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Irene Leeet al 1
Research Analyst/
Xangle
Apr 22, 2024

 

Table of Contents

1. Project Overview

2. 1Q24 Highlights
2-1. Securing users and branding for mass adoption   
2-2. Multichain scaling and building developer-friendly environment
2-3. Key partnerships for expanding ecosystem
2-4. Key metrics

3. On-chain Performance
3-1. Performance
3-2. Network activity
3-3. Network security
3-4. Development activity

4. Key Events, Partnerships & Updates
4-1. Key Events
4-2. Updates
4-3. Partnership

5. Closing Thoughts

 

 

1. Project Overview

NEAR Protocol (NEAR) is an L1 blockchain that uses the threshold proof of stake (TPoS) consensus. NEAR is a user-friendly and carbon-neutral blockchain, built with performance, security, and scalability in mind. The NEAR Protocol is based on its own scalability solution, "Nightshade Sharding" and the "Doomslug" consensus mechanism. Nightshade Sharding aims to achieve massive transaction throughput by dividing a network of blockchain nodes into smaller pieces called "shards". Doomslug, a self-consensus mechanism, allows validator nodes to generate blocks in turn without having to compete directly based on stakes, increasing both efficiency and block finality.

 

2. 1Q24 Highlights

2-1. Securing users and branding for mass adoption

  • AI is NEAR: Spoke at NVIDIA conference, attempting AI adoption by hosting hackathon and summit.
  • Attempted to onboard users to the Telegram-based NEAR Wallet via meme coin $HOT.
  • Expanded the ecosystem by serving as the main sponsor for major conferences such as ETHDenver and BUIDL Asia, and others

2-2. Multichain scaling and building developer-friendly environment

  • Introduced Telebgram-based NEAR Wallet for mass adoption
  • Drove chain abstraction to foster interoperability
  • Enabled multichain scaling by launching Chain Signatures
  • Launched enterprise-exclusive Node Operator Program for Web2 enterprises

2-3. Key partnerships for expanding ecosystem

  • Integrating NEAR DA with Polygon CDK to enhance NEAR DA scalability
  • Partnership with D3 to accelerate adoption of the open web
  • Partnership with The Graph to enhance multi-chain data accessibility and chain abstraction capabilities
  • Collaboration with Frax to launch NEAR-based stablecoin for DeFi boost

2-4. Key metrics

 

3. On-chain Performance

3-1. Performance

NEAR reported Q1 revenue of $1.9M (QoQ +72.7%) and net profit of -$57.7M (QoQ -132.4%), showing a significant increase in revenue, but also a widening loss. The increase in revenue reflected higher fees and higher token prices due to an increase in daily transactions. The loss was due to the continued rise in token incentive costs. Although the company has been in the red every quarter, it is good to note that revenue has been increasing significantly since Q4.

*Token incentive costs are defined as the cost of newly issued tokens for block validation on the network or paid to validators from the reward pool.

3-2. Network activity

NEAR's daily transaction count has been on a steady rise since Q4 of last year, with an average of 4.4M transactions per day in Q1 of this year—a whopping 68% increase QoQ. This is the highest average daily transaction count compared to other major networks during the same period including BNB, Avalanche C-Chain, Polygon, and others, demonstrating NEAR network’s growth. This rise is driven by the increasing use of popular dApps. According to data from DappRadar, four of the top 10 dApps by UAW in the last 30 days were built on NEAR. In particular, KAI-CHING, the number one ranked dApp, is that of the popular Singaporean shopping application KAIKAI, which has over 1 million users. Not only that, the NEAR Wallet, which powers the third-ranked HOT Game, onboarded a large number of users in a short period of time by allowing users to play games using $HOT tokens and providing the convenience of sending tokens via Telegram.

NEAR's TVL hovered between $30M and $50M until Q3, but showed significant surge in Q1 2024, rising 192.3% QoQ to $275.9M. According to CryptoRank, NEAR's TVL growth rate ranked into the top 10 blockchains in Q1. The surge was led by Burrow, Linear Protocol, Meta Pool, Ref Finance, and others, with Burrow surpassing its ATH of $204.98M in TVL (per DefiLlama) as of April 8. Liquidity staking protocols such as Meta Pool have also seen significant growth within the DeFi ecosystem, with new ATHs. This growth can be largely attributed to favorable news such as Frax, a major stablecoin project, bringing liquidity to the NEAR Protocol via Ref Finance and Burrow in Q1.

Between Q3 and Q4 of last year, the number of daily active wallets grew at a strong rate of 311.5% and 230.2%, respectively, and this trend continued in Q1 with a 36.1% increase to 1.2M. The continued growth in the number of new wallets created is also notable. According to CryptoRank, NEAR ranked third in terms of active addresses in Q1, behind Tron (TRX) and BNB Chain (BNB), with the total number of accounts exceeding 100 million. This growth can be attributed to the popularity of $HOT coin and the Telegram-based NEAR Wallet, which is founded on chain abstraction, that gained 500,000 on-chain users within a week of its launch.

3-3. Development activity

NEAR's development activity slowed down in Q3 before showing gradual improvement. The number of smart contracts deployed increased by 120.62% QoQ to 3,969. Although the number of commits decreased by -6.9% QoQ, various technical updates such as DA, zkWASM, and Chain Signatures were released, indicating that the chain continued to maintain and improve its development.

 

4. Key Events, Partnerships & Updates

4-1. 1Q24 key events for mass adoption

AI is NEAR: Speaking at NVIDIA conference, attempting AI adoption by hosting hackathon and summit

Source: X(@NearKoreaHub)

Along with the increased interest in the AI market centered around ChatGPT, Ethereum founder Vitalik Buterin's comments on the marriage of AI and blockchain have also raised interest in the AI sector within the cryptocurrency market. In the case of NEAR, co-founder Illia is a co-author of the seminal AI paper "Attention Is All You Need," which introduced the Transformer neural network architecture, which is considered revolutionary and laid the foundation for current hot AI technologies such as ChatGPT.

Since founding the NEAR Protocol, Illia has continued to emphasize the adoption of AI, raising anticipation for the combining of AI and blockchain through NEAR. He spoke at ETHDenver2024 about digital sovereignty in the AI era, and spoke with Vitalik at BUIDL Asia to emphasize the use of AI to address issues on the blockchain, such as DAOs. Most notably, Illia was a speaker at NVIDIA's developer conference NVIDIA GTC 2024, which doubled the price of NEAR within a week. During one of the key sessions at GTC 2024, the "Transforming AI" panel discussion, he spoke with NVIDIA CEO Jensen Huang and others about the future of AI.

Beyond Illia's participation at GTC, NEAR also emphasized the convergence of blockchain and AI at conferences where NEAR Protocol was a main sponsor, including ETHDenver and BUIDL Asia. Sessions and panel discussions centered around "decentralized intelligence," AI hackathon and summit were held, and ETH Seoul awarded AI-powered DeFi and DAO projects.

Attempting to onboard users to the Telegram-based NEAR Wallet via meme coin $HOT

Source: NEAR Korea

The cryptocurrency market saw a meme coin craze in Q1, and NEAR saw a huge hype around $HOT, a meme coin offered by the Telegram-based NEAR Wallet. NEAR Wallet is a mass adoption solution that is part of chain abstraction, and the buzz was around the mining of $HOT coins. More than just a meme coin, the $HOT token can be used to process transactions on other blockchain mainnets, including Ethereum, through NEAR Wallet.

Expanding the ecosystem by serving as the main sponsor for major conferences such as ETHDenver, BUIDL Asia, and others

Source: BUIDL Asia

NEAR significantly expanded its ecosystem by serving as a headline sponsor for major conferences like ETHDenver, BUIDL Asia, and others during the first quarter. As a key sponsor at events such as ETHDenver 2024 and BUIDL Asia 2024, NEAR showcased its dedication to fostering growth within the developer and business communities. These conferences emphasized the importance of Chain Abstraction for mass adoption, enabling users to seamlessly interact with multiple blockchains through NEAR while maintaining an optimal user experience. NEAR’s active involvement in Web3 and open-source AI was further highlighted through initiatives like the AI x Web3 Hackathon and Decentralized AI Summit hosted at ETHDenver 2024. Additionally, NEAR recognized and rewarded innovative projects that integrated AI and blockchain during these events.

4-2 Multichain scaling and key updates to foster a developer-friendly environment

Introducing Telegram-based NEAR Wallet for mass adoption

The NEAR Wallet, a non-custodial wallet accessible via Telegram, has been introduced to facilitate easy token transfers, including $NEAR, $USDC, $USDT, and mining $HOT tokens directly through Telegram accounts. Leveraging NEAR Protocol's chain abstraction technology, this wallet seamlessly connects users to decentralized applications (dApps) across different blockchains. Features like account abstraction and meta-transactions eliminate the need for repetitive signatures, while the creation of "User.tg" addresses enhances user experience. Furthermore, NEAR Wallet enables users to engage in $HOT-based games and, with the implementation of chain abstraction, will extend its functionality to process transactions on various blockchain networks. Notably, NEAR Wallet has spearheaded the mass adoption of NEAR, boasting 500,000 on-chain users within just a week of its launch on January 31.

Driving chain abstraction to foster interoperability

NEAR Protocol has been emphasizing "chain abstraction" lately. The core idea of chain abstraction is to shield users from the complexities of blockchain technology, enabling seamless interaction without the need to distinguish between different blockchains. NEAR Protocol is actively developing various solutions to enhance user experience, including security aggregation, account aggregation, Data Availability (DA) layers, intent brokers, decentralized frontends, and super wallet development.

Particularly noteworthy are FastAuth, supporting email login; Chain Signature, enabling a single NEAR account to sign multiple chains; and Multi-Chain Gas Relayers, facilitating cross-chain transactions. These chain abstraction features streamline user and application interactions across various chains, allowing them to seamlessly engage with platforms like Ethereum, Avalanche, and others using a single NEAR account.

Chain Signatures: Enabling multichain scaling

The NEAR Foundation has unveiled Chain Signatures, a groundbreaking initiative enabling users to sign transactions across multiple blockchains using their NEAR accounts. Powered by a multi-party computation (MPC) network, Chain Signature allows users to cover gas fees using NEAR’s native tokens, $NEAR, or NEP-141 tokens. Initially supporting Bitcoin, Ethereum, Cosmos, Dogecoin, and Ripple, Chain Signature will soon extend its support to Solana, the Tone Network, and Polkadot. Currently operational on the testnet, Chain Signatures is slated for a mainnet release in early May.

Launched enterprise-exclusive node operator program for Web2 enterprises

Meta Pool, the NEAR-based liquidity staking protocol, has unveiled its Enterprise Node Operator program in collaboration with the NEAR Foundation. Designed to attract leading institutions and corporations to the NEAR ecosystem, this program streamlines the process for them to become validators should they choose to integrate the NEAR protocol into their operations. By doing so, the program aims to bolster ecosystem expansion and development while enhancing the security and decentralization of the NEAR Protocol. To date, more than 15 projects have joined the program, marking a significant step forward in advancing NEAR's mission.

4-3. Strategic partnership for ecosystem expansion

Integrating NEAR DA with Polygon CDK to enhance NEAR DA scalability

Source: NEAR

On January 8th, the NEAR Foundation, overseeing the NEAR Protocol ($NEAR), announced the integration of Polygon's ($MATIC) technology stack, Polygon CDK, into the NEAR Data Availability Layer (NEAR DA).

Launched last November, NEAR DA aims to simplify Ethereum rollup construction, reducing network complexities and costs while enabling scalable designs. The integration of Polygon CDK with NEAR DA empowers developers to build and deploy custom ZK rollups and more.

Previously, NEAR developed a framework to integrate NEAR DA into Arbitrum Orbit, resulting in the creation of Arbitrum rollups. Furthermore, NEAR's technical collaborations with other foundations, such as the Fast Finality Layer in partnership with Eigen Labs and zkWASM in collaboration with Polygon Labs, demonstrate NEAR's commitment to enhancing interoperability with Ethereum. This commitment extends beyond its ecosystem to the broader Ethereum L2 ecosystem.

Partnership with D3 to accelerate adoption of the open web

Source: NEAR

The NEAR Foundation announced on its official blog a strategic collaboration with D3, a digital infrastructure provider specializing in domains, aimed at acquiring the top-level domain (TLD) '.near' from the Internet Corporation for Assigned Names and Numbers (ICANN). A top-level domain (TLD) represents the last segment of a domain name on the Internet, such as '.io' in https://xangle.io/.

This partnership seeks to expedite the adoption of the open web by integrating web domains with the existing Domain Name System (DNS), according to the NEAR Foundation. Furthermore, it will incorporate D3's interoperable digital identities into the NEAR ecosystem, enhancing usability for users and developers alike. Through D3's digital identity solution, users can leverage NEAR-based domains for various purposes, including websites, email addresses, wallet addresses, and more, while also accessing verified credentials within the NEAR ecosystem.

Partnership with The Graph to enhance multi-chain data accessibility and chain abstraction capabilities

Source: NEAR

The Graph (GRT), a decentralized indexing protocol, has unveiled NEAR support for expanded subgraphs. This integration enables developers on the NEAR network to utilize The Graph's subgraphs for DApp development purposes. By leveraging these subgraphs, NEAR developers gain access to a decentralized network that streamlines data queries, lowers costs, and enhances synchronization speeds. This support for subgraphs empowers NEAR builders to enhance multi-chain data accessibility and broaden the range of tools and technologies supporting chain abstraction.

Collaboration with Frax to launch NEAR-based stablecoin for DeFi boost

Source: NEAR

Frax has introduced FRAX, a dollar-pegged stablecoin, into the NEAR ecosystem through a strategic collaboration with NEAR Protocol. This marks Frax's inaugural venture into the non-EVM ecosystem and provides NEAR-based DeFi protocols with a platform to introduce various products. Through this partnership, the NEAR ecosystem is anticipated to experience enhanced liquidity, usability, and increased visibility. Frax also revealed plans to partner with Ref Finance and Burrow, two leading DeFi projects on the NEAR protocol, to launch a campaign incentivizing liquidity providers for USDC/FRAX, NEAR/FRAX pools, and curve-style stable swap pools, as well as borrowers/lenders using USDC, USDT, and FRAX. The campaign will expand to other DeFi protocols in the future, fostering growth and development within NEAR's DeFi market through collaboration with the Frax ecosystem.

 

5. Closing Thoughts

In Q1 2024, NEAR experienced significant growth in on-chain performance and ecosystem expansion. Beyond the broader crypto market's bullish trend fueled by Bitcoin ETFs, there has been notable attention directed towards AI, memecoins, and Web3's recent metas of mass adoption. Consequently, NEAR's revenue surged 69.6% QoQ to $1.9M, with the price also showing a steady increase of 89.1% QoQ. With the ongoing emphasis on chain abstraction, exemplified by initiatives like the Telegram-based NEAR Wallet, the ecosystem is positioned for further expansion as it delivers innovative multi-chain user experiences centered around NEAR accounts.

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