NEAR 2Q24 Review

Table of Contents

1. Project Overview

2. 2Q24 Highlights
2-1. Key highlights
2-2. Key metrics

3. Major Events, Updates, and Partnerships
3-1. Key projects with real use cases in the ecosystem
3-2. AI is NEAR: Accelerating the convergence of blockchain and AI
3-3. Technical development updates for performance and scalability enhancement
3-4. Expanded ecosystem via strategic partnerships and project support

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

5. Closing Summary

 

 

1. Project Overview

NEAR Protocol (NEAR) is a layer 1 blockchain that employs the threshold Proof of Stake (TPoS) consensus mechanism. Designed for performance, security, and scalability, NEAR is both user-friendly and carbon-neutral. Recently, NEAR has gained traction with dApps like KAIKAI (KAI-CHING), HOT, and Sweat Economy, which have topped usage charts across the blockchain ecosystem. The success of these dApps has significantly boosted on-chain metrics. NEAR Protocol is built on its own scalability solutions, "Nightshade Sharding" and the "Doomslug" consensus mechanism. Nightshade Sharding enhances transaction throughput by dividing the blockchain network into smaller segments called "shards." Doomslug, a self-consensus mechanism, allows validator nodes to generate blocks in sequence without direct competition based on stakes, thereby increasing efficiency and block finality.

 

2. 2Q24 Highlights

2-1. Key highlights

On-chain growth driven by real use cases of killer dApps and the popularity of DeFi narratives

• KAIKAI (KAI-CHING), HOT Game, and Sweat Economy have consistently ranked within the top 10 dApps, showing explosive growth.
• NEAR's on-chain growth is fueled by diverse services, LST, stablecoin expansion, and popular narratives.
• It is impressive that many of the top dApps are not just transaction-based but have real use cases.

Enhancement of technical infrastructure to improve mainnet performance

• Expanded the number of shards from 4 to 6, increasing network capacity by 50%.
• Launched “NEAR Fast Finality Layer” (NFFL) infrastructure on Holesky Testnet.
• Established Nuffle Labs, an independent entity to develop modular products, raising $13 million in funding.

Advancing the "AI is NEAR" initiative

• User-Owned AI: Relaunched the NEAR.ai R&D Lab to enhance the integration of Web3 and AI.
• Developed the NEAT protocol to implement a roll-up solution for scaling AI applications.
• Introduced the HZN AI Incubation Program to build User-Owned AI infrastructure.
• Partnered with Frax Finance and Gauntlet to accelerate the development of innovative AI products.

Expanded ecosystem with partnerships and fund launches

• Grayscale launches NEAR Investment Trust to increase institutional investor access.
• Established the Ecosystem Infrastructure Council with a $4 million operating budget.
• Announced cross-industry partnerships from insurance to NFTs at the International Tech Summit.
• Launched ‘*NEAR Name Tokens’, a multi-chain digital identity solution, for greater user convenience.

2-2. Key metrics

 

3. Major Events, Updates, and Partnerships

3-1. Key projects with real use cases in the ecosystem

NEAR Protocol's main dApps, KAIKAI (KAI-CHING), HOT Game, and Sweat Economy, remain at the forefront of the blockchain ecosystem, driving NEAR's growth. These dApps increase user engagement through daily activities and accessibility, thereby boosting on-chain activities through real-world use cases. Additionally, the expansion of DeFi protocols, Liquidity Staking Token (LST) projects, and stablecoin initiatives contribute to on-chain growth.

• KAIKAI and KAIKAINOW: KAIKAI is a Singapore-based shopping app that rewards users with its token, KAI-CHING (KAIC), every time they shop. KAIKAINOW rewards users with KAI-CHING as they enjoy personalized news, language learning, games, and other content on their lock screen. The KAI-CHING ecosystem has totaled 47.29 million transactions and 17,890 cumulative unique users, remaining the #1 overall blockchain ecosystem on DappRadar.
• HOT: The protocol based on the $HOT coin has over 8 million users and a daily transaction volume of 1.4 million transactions. Its user-friendly interface and fast transaction processing speed are notable. With 45 million HOT tokens mined, services such as HOT Game, HOT Swap, and HOT Bridge remain in the top 10 of NEAR dApp rankings.
• Sweat Economy: This innovative "Move-to-Earn" platform rewards users for their steps with its token. With a user base of over 150 million, it has more than 100 million downloads on Google Play, 14 million wallets created, and 12 million users whitelisted, showing rapid growth.

In the DeFi sector, TVL for projects such as Ref Finance, Burrow, LiNEAR Protocol, and Meta Pool has grown significantly. Liquidity staking is gaining popularity, and stablecoin-based DeFi products like Frax are increasing liquidity. Burrow, in particular, has shown impressive results, with TVL surpassing $200 million and growing 300% year-over-year.

3-2. AI is NEAR: Accelerating the convergence of blockchain and AI

User-owned AI: Relaunching NEAR.ai R&D labs to strengthen Web3 and AI integration

NEAR Protocol is advancing the integration of Web3 and AI with the relaunch of its NEAR.ai R&D Lab and the User-Owned AI initiative. NEAR aims to democratize AI, making it accessible and beneficial to users rather than centralized corporations. This initiative is underpinned by a user-friendly and scalable blockchain.

The NEAR Foundation is investing in infrastructure to support data collection, crowdsourcing, creator rewards, and more, ensuring the verifiability of AI training and inference processes. The goal is to develop AI applications that prioritize user ownership, privacy, and security. The NEAR.ai R&D Lab, led by Alex Skidanov and Illia Polosukhin, is working on an "AI developer" capable of building end-to-end Web3 applications based on user intent.

The long-term vision is to create a user-owned AGI (Artificial General Intelligence) that transforms computing interactions and improves productivity by performing tasks better than an expert. By maintaining an open-source approach and fostering community engagement, NEAR seeks to build a decentralized AI ecosystem that spurs innovation and economic opportunity, ultimately leading to User-Owned AI.

NEAT Protocol: Enabling roll-up scalability solution for AI applications

NEAT Protocol (Source: NEAT)

NEAR Protocol has successfully developed the NEAT Protocol, a roll-up solution for scaling AI applications. NEAT is built on NEAR's inscription standard, offering an efficient scaling solution for AI and machine learning applications. Key features include utilizing off-chain indexer nodes for execution and NEAR L1 as the data availability layer, significantly reducing rollup transaction costs, making it ideal for compute-intensive applications such as AI and gaming.

The NEAR Foundation recently delegated 1 million NEAR tokens to NEAT to support ecosystem growth and provide high yields to $NEAT stakers. NEAT is building the first fully customizable decentralized indexer network, allowing projects to store data on the NEAR blockchain and deploy custom indexing logic. This will accelerate AI integration in the NEAR ecosystem, combining blockchain transparency with off-chain computational efficiency.

HZN AI Incubation Program: Building user-owned AI infrastructure

HZN AI Incubation Program (Source: NEAR Horizon)

The NEAR Foundation has launched the HZN AI Incubation Program to support early-stage Web3 AI projects. The program aims to build a user-owned AI ecosystem, maximizing the benefits of AI for users and providing new economic opportunities through blockchain as an alternative to centralized, corporate-owned AI. The HZN AI Incubation Program offers support through access to NEAR's network of AI experts, technical and token launch assistance, computing resources, and funding opportunities. Selected projects include “Mizu,” creating an open and collaborative data ecosystem, “Pond,” developing cryptographic models to analyze on-chain data and predict future behavior and “Ringfence,” enabling creators and artists to securely own and monetize their work. The program aims to accelerate the advancement and adoption of AI technologies within the NEAR ecosystem.

Accelerating innovative AI product development through partnerships with Frax Finance and Gauntlet

NEAR Protocol X Frax Finance (Source: Frax Finance)

NEAR Protocol is expanding its AI ecosystem through strategic partnerships with Frax Finance and Gauntlet. The collaboration with Frax Finance, an algorithmic stablecoin project, aims to develop an AI-powered multi-chain infrastructure for innovative financial solutions that combine programmable money with user-centric AI technology. The partnership with Gauntlet focuses on building a decentralized AI ecosystem, facilitating the development of user-owned AI. These alliances are expected to maximize the synergies of Web3 and AI, strengthening NEAR's competitiveness in blockchain and AI convergence.

3-3. Technical development updates for performance and scalability enhancement

Expanding the number of shards from 4 to 6 to increase network capacity by 50%

NEAR Protocol has increased the number of shards from 4 to 6, boosting network capacity by 50%. Sharding divides the blockchain into smaller units (shards), each capable of processing transactions and maintaining state independently. NEAR's unique sharding architecture, Nightshade, introduces "Chunks”. As the number of shards increases, the network achieves higher scalability. Increasing the number of shards to six reduces network congestion and allows for quicker, more efficient transaction processing.

Additionally, NEAR Protocol plans to introduce Stateless Validation, where validators will no longer need to store blockchain state information locally to validate transactions. This is expected to reduce validator load and increase each shard's processing capacity up to five times. NEAR Protocol continues to make progress on its roadmap, aiming to accommodate more users with improved chain performance and high scalability.

Launching “NEAR Fast Finality Layer” on Holskey testnet

NEAR Protocol has recently launched the NEAR Fast Finality Layer (NFFL) on the Holesky Testnet. NFFL provides fast transaction throughput and finality for Ethereum Layer 2 rollups by combining EigenLayer's restaking, NEAR's validator guarantee, and Ethereum's security mechanisms.

The NFFL transaction process includes:

1. Transaction submission: Users submit transactions to NEAR Data Availability (DA) via rollups such as Polygon or Arbitrum.
2. Validation: NFFL nodes fetch transaction data from NEAR DA and execute transactions according to the rollup's virtual machine rules.
3. Restaker consensus: NFFL nodes validate and sign transactions, aggregating signatures to prove valid state transitions.
4. Cross-rollup settlement: Aggregated signatures are published to the target rollup, updating the latest state of the source rollup.
5. Final settlement: The transaction is finalized on the Ethereum blockchain, ensuring integrity and security.

NFFL significantly reduces the time to reach transaction finality, greatly improving user experience. This technology is expected to enhance interoperability between NEAR Protocol and other blockchains, enabling efficient and secure cross-chain transactions.

Establishing Nuffle Labs as an independent entity and securing $13 million in funding for modular product development

Nuffle Labs (Source: Near Korea DAO)

The NEAR Foundation has spun out Nuffle Labs as an independent entity focused on developing NEAR’s modular products, including NEAR DA and NEAR NFFL, and has secured $13 million in funding. This strategic move aims to enhance ecosystem decentralization by separating development roles. Similar to other blockchain foundations striving for greater decentralization, the independent status of Nuffle Labs allows for faster and more flexible decision-making. This approach is expected to maintain the competitiveness of NEAR’s modular products and facilitate ecosystem expansion through various partnerships.

3-4. Expanded ecosystem via strategic partnerships and project support

Grayscale launches NEAR Investment Trust to increase institutional investor access

Near Trust (Source: Grayscale)

Grayscale Investment has introduced the Grayscale Near Trust, markedly improving institutional investors' access to the Near Protocol. This trust enables investors to engage with the Near ecosystem without directly purchasing and holding NEAR tokens. Mirroring the functionality of Grayscale's existing single-asset investment trusts, the Grayscale Near Trust is designed with the long-term objective of registering as an exchange-traded fund (ETF). The launch acknowledges NEAR's technical innovation and growth potential, providing a safer and more efficient investment avenue for institutional investors.

NEAR launches Infrastructure Committee with $4M in funding

NEAR Infrastructure Committee (Source: Near)

The NEAR Foundation has launched an Infrastructure Committee, with $4 million earmarked for infrastructure projects. This committee aims to bolster the NEAR protocol's core infrastructure and enhance ecosystem transparency and efficiency through decentralized decision-making. It supports a variety of infrastructure projects, including RPC nodes, relayers, indexers, bridges, and wallets, to improve network performance and reliability. The committee also funds innovative projects reflecting the community's diverse perspectives via proposal reviews and asynchronous voting. Ongoing projects include the introduction of new RPC nodes, enhancements in data availability, and audits of Ledger integration. This decentralized, supportive ecosystem is expected to yield improved performance, increased community engagement, economic opportunities, and enhanced stability and reliability.

International tech summit unveils cross-industry partnerships

NEAR Foundation X International Tech Summit (Source: Near)

At the International Tech Summit 2024, the NEAR Foundation announced several strategic partnerships. These include an alliance with Penrose Partners to leverage Bermuda's crypto-friendly environment, a collaboration with Nayms to innovate on-chain insurance, a partnership with Mountain Protocol to integrate the USDM stablecoin into NEAR, a collaboration with HITCH to incorporate digital assets into everyday transactions, and an expansion of the digital art experience with Mintbase's NFT gallery. These diverse partnerships are part of NEAR's strategy to integrate blockchain technology across various industries, including finance, insurance, art, and mobility, aiming to expand the NEAR ecosystem, increase real-world applications, and attract institutional investor interest.

Introducing *NEAR Name Tokens: A multi-chain digital identity solution

*NEAR Name Tokens (Source: D3)

The NEAR Foundation, in collaboration with D3, has launched *NEAR Name Tokens, a multi-chain and cross-platform digital identity solution for the Web3 ecosystem. This initiative aims to bridge the gap between traditional internet infrastructure and Web3. *NEAR Name Tokens provide simplified wallet addresses across multiple blockchain networks and platforms, offering the convenience of a Web2-like identity in a Web3 environment. They also serve as verifiable credentials (VCs) for accessing unique benefits and reward programs within the D3 ecosystem. This solution is expected to accelerate NEAR-centric cross-chain activities and Web3 adoption by delivering digital identity management in a familiar format to existing internet users, thereby enhancing the user experience in the Web3 space.

 

4. On-Chain Performance

4-1. Performance

NEAR Protocol's network activity, encompassing transactions and active wallets, demonstrated substantial growth, culminating in Q2 revenue of approximately $2.7M, a 41% increase QoQ. Despite the deficit widening by 57%, the expanding ecosystem suggests that the financial outlook will improve with effective cost management.

4-2. Network activity

The daily transaction count on NEAR continues to rise, driven by a growing user base of commerce applications and popular DeFi protocols. With consistent protocol upgrades and scalability milestones, the network processed over 10 million transactions daily. This upward trend establishes a solid foundation for mass adoption, suggesting sustained long-term growth and robust trading activity.

NEAR’s daily active wallet count has shown impressive growth each quarter, soaring from 262.8K in 3Q23 to 1.82M in 2Q24, a remarkable 593% increase over the year. This surge is primarily due to the popularity of key DApps such as KAIKAI (KAI-CHING), HOT Game, and Sweat Economy. These applications' influx of new users and steady transaction growth fuel NEAR's ecosystem expansion, enhancing network activity and laying the groundwork for widespread adoption.

Over the past year, NEAR's TVL has surged by 554.9%, with quarterly growth rates exceeding 100%. By 2Q24, the TVL reached $236.4M, a 100.2% increase from the previous quarter. This growth is driven by key DeFi projects within the NEAR ecosystem, including Burrow, LiNEAR Protocol, Meta Pool, and Ref Finance, along with the rising popularity of liquidity staking (LST) and the expansion of stablecoin-based DeFi products like Frax. Despite market-driven price declines, the sustained strong TVL growth is a positive indicator.

4-3. Network security

NEAR Protocol's decentralization remains robust, with a total of 223 validators as of June 30, 2024, and the largest validator stake capped at 5.46%. The increasing number of unique delegators and validators strengthens the network's security and stability. Additionally, the steadily rising total staked amount enhances ecosystem trust.

4-4. Network activity

In 2Q24, the number of developers in the NEAR ecosystem grew by 7.14%, reaching a total of 90. Despite a quarter-over-quarter decrease in new smart contract deployments to 4,218, activity levels remain high. This steady increase in developers and continued contract deployment activity reflects NEAR's technical stability and ecosystem expansion.

 

5. Closing Summary

During Q2, the NEAR Protocol achieved significant growth across multiple metrics. On-chain, daily transactions reliably surpassed 10 million, and daily active wallets grew from 262.8K in 3Q23 to 1.82M in 2Q24, marking a 593% annual increase. The TVL expanded by 554.9% over the year, reaching $236.4M, and showed a 100.2% quarterly increase. This growth is attributed to the popularity of key dApps like KAIKAI (KAI-CHING), HOT Game, and Sweat Economy, as well as the effectiveness of DeFi trends such as LST.

Ecosystem advancements were marked by the launch of the HZN AI Incubation Program and strategic partnerships with Frax Finance and Gauntlet, accelerating the convergence of AI and blockchain. These initiatives lay the groundwork for developing user-owned AI infrastructure and broaden NEAR's application in diverse industries, including insurance, stablecoins, and daily transactions. The introduction of Grayscale's NEAR Investment Trust and the establishment of the Ecosystem Infrastructure Committee have also enhanced institutional investor access and ecosystem transparency.

Additionally, NEAR is bolstering network security and decentralization through ongoing technical enhancements and strategic collaborations. The expansion of shards and the introduction of the NEAR Fast Finality Layer have markedly enhanced performance and scalability. NEAR's impressive ecosystem expansion and technical achievements signal continued growth in Q3, driven by diverse use cases and strategic partnerships, particularly in AI and DeFi sectors.