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    Section 2: fees

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    Season 3: stake and unstake

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    Season 0 :introduction

    Season 1 : generals

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    Introductions

    NEAR Protocol’s Origin and Purpose

    NEAR’s founders are Alexander Skidanov and Illia Polosukhin, who hail from Ukraine and were educated in computer science and mathematics. They have been working on NEAR Protocol since 2017 after contributing to Ethereum’s open-source code. NEAR mainnet came online in August 2020.

    Polosukhin also worked on Tensor Flow, an open source machine learning library. They based the company in San Francisco, which is typical for most developers pushing the software envelope. Skidanov and Polosukhin aimed to create a better Ethereum, without relying on Layer 2 scalability.

    In contrast, NEAR Protocol relies on making the mainchain (Layer 1) scalable. As such, it offers enterprise-grade performance from the get-go, offering up to 100,000 transactions per second once it’s fully upgraded. As a result, it has gained popularity across all continents to mainstream dApp/Web3 deployment, attracting 1,700 monthly active developers.

    Venture capitalists backed NEAR to the tune of $566M so far, led by Andreessen Horowitz, DCG, Coinbase Ventures, Tiger Global, Accomplice, Pantera Capital, Electric Capital, Blockchange, Dragonfly Capital, Blockchain.com, and others.

    NEAR Protocol’s Impressive Performance

    NEAR Protocol network has 18M wallets and daily transactions, 400,000 transfers at 2.4s finality, and a remarkable $0.01 fee. Although NEAR’s daily transaction count is three times lower than Ethereum’s, it completes transactions five times faster. Most importantly, the protocol’s fees are comparable to Ethereum’s Layer 2 Arbitrum or Polygon networks.

    On paper, this makes NEAR more streamlined, less complicated, and ready for mass DeFi adoption. The question is, how is this scaling possible without taking advantage of Layer 2 networks to spread the traffic load, the key driver for Ethereum’s high gas fees?

    It turns out, the same technology Ethereum will implement in its Surge upgrade following The Merge — sharding. But, before delving deeper into sharding, it is important to understand the problem all blockchain networks face.

    Decentralization Compromise

    The key distinction between Web2 and web3 is centralization. Case in point, a Web2 company like Google can offer lightning-fast services because it has full control over its server farms.

    Each server node is geared for performance, and controlled by Google. In turn, Google can grant or revoke access to its cloud services at will. With public and permissionless blockchain networks, it is possible to offer Google-like services but without the centralization baggage.

    That’s possible because everyone can turn their computer into a network node, which then syncs up with other nodes to validate transactions and store the blockchain’s entire transaction history — a public ledger. Because validators need to confirm transactions across other nodes, this makes blockchains less efficient unless they are equally centralized as Google’s server farms.

    In short, all blockchain networks have to find ways to optimize network traffic, so their performance is close to or equal to a centralized computer network. NEAR Protocol accomplishes this optimization through sharding.[1]

    References

    What is success rate?

    The ratio of success transactions to all transactions called success rate.

    What is Transaction per user per day?

    Average transaction number by users on each day called Transaction per user per day

    Introduction When you send a transaction to the NEAR network different validators process it using their own infrastructure.

    Maintaining the infrastructure up and running is important to keep the network healthy, but represents a significant cost for the validator.

    As many other networks, NEAR pays the validators for their job. Also like many other networks, users have to pay a small fee (aka gas fee) on every transaction. But instead of giving the gas fee to the validators, validators receive their reward independent from the gas fees. This topic is discussed in more details in the validators section.

    In addition, NEAR implements two unique features with respect to gas fees:

    Sharing fees with developers Allowing for free transactions

    1. Gas as a Developer Incentive Something unique to NEAR is that the GAS is not used to pay validators. In transactions where calling a contract would incur a gas fee, the fee is actually divided as follows:

    30% goes to the smart contract. 70% is burned. In this way, NEAR uses the gas to also incentive development of dApps in the ecosystem.

    1. Free Transactions Another unique feature of NEAR is that it allows to call read-only methods in smart contracts for free, without even needing a NEAR account.

    In such case, it is the validators who absorb the gas cost.

    Gas Units & Gas Price On every transaction NEAR users get charged a small $NEAR fee, which has to be paid upfront. However, transaction fees are not computed directly in $NEAR.

    Gas Units Internally, the computation is done using gas units which are deterministic, meaning that a given operation will always cost the same amount of gas.

    Gas Price To determine the actual $NEAR fee the gas of all operations done by the transaction are added up are multiplied by a gas price.

    The gas price is not fixed: it is recalculated each block depending on network demand. If the previous block is more than half full the price goes up, otherwise it goes down.

    The price cannot change by more than 1% each block and bottoms out at a price that's configured by the network (currently 100 million yocto NEAR[2].

    If you’ve been in the crypto space for a little while now, you may have heard the term “staking.” You might still have some questions around what it means, how it works, the risks associated with staking, and which cryptocurrencies offer stalking rewards. Not to worry, in this blog post, we’ll go over the basics of staking for you. 

    But first, we’ll start by saying that crypto staking is the process of putting a set amount of cryptocurrency you already own as collateral to support the verification of blockchain transactions. Participants that offer up their crypto are rewarded for doing so. 

    Another way to think about it is that participants are incentivized to earn rewards by maintaining the integrity of the blockchain without a centralized party. While staking is a great way to build your cryptocurrency portfolio, it does come with some risks. 

    Read on to learn more about how staking works, the risks involved, and how to get started.

    What is Crypto Staking?

    Like we mentioned above, crypto staking is the process of offering your crypto assets to help verify transactions. When you stake crypto, you are essentially putting your crypto up as collateral to help validate these transactions. 

    As a token of appreciation for your support, you earn rewards in the form of new crypto tokens. The amount of crypto you earn and the payout interval will depend on the crypto asset you stake, the length of time you stake it for, and the network’s overall health.

    Not all cryptocurrencies can be staked though. 

    Only cryptocurrencies that use a Proof-of-Stake (PoS) algorithm can be staked. Proof-of-Stake is a consensus mechanism that requires participants to stake coins in order for them to be randomly selected as a validator of the network. Because participants have to give up their crypto assets, the network is thought to be less susceptible to hacks. After all, participants would not want to tamper with the blockchain, lose their crypto assets and the potential for rewards for the sake of hacking it. 

    PoS is one of different ways blockchains can process and verify transactions. Another method is called Proof-of-Work, which we will explain later. For now, keep in mind that PoS keeps the blockchain distributed, decentralized and secure. 

    Crypto staking can be a great way to earn passive income from your crypto holdings while helping to secure a blockchain network, which can be a noble contribution. 

    How Does Crypto Staking Work?

    To stake crypto, you need to have a crypto wallet that supports staking. Not all crypto wallets or cryptocurrencies support staking, so be sure to check that your wallet allows you to stake.

    Once you have a compatible wallet, you will need to deposit the cryptocurrency you wish to stake into your wallet. If you bought crypto from the Netcoins platform, then you’d need to withdraw your crypto from Netcoins and deposit them into your wallet. 

    Once your crypto is in your wallet and ready to be staked, the actual process of staking will vary depending on the crypto asset you are staking and the platform you are using and the directions provided to you. When your crypto is in your staking account it will start earning rewards.

    You can choose to stake your crypto for a specific length of time. For example, you may wish to stake your crypto for one year to receive the maximum amount of rewards. Or, you may decide to unstake your crypto at any time (depending on the platform and blockchain) but doing so will likely forfeit any rewards that you have earned up until that point.

    It’s important to note that crypto staking is not the same as mining. With mining, you use your computer’s processing power to help validate transactions on a blockchain rather than offer up existing coins. On the other hand, with staking, you are simply holding crypto in your wallet as collateral. You are not using your computer’s processing power or solving complex mathematical problems (like in mining).

    Generally speaking, when you stake crypto, your crypto assets are used to help validate transactions on a blockchain network.

    The Rewards You Get for Staking Crypto

    The amount of crypto you earn from staking will mostly depend on the crypto asset you stake and the length of time you stake it for.

    As an example, if you stake Cardano for 12 months, you may earn around 3% to 6% per year. But if you stake it for two months, you might make just 1% to 2%. If you stake a less well-known crypto asset like PIVX, you could earn over 6% per year. But you could expose yourself to more volatility and risk. That’s why it’s important to do your due diligence on ease of staking, reward pay-out, and risks involved.

    It’s also important to remember that crypto prices and rewards are volatile and can go up or down at any time. A safer bet can be staking stablecoins tied to a fiat currency (like the U.S. dollar). With stablecoins, you can earn staking rewards without the worrying too much about volatility.

    Often times, staking cryptocurrencies can also grant you voting rights over proposals, changes and the future direction of that crypto.

    The Risks of Crypto Staking

    Staking cryptocurrencies provides passive income to crypto stakers, but it also has some potential downsides.

    When you stake crypto, you are essentially locking up your crypto asset for a period of time. This means that you cannot sell or trade your crypto while it’s being staked. If the price of crypto goes up while your crypto is staked, you could miss out on those gains. Inversely, if the crypto assets you have staked lose value, you could lose money.

    Finally, if the blockchain network you are staking for experiences a hack or an attack, your crypto could be at risk too[3].

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