- Factors that propelled NEAR to become one of the FOAN trade quartet
- NEAR’s unique sharding solution Nightshade
- Glossary of terms
We talked about the Blockchain Trilemma in our previous article What are Layer 1 and Layer 2 Protocols? Sharding technology is a popular solution aimed at improving scalability and increasing transaction speed.
NEAR Protocol is one of the projects offering a unique sharding solution - Nightshade. With Nightshade, NEAR Protocol can scale to a large number of users without compromising its decentralization, transaction speed and low fees. If Ethereum and its challenges come to mind, note that NEAR has been touted as a real competitor to Ethereum. Additionally, the NEAR ecosystem involves a ETH ↔ NEAR Rainbow Bridge. The Rainbow Bridge allows users to seamlessly migrate assets from Ethereum to NEAR’s platform.
Commonly viewed as an undervalued project, its native token NEAR is one part of the FOAN trade quartet and has seen a steady uptick in on-chain activity. As recently as mid-this month, NEAR hit an all-time high.
Highlights of NEAR Protocol
The NEAR Protocol is a highly extensible base protocol that ensures DApps run fast enough on mobile devices. The network runs on a proof-of-stake (PoS) consensus mechanism called Nightshade, designed to provide dynamic scalability and stable fee rates.
NEAR is the native utility token of the NEAR protocol.
- Its first function is to ensure network security. Under PoS, users have to stake NEAR to become node validators. Some nodes observe the network and report malicious behaviour. If a validator behaves badly, they lose their stake.
- The second is governance. NEAR is used for network governance voting to decide how network resources are allocated and the future technical direction of the protocol.
The issuance of NEAR tokens is not a simple inflation model, but a dynamic mechanism. When the transaction scale reaches a certain level, NEAR will enter a deflationary stage.
NEAR Protocol also actively encourages interoperability with its ETH ↔ NEAR Rainbow Bridge. The cross-chain value of NEAR and Ethereum is that the NEAR ecosystem can be built on the mature financial infrastructure of Ethereum, thus breaking ecological barriers.
So what is Nightshade?
NEAR is not the only project exploring sharding solutions. However, what makes NEAR’s Nightshade unique?
Sharding as a Scaling Solution
First we have to understand the scalability challenge blockchains are facing. Public blockchains are distributed ledgers that store data in a decentralized way. They use nodes to do so. Think of nodes like data servers on the blockchain. They store and exchange data with one another and form the backbone of the blockchain.
Since public blockchains are decentralized, all data has to be validated by every node on the blockchain before the information is added to the public ledger. Unfortunately, when there are more transactions and more nodes, transaction processing time increases. Such blockchains are not scalable.
Sharding tries to solve this. Sharding is a database partitioning technique where each shard is only responsible for a portion of the data on the network; hence helping to reduce data overload and processing time.
Let me use a simple example to help you visualise. Imagine that you and your friends are each tasked to count the total number of parcels in a warehouse. Counting all the parcels alone would be inefficient and time-consuming. With sharding, you and your friends can divide the warehouse into sections, with each person responsible for counting the total number of parcels in their own sections. This reduces the overall time and energy spent.
NEAR Protocol’s Nightshade
Beacon Chain model vs. Nightshade sharding model
The Beacon Chain model is the standard for traditional scaling solutions. Traditional sharding splits a blockchain into multiple blockchains. The Beacon Chain manages the base protocol itself and all shard chains.
Nightshade actually simplified this model. In the Nightshade model, only one blockchain is maintained as compared to multiple blockchains. All transactions on the shards will be confirmed on this chain.
Unlike the Beacon Chain model, Nightshade shards are not created as separate shard chains but as chunks. The transaction list in a block is divided into multiple chunks according to the number of shards. Each chunk corresponds to a shard.
As mentioned previously, validator nodes in sharding solutions are responsible for only a portion of the data on the network. On NEAR Protocol, the verifier of the shard only needs to download and verify the chunk of the shard instead of downloading the entire block. In this case, transactions can be processed a lot faster.
Glossary
Proof-of-stake (PoS): A type of consensus mechanism used to validate cryptocurrency transactions. In PoS mechanism, miners stake their digital coins for the right to validate new block transactions.
Token Inflation Model: Continuous issuance of the token without a fixed total number of tokens.
Interoperability: Enables blockchains to communicate, share and access their data with one another.
The views expressed in this article are the author's alone and do not necessarily represent the views of ApolloX.
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