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State of NEAR Q1 2024

May 3, 2024 ⋅  17 min read

Key Insights

  • NEAR's TVL ended the quarter at $335 million, a 163% increase from the previous quarter and 547% increase over the previous six months. Within the NEAR Network's TVL, NEAR contributed 90% or $300 million, and Aurora contributed 10% or $35 million.
  • Daily active addresses were 1.2 million, showing a growth of 42% QoQ and 377% over the previous six months. This expansion is primarily driven by ongoing contributions from KAIKAINOW, Sweat, and Playember, with a new entrant, HOT Wallet, seeing over 1 million users in the first two weeks.
  • NEAR’s stablecoin market cap increased 176% QoQ to a total of $214 million. USDT increased 1,155% QoQ to $88 million, while USDC increased 189% QoQ to $85 million.
  • The NEAR Foundation announced its strategy for Chain Abstraction to simplify user interactions across chains. It leverages three core technologies: NEAR Accounts, Chain Signatures, and Intent Relayers.
  • NEAR's vision emphasizes digital self-sovereignty, advocating for systems that enable individuals to control their own assets, data, and governance, particularly against the backdrop of technological manipulation and control by governments and corporations.

Primer

NEAR Protocol (NEAR) is a smart contract platform that utilizes a Thresholded Proof of Stake (PoS) consensus algorithm to execute transactions. NEAR incorporates a Nightshade Sharding mechanism, which facilitates increased transaction throughput and scalability, takes a novel approach to basic network functionality, and supports EVM and Substrate via Aurora and Octopus Network.

The NEAR Foundation’s focus is expanding chain abstraction across more chains and ecosystems, with the goal of abstracting the blockchain away from the user and developer experience. The chain abstraction vision is that apps should just work with all chains, onboarding should be seamless, and things like gas fees and bridging should become invisible to end users. To achieve this, NEAR is focusing on key developments including Account Aggregation and building a blockchain infrastructure stack that can power the Chain Abstraction movement NEAR Data Availability, Fast Finality with Eigenlayer, zkWasm with Polygon Labs, and a hyper-scalable Layer 1 through Nightshade technology. Recently, the NEAR protocol expanded from four shards to six shards.

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Key Metrics

Financial Overview

Market Capitalization

In Q1 2024, NEAR's circulating market cap increased to $7.2 billion, marking a 94% increase QoQ. The fully diluted market cap rose to $8.2 billion, a 91% increase QoQ. NEAR's market cap ranked top 20 among the entire crypto market. For comparison, BTC increased 69% and ETH increased 53% QoQ.

Revenue

In Q1 2024, NEAR's revenue, measuring network transaction fees but not storage staking, rose to $1.9 million, an increase of 82% QoQ. The persistent increases in revenue are due to the sustained success of protocols like KAIKAINOW and Sweat, while newly launched protocols like HOT Wallet also contributed. The average NEAR transaction fee was $0.001. NEAR employs a fee-burning mechanism for transaction fees, where 70% of all fees are burned, while the remaining 30% is directed to the contract from which the transaction originated.

Supply

NEAR's native token (NEAR) is used for staking, transaction fees, and storage fees. NEAR employs a combination of inflationary and deflationary measures, with no fixed supply of NEAR tokens. The network follows a fixed annual inflation rate of 5%, with 90% of the inflationary rewards directed towards validators and the remaining 10% allocated to the protocol treasury. As of Q1 2024, 86% of the total NEAR supply is in circulation. NEAR tokens are gradually unlocked at a rate of 4.3 million NEAR per month into the treasury, with full unlocking expected by October 2025. However, these tokens will only enter the market when distributed from the treasury.

Network Overview

Usage

In Q1 2024, following two consecutive quarters of extremely strong address growth, NEAR continued the trend. The average daily active addresses increased to 1.2 million, showing a growth of 42% QoQ. Additionally, daily new addresses rose to 236,000 (a 37% increase QoQ) and NEAR surpassed 100 million total accounts cumulatively. This expansion is primarily driven by ongoing contributions from KAIKAINOW, Sweat, and Playember, with a new entrant, HOT Wallet, seeing rapid adoption, averaging over 350,000 daily active addresses in March and nearly 3 million wallets total.

In comparison to other leading chains during the same period, NEAR's daily active addresses were among the highest. Arbitrum averaged 181,000 daily active addresses, Polygon PoS reached 818,000, and Solana saw 889,000 in Q1 2024.

NEAR Inscriptions led to a massive multi-day spike in transactions and the average transaction fee in December 2023. Q1 2024 did not witness a one-off spike; instead, it saw sustained activity, increasing throughout the quarter. Daily transactions reached 4.3 million, a 78% increase QoQ and a 538% increase over the last six months. Despite the increase in transactions, the average transaction fee decreased by 25% QoQ to $0.001. This stability in transaction fees can be attributed to NEAR's distinct fee mechanism, which adjusts fees based on the network's compute and bandwidth utilization.

In late-August, NEAR network activity began increasing and has steadily increased since, placing it among the top blockchains by activity in crypto. This surge could be attributed to KAIKAINOW, an innovative social platform by Cosmose AI that launched in September. KAIKAINOW leverages blockchain and AI to deliver curated content to users' lock screens while also rewarding them with KAI-CHING tokens on the NEAR blockchain. KAIKAINOW averaged 831,000 daily active addresses in Q1 2024.

A new development in Q1 2024 was the emergence of HOT Wallet. HOT Wallet is a Telegram wallet that supports multiple assets and integrates novel social features. It launched in early February and quickly amassed over 1 million users in the first 10 days, at one point ranking as the top protocol on DappRadar.

Gaming remains a strong sector on NEAR. Sweat, introduced during the summer of 2022, quickly became the leading application on NEAR for the subsequent year, with a cumulative user base exceeding 140 million across both Web2 and Web3 versions. Following closely, Playember, a Web3 monetization platform that facilitates connections between brands, studios, and game developers, boasts an impressive 120 million downloads and has consistently maintained its position as a leading crypto game within the ecosystem.

Development

NEAR places an emphasis on supporting developers, with 30% of transaction fees distributed to the creators of the smart contract called by the transaction. In addition to this fee structure, NEAR offers an extensive suite of tools tailored for developers working within its ecosystem. This suite encompasses SDKs dedicated to popular coding languages, sandbox environments, a NEAR CLI, and NEAR Developer Governance.

NEAR has established the NEAR Dev Hub as part of its decentralization efforts. The Dev Hub serves as a resource repository for developers, facilitating collaboration and innovation within the NEAR ecosystem. Early successes include sponsored hackathons, the formation of community groups, and collaboration on NEAR Enhancement Proposals. The implementation of Dev Hub and the BOS, which are designed to support developers, is expected to catalyze development activity.

Additional development activities in Q1 2024 include:

  • NEAR is now compatible with MetaMask.
  • The NEAR Foundation has partnered with D3 to apply for the ".near" Top-Level Domain allowing users to utilize a single domain for multiple purposes, such as websites, email addresses, or wallet addresses, within the NEAR ecosystem.
  • The NEAR Foundation, in collaboration with Edge and Polygon Labs, co-sponsored the inaugural Decentralized AI Summit and Autonomous Agent Hackathon at ETHDenver.
  • NEAR Foundation partnered with PotLock to launch the Near Public Goods Funding initiative, allocating over $100,000 for pilot campaigns on the new quadratic funding platform.
  • The Graph Foundation has expanded its support to include NEAR as the first non-EVM chain.
  • NEAR Protocol co-founder Illia Polosukhin discussed the convergence of AI, blockchain, and programmable money at NVIDIA GTC 2024.
  • NEAR's Horizon Accelerator, HZN3, launched its third cohort to support early-stage founders
  • Illia Polosukhin and Vitalik Buterin discussed blockchain interactions, the potential of AI in Web3, and the significance of decentralized AI at Korea BUIDL.
  • NEAR Foundation launched a $4 million Infrastructure Committee to enhance its blockchain infrastructure, addressing needs in RPC nodes, indexers, bridges, and more.
  • NEAR announced plans to hire AI engineers to advance its AI initiatives, aiming to integrate AI to enhance user experience and development on its platform.

Decentralization and Security

NEAR employs a Thresholded Proof of Stake (TPoS) consensus mechanism with three distinct validator roles: Block Producers, who are responsible for validating transactions across all shards; Chunk-Only Producers, focusing on individual shards with reduced hardware requirements; and Hidden Validators, acting as independent third-party monitors.

The implementation of Nightshade sharding began with Phase-1 in September 2022, enhancing the network's capacity to support Chunk-Only Producers. By Q1 2024, NEAR launched Phase-2 of Nightshade Sharding, with six shards operational on the mainnet, progressing towards the plan to expand to 100 shards. Q1 2024 also saw the launch of the Enterprise Node Operators program by Meta Pool in partnership with the NEAR Foundation, aiming to onboard leading institutions into the ecosystem.

By the end of Q1 2024, the network recorded 100 Block Producers and 129 Chunk-Only Producers.

NEAR Protocol enables staking through running a validator node or delegation, rewarding participants with inflationary NEAR tokens and storage staking benefits.

In Q3 2023, NEAR introduced a Validator Delegation Proposal based on community feedback, rewarding participants with inflationary NEAR tokens and storage staking benefits. By quarter's end, 560 million NEAR (55% of circulating supply) was staked.

Governance

In Q4 2023, the NEAR Foundation announced that Illia Polosukhin, the co-founder of NEAR Protocol, was appointed as the NEAR Foundation CEO. Additionally, previous CEO Chris Donovan stepped into the position of the NEAR Foundation COO to manage the daily operations of the Foundation, and will continue to remain as a member of the NEAR Foundation Council.

NEAR emphasizes a decentralized model of capital allocation by handing over decision-making to community DAOs such as the Marketing DAO, focused on marketing efforts; Dev Hub, aimed at decentralizing the NEAR developer ecosystem; Creatives DAO, empowering artists and creators; and the NEAR Digital Collective (NDC), a new governance body.

In Q1 2024, the NEAR Foundation reduced its team by approximately 40%, impacting 35 members, primarily across the marketing, business development, and community teams. The NEAR Foundation maintains a treasury containing over $285 million in fiat, 305 million NEAR (worth over $1 billion), and $70 million of investments and loans. This ensures substantial financial resources for ongoing and future initiatives.

Ecosystem Overview

DeFi

NEAR's Total Value Locked (TVL) ended the quarter at $335 million, a 163% increase from the previous quarter and a 547% increase over the previous six months. Similarly, TVL denominated in NEAR increased 40% QoQ, suggesting that TVL gain was not solely due to the increase in the price of NEAR, but there was a net positive capital flow into the network. NEAR ranked approximately 20th among all networks by TVL. Within the NEAR Network's TVL, NEAR contributed 90% or $300 million, and Aurora contributed 10% or $35 million.

In Q1 2024, the leading protocols by TVL on the NEAR Network remained consistent with the previous quarter. Key contributions include:

  • Burrow Finance: The leading protocol by TVL, Burrow’s TVL increased 214% QoQ and 973% over the previous six months. Additionally, the team announced plans to make the BRRR token deflationary, including a buyback and burn strategy.
  • Ref Finance: Holding the second-highest TVL, Ref Finance reached $70 million, marking a 185% increase QoQ and 522% increase over the previous six months. Ref Finance's introduction of Ref Finance 2.0 leverages NEAR’s chain abstraction functionality, bringing enhanced multichain swapping functionality.
  • Aurora Plus: TVL increased 36% QoQ and 479% over the previous six months, ending the quarter at $23 million. As a comprehensive membership platform, it introduced new lending and borrowing features and announced multiple new partnerships, including with Trisolaris.
  • Trisolaris: Jumped to the fourth largest protocol by TVL on NEAR with a 22% increase QoQ and 174% increase over six months, culminating in $5 million.

Together, Burrow, Ref Finance, Aurora Plus, and Trisolaris account for 94% of the NEAR Network's Total Value Locked. This concentration of TVL across these protocols results in a NEAR DeFi Diversity score of four.

On the NEAR network, there are two primary liquid staking protocols: Meta Pool and LiNEAR.

  • Meta Pool: TVL increased by 122% QoQ to $150 million. Q1 2024 saw the launch of the Enterprise Node Operators in partnership with the NEAR Foundation, and the launch of the mpDAO token.
  • LiNEAR: TVL rose by 131% QoQ to $156 million. In Q4 2023, LiNEAR launched its native governance token LNR, and in Q1 2024, it launched NEAR re-staking.

NEAR had an average daily DEX volume of $8 million, which represents a 95% increase from the previous quarter and a 554% increase over the previous six months. In Q1 2024, Ref Finance began to establish itself as the leading DEX by volume on NEAR, with $6 million in daily volume (+64% QoQ), compared to Orderly Network, which had $2 million in daily volume (+8% QoQ).

Following a gradual decline in NEAR’s stablecoin market cap over a few quarters, Q1 2024 saw a significant increase, spiking 176% QoQ to a total of $214 million. USDT experienced a substantial surge, with its market cap increasing to $88 million (+1,155% QoQ). Similarly, USDC also saw a notable rise, with its market cap climbing to $85 million, up 189% QoQ. USN, the winding-down stablecoin from Decentral Bank, remained unchanged in its market capitalization.

NFTs

Following a sluggish first three quarters of 2023, NFT activity on NEAR has picked up over the past six months. Activity was jump started with the Inscriptions mint which led to a spike in trading volume, peaking at $30,000 on December 21, 2023. On February 25th, 2024, MITTE marketplace launched on NEAR. Within two months, MITTE amassed nearly 70,000 sales with 9,000 unique users, quickly becoming the top NFT marketplace on NEAR. Despite losing its lead, Paras Marketplace now ranks second, maintaining a significant user base and activity level.

Daily NFT sales volume increased to $2,700, reflecting a 24% growth QoQ. Additionally, the number of daily NFT buyers increased to 60, an increase of 331% QoQ. Note - in the month of April NEAR had 52,000 NFT sales by 11,000 unique users and a total sales volume of $1.3 million, placing it in the top 15 chains.

Chain Abstraction

The NEAR ecosystem’s focus for 2024 is expanding chain abstraction across more chains and ecosystems, with the goal of abstracting the blockchain away from the user and developer experience. The chain abstraction vision is that apps should just work with all chains, onboarding should be seamless, and things like gas fees and bridging should become invisible to end users. To achieve this, NEAR is focusing on several key developments outlined below.

Account Aggregation

NEAR's Account Aggregation aims to offer users the ability to transact on any blockchain through a single account and interface. It simplifies user interactions across multiple integrating three core technologies:

  • NEAR Account: account abstraction for smooth onboarding and recovery of accounts.
  • Chain Signatures: enabling NEAR network to have MPC nodes that are jointly signing transactions and messages. Chain Signatures launched on mainnet on March 26th.
  • Intent Relayers: parties in the ecosystem that are able to execute the intent of the user on different chains.

This approach enables a unified, non-custodial account experience, significantly reducing the barriers to accessing and navigating the decentralized web.

Data Availability

The NEAR Data Availability (NEAR DA) layer is designed to enhance data availability for Ethereum rollups in a cost-efficient manner. Partnerships include Arbitrum Orbit, Polygon CDK, Madara by StarkNet, Caldera, and Fluent. NEAR DA aims to substantially reduce developer costs by offering a cheaper alternative for call data.

Comparative data highlights the cost efficiency of NEAR DA compared to other solutions. As of December 2023, 231 kB of calldata costs $0.0016 on NEAR, significantly lower than $140.54 on Ethereum L1 and $0.046 on Celestia for the same amount.

Fast Finality Layer

The NEAR Foundation and Eigen Labs partnered to create a Fast Finality Layer for Ethereum Layer 2s. This development is aimed at drastically reducing transaction times from the current minutes or hours to just three-to-four seconds, while also decreasing transaction costs by a factor of 4,000. This innovation maintains Ethereum's security standards while integrating NEAR and EigenLayer's robust features. It enhances transaction efficiency and flexibility for Layer 2s.

Pagoda, the NEAR ecosystem development team, leads the collaboration to transition the NEAR-Ethereum Rainbow Bridge to an actively validated service (AVS). This effort aims to improve composability with Ethereum Layer 2s and reduce liquidity fragmentation within the rollup ecosystem. The partnership does not only aim to benefit projects on Ethereum but also to enhance the bridging experience between NEAR and Ethereum, hoping to enable faster transaction finality with increased security and decentralization.

Network Overview (BOS)

The Blockchain Operating System (BOS) is an open-source platform enabling developers to develop front-ends on any blockchain using popular languages and community-developed components. The BOS provides a cohesive platform addressing Web3 complexities and Web2 centralization limitations. The BOS is powered by and settles on the NEAR Layer-1 blockchain.

Key features of BOS include FastAuth SDK, which streamlines user onboarding using biometric-linked Passkeys; Web Push Notifications, enhancing user engagement through direct device notifications; and NEAR Query API, a serverless solution that optimizes blockchain data interaction. Additional features include Developer Enablement, Universal Search, Gateways, Trust and Safety Content Moderation, and NEAR tasks. For an in-depth review of the BOS, check out this Messari report.

zkWasm

The NEAR Foundation and Polygon Labs partnered to develop zkWasm, a zero-knowledge prover designed for Wasm blockchains. The collaboration focuses on providing a customizable development environment for Wasm chains to integrate more effectively with Ethereum's liquidity and network capabilities. As part of this collaboration, the NEAR Foundation has become a core contributor to Polygon's Chain Development Kit (CDK).

Closing Summary

Following a strong ending to 2023, NEAR continued the momentum into Q1 2024. NEAR's market cap was among the largest gainers of the top fifty assets, seeing a 94% increase QoQ, bringing the circulating market cap to $7.2 billion. Daily active addresses were 1.2 million, showing a growth of 42% QoQ and 377% over the previous six months. The TVL ended the quarter at $335 million, a 163% increase from the previous quarter and a 547% increase over the previous six months. Additionally, the stablecoin market cap increased by 176% QoQ to a total of $214 million.

NEAR’s rollout of Chain Abstraction continued. In Q4 2023, the NEAR Foundation announced several components integral to this vision, including the NEAR Data Availability layer, collaboration for a fast finality layer for L2s, and zkWasm development with Polygon Labs. In Q1 2024, NEAR announced plans for NEAR Account Abstraction, further advancing this initiative. These developments underscore NEAR's commitment to building out the technical components necessary to make Chain Abstraction a reality.

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Nick is a research analyst at Messari on the Protocol Services team. Prior to joining Messari, Nick worked in Deloitte's Consulting practice.

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About the author

Nick is a research analyst at Messari on the Protocol Services team. Prior to joining Messari, Nick worked in Deloitte's Consulting practice.

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