing industries. Ultimately, whether you are an entrepreneur, a developer, an enterprise executive, or a crypto-enthusiast, NEAR offers a comprehensive package of benefits to those looking to quickly and consistently build dApps, protocols, and other data driven solutions.
Main Takeaways from Section 4:
The NEAR Platform has the capacity to sustainably manage the move towards digitization and blockchain, taking place in numerous industries as well as in new industries.
At its current rate the blockchain industry is growing rapidly, with more and more enterprises becoming familiar with the benefits offered by the general purpose technology. By 2025, it is estimated that the blockchain industry will be valued at $57,641 million dollars.
Entirely new business models and industries are already being built on NEAR. The NEAR platform is built with Nightshade to scale, in such a manner that any entrepreneur, developer, or enterprise can quickly and easily build their solution in a cost-effective and easily-deployable environment.
NEAR Protocol has a number of technical designs built into its platform that make it easy and intuitive to use, as well as extremely user-friendly.
Section 5: The NEAR Token
Crypto-Economics are highly important for understanding the core value proposition of a project. Demand or usage of the token, is an essential concern for project followers and investors. On NEAR, the NEAR token is the placeholder of value used to transact on the NEAR platform. As such, it possesses 4 distinct utilities (and therefore can be categorized as a ‘Utility Token’).
Network Usage Fees: Any dApp, marketplace, or protocol built on top of NEAR uses the NEAR token as its store of value for pushing transactions between contracts. This means that as NEAR scales, and more dApps are built on the platform, more NEAR will be required to manage the transaction load (these transactions are also eventually burned).
Medium of Exchange: Similar to Network Usage Fees, if a specific project on NEAR charges a fee for usage of its services, that fee is denominated in NEAR or the project’s specific token built on top of NEAR.
Security Provider of the Network: With a Thresholded Proof of Stake Mechanism design, NEAR tokens are used to secure the network, as each validator must ‘stake’ NEAR tokens to gain access to a seat on the network.
Unit of Account: NEAR tokens are used to calculate the cost of storing data on the network – Gigabytes of data require a proportionate amount of NEAR to lock up as ‘rent collateral’ while that data is stored on the network. For more see the Storage Section.
What does the functionality of the NEAR token tell us about demand side pressures? That as the network scales, the value of NEAR will increase. Not only is this because more validators will be required to lock up their NEAR to earn a seat on the network (as more seats become available), but also that more value will be transacted, stored, and exchanged on the platform using NEAR. All of these activities will require new parties, developers, enterprises, and entrepreneurs to join the network and participate in the ecosystem via the NEAR token.
In very simple terms: The value of NEAR is likely to increase as the network scales and grows. The value of NEAR is likely to decrease, if the network fails to garner adoption and does not grow.
Main Takeaways From Section 5:
The NEAR token has 4 distinct utilities: For (1) Network Usage Fees, as (2) a Medium of Exchange, (3) a Unit of Account, and (4) for maintaining network security.
A significant amount of NEAR tokens will be held: by Validators stalking their NEAR on the network, by developers for pre-paying fees for apps, and by different users and applications for storing data on the network.
All of these utilities suggest that as the Network grows, so will the value and demand for the token.
At this point in time, it is clearly too early to tell whether NEAR will succeed or not. However as mentioned above, the context, team and funding, technical design, and token functionality inspire confidence in the future of the project. There are few other projects in the crypto-industry that are as thoughtful, well-funded, user and developer-friendly, and ambitious as NEAR. The team is professional and the project is well funded. It would be a huge mistake to think NEAR is only a short-term opportunity. Anyone who has spent time in crypto knows, from Bitcoin itself, to Ethereum to most recently ChainLink that high value projects take time to grow and develop. NEAR is no different.
About 4NTS Guild:
4NTS Guild is a rising NEAR Guild focused on connecting and communicating NEAR, its different projects, and the tremendous opportunity for entrepreneurs, contributors and other Guilds. Feel free to drop us a line at firstname.lastname@example.org.
“The measure of success to me is keeping the principles – remaining free, open, decentralized, neutral, and censorship resistant – while becoming available to the people who need it around the world. That’s my measure of success.”
– Andreas Antonopolous, The Internet of Money: Volume 3.
Every project begins with a certain vision of the future, grounded in reality by underlying values and core principles. Such values and principles work as both a guide and foundation for the project’s successful development and realization. For NEAR Protocol, the prospect of an Open Web that is secure, transparent, censorship resistant and easily-accessible, provides a vision for a better future that has been hitherto unimaginable. Centered upon the NEAR blockchain, this future extends into the hundreds of dApps and verticals building on NEAR, that have the potential to recreate entire industries and offer bold new services – to anyone.
Chapter 1 begins as an introduction with a brief overview of NEAR Protocol and its core features. It then proceeds, in chapter 2, to expand upon the core values that sustain the development of NEAR. In chapter 3, these values are complimented by the long-term goals of the NEAR Ecosystem with reference to the numerous prospects of a more engaged, transparent, and user-friendly world. To conclude, the article emphasizes that the time to build is now.
1. What is NEAR Protocol?
A Community-Run Cloud Platform for Decentralized Applications
NEAR is first and foremost, a community-run cloud platform for decentralised applications. Its community – NEAR Validators, dApp developers, and Entrepreneurs – interact and participate with one another to govern the direction and development of the NEAR Protocol. As a cloud-platform, NEAR is the technical bedrock of decentralised applications sustained by the NEAR token or other tokens/currencies launched on top of NEAR.
“It uses the same core underlying technology that made Bitcoin an unkillable currency and it combines it with cutting edge advances in community consensus, database sharding, and usability. On this web, everything from new currencies, to new industries can be created, opening the door to a brand new future.” – NEAR Whitepaper
A Secure, Scalable, and User-Friendly Blockchain Ecosystem
More technically, NEAR is a Thresholded Proof of Stake Blockchain Ecosystem that incorporates dynamic sharding from the Nightshade algorithm to provide a scalable, secure, and robust infrastructure for managing and storing data. Unlike many other blockchain ecosystems, NEAR’s crypto-economic model and Account Design Structure makes it easy and intuitive for users and developers to interact and build on the platform.
2. The Values Grounding NEAR Protocol
“There are no restrictive rules for accessing platform services, running a validator node, or building an application.”
More important than any technical feature, token valuation, or single dApp, are the values and principles underlying the development of the NEAR Ecosystem. At a time when surveillance capitalism has created exploitative data models and deep-seated privacy concerns, NEAR aspires to remake the Web according to the following principles.
Distributed consensus among a network of validators means that no single party or authority has control over the expression, activities, and individual access to the solutions and applications developed on top of NEAR. No government, company, or wealthy individual has the power to decide what is or is not allowed. Instead, the NEAR community maintains ownership over the free, open, and censorship resistant platform.
Open state components and self-executing software, allows developers to build open-source applications on NEAR that are honest, transparent and collaborative in nature. Users are able to have complete visibility over what happens to their money, data, and behavior.
NEAR Protocol is made by and for the people. There are no restrictive rules for accessing platform services, running a validator node, or building an application. The public permissionless nature of the NEAR blockchain means that all data, value, and currency can be acquired and managed by anyone interested in creating a wallet and jumping onto the network.
Network decisions for the future development and growth of NEAR Protocol are made by the public community of validators invested in the future security and durability of the Ecosystem. Without pooling tokens, each and every validator has a say in the future of the network in proportion to the number of tokens they are willing to stake in the system.
Easy and Intuitive Accessibility
Human readable account ID’s transform the convoluted world of Hashes and public keys into a more familiar and personal transactory experience. Single Sign On (SSO) functionality combined with the option to prepay gas fees for first time users makes the NEAR Experience similar to existing web paradigms in its intuitive ease, and untechnical management.
On NEAR, developers have complete control over what kind of an application they build – without infringing rules or policies from the network weighing down upon them. Additionally, unique NEAR features such as Progressive Security, Easy Subscriptions, Hiding the Cost of Infrastructure, and Predictable Transaction Pricing, makes building and managing dApps a seamless experience.
3. The Long Term Goals for the NEAR Ecosystem
“We have the opportunity to drive the greatest wealth creation since the original Internet by helping Developers and Entrepreneurs everywhere access new markets and build new kinds of businesses on top of the NEAR Protocol.”
The Foundation of the Open Web
“The web is no longer a level playing field — it’s a platform controlled by a select few.” NEAR exists to re-imagine the Web in a manner that is inclusive, open, and shared among a collective group of equal participants. As the foundation of the Open Web, NEAR protocol aspires to provide the bedrock technology and infrastructure for scalably managing decentralized applications, markets, and industry verticals, across the global economy.
A Hub For Decentralized Business Solutions and Open-Source Innovation
Beyond the specific benefits of the core technology underpinning the NEAR protocol, the NEAR Ecosystem aspires to become a vibrant and creative hub for decentralized business solutions and open-source innovation, propelled by developers, entrepreneurs, individual contributors and hundreds of different Guilds! As a single digital platform for different currencies, tokens, non-fungible tokens, and a community of curious entrepreneurs NEAR is primed to jumpstart the next generation of digital innovation.
The Go-To Scalable, Developer Friendly, User-First Platform for Decentralized Applications
More so than any other existing blockchain ecosystem, NEAR aspires to provide developers of the Open Web with libraries of tools, low transaction fees, and constant support from the NEAR Foundation. With 30% of existing transaction fees recycled back into application contract rewards, and a number of network features designed to make application deployment intuitive and user friendly, NEAR is prepared to attract thousands of developers and projects from across the globe!
Conclusion: Now Is the Time To Build
With 10% of epoch rewards allocated to the Protocol Treasury for ecosystem development purposes, and decades of startup and business experience from the NEAR Core Team, there is no better time to start building your application or scaling your startup. Now is the time to build.
With new emerging technologies looming on the horizon, NEAR is prepared to embrace an interconnected and digitized future with decentralised and autonomous computing at its core. As a value-based Ecosystem, NEAR offers entrepreneurs and developers alike an opportunity to build on the Open Web in a transparent, censorship resistant, privacy-oriented, user-first environment.