Why NEAR? The Merchants Investment Thesis for NEAR
Currently in the cryptocurrency space, there are two dominating coins each serving a different purpose. Bitcoin was the first prominent cryptocurrency created and has been king, while Ethereum holds the number two spot. Bitcoin and its alternatives (Litecoin, Dogecoin, Monero, Bitcoin Cash, ect…) are more used as hedges against inflation, treasury assets and as currencies. Ethereum and its alternatives (Binance chain, Cardano, Solana, Tron, NEAR, ect…) are primarily used as smart contract platforms to build and create applications, while the native tokens are used for gas fees to transact on the network. All Ethereum alternatives have cheaper gas and more transaction throughput so we will go into other details of what makes NEAR unique from the rest of the crowded field. This article will discuss why we believe NEAR will be the next great smart contract capable chain and capable of coexisting and competing with Ethereum in the long run.
Aurora and Rainbow Bridge
Due to first mover advantage in the smart contract capability blockchain, Ethereum has a considerable lead in terms of market cap and number of users. Some competitors have taken the copycat approach and “forked” the popular dApps onto their chain while adding centralization to tackle high fees (i.e TRON and Binance smart chain). While a perfectly legitimate strategy, as code for many apps are all open source, this has led to distrust and distaste from many in the community.
An alternative approach is to build on top of or in parallel with the existing Ethereum ecospace. We believe this is a much wiser plan for a number of reasons: leveraging existing user base and EVM capabilities, can capture growth on both chains, and does not fragment communities. Currently, the two most successful instances of this strategy is Polygon (MATIC), a layer 2 scaling option, and NEAR with Aurora and rainbow bridge.
Rainbow Bridge is a trustless protocol which allows for connecting of ETH and NEAR protocol, allowing users to bridge with any ERC-20 token onto NEAR. Aurora is essentially using the Rainbow Bridge technology and applying it to connect smart contract applications. This allows users to take advantage of cheaper gas on NEAR while still maintaining EVM functionality. Rainbow bridge just launched recently and Aurora is on track to launch later this year. We are excited for these developments and what that means for NEAR; you can read more about these two protocols below:
User and Developer Friendly
For crypto veterans, many things are now second hand nature, be it wallet creation, transferring between wallet addresses, swapping using decentralized exchanges, or providing liquidity and yield farming. However for cryptocurrency to become fully mainstream, these processes must be much more user friendly and accessible to the average individual. NEAR has many improvements for both users and developers alike which make its adoptions much more appealing.
The biggest feature NEAR has for users is human readable ID’s. Instead of wallet addresses being required to be 40 digit hexadecimal strings, addresses can be as simple as MoN.near. Another great feature of NEAR is the ability to stake directly from your wallet. This allows for additional return on investment without having to move your crypto to third party custodial staking services. An unique feature to NEAR is the ability to buy and sell accounts, which will be useful for NFT collections, businesses and organizations down the line.
For developers there are also many benefits of NEAR. The biggest perk is the ability for dev rewards to be coded into the smart contracts and applications. This allows developers to integrate both tokenomics distribution and rewards directly from the smart contract/dApp. Lastly, NEAR supports Rust and AssemblyScript for their programming languages, which is more developer friendly and safer than the likes of solidarity and C++.
In the financial and trading industries many things are extremely time sensitive. For instance, firms spend millions of dollars trying to shave off a few microseconds on trade executions. The current block time and finality for Ethereum sits at roughly 7–15s per block and up to 3 mins for transaction finality. Many alternatives have improved on this blocktime and finality but only have marginal improvements: Solana right now has a blocktime of .4s and a finality of 60s.
The best combination is NEAR with a 1s blocktime and a 2–3s finality. Although SOL has a shorter blocktime, the huge discrepancy of finality makes NEAR superior. A faster finality is crucial for many financial functions including trading, liquidations, and price discovery. The main reason why NEAR is capable for these times is due to its implementations of Proof-of-Stake and Sharded design. We will not go into technical detail for terms PoS and sharding but understand the implementation of both of these into NEAR protocol is very impressive. For example, Ethereum was initially created as a Proof-of-Work chain in 2015 but already had designs to move to a Proof-of-Stake consensus mechanism on inception. It has taken Ethereum nearly 5 years to make this switch; obviously NEAR had the advantage of designing a protocol with PoS in mind but we hope this paints a picture.
Robust Monetary Policy
Bitcoin is often referred to as digital gold, with the apt comparison that supply is limited and capped. Roughly every four years, the Bitcoin block reward subsidy for miners is halved until eventually 21 million BTC is mined and block subsidy goes to 0 and no more new BTC is minted. This is why investors flock to BTC as a store of value and treasury asset. NEAR also is carefully designed to balance inflationary and deflationary impulses: Transaction fees ultimately burn NEAR, while new NEAR is created at a fixed inflation rate each year. In this sense, the more the network grows, the more $NEAR is burned. At scale, we suspect equilibrium to be reached over the course of the next decade of growth and development.
Sputnik V2, DAO Factory
Sputnik V2 represents one of the most-innovative products in crypto for on-chain governance purposes. With Sputnik V2, any guild, team, or dApp can organize themselves on-chain for managing their product or entity as it develops over time. Highly customizable, and malleable for many different purposes, the Sputnik V2 DAO Factory is the perfect place for organizing, managing and developing new Dapps, Guilds, Collectives, and businesses for the digital age.
This point is admittedly biased given the launch of Merchants of NEAR Guild but we believe is important to mention nonetheless.
NEAR has done a fantastic job with community engagement through multiple opportunities for individuals to contribute and earn NEAR and the launching of guilds. Allowing users to earn tokens is great for several reasons: onboards people new to NEAR, promotes growth + activity on chain and access to quality user contributions. The more engaged a community is, the more likely for sustained long term growth.
You can check out the newly launched guilds: Sandbox Guild is solely dedicated for community contributions to earn NEAR!