The Future's NEAR: This Project Could Become BOS

Summary We may still be in a Crypto Winter. If so, look for projects with the highest funding and the longest staying power. Though Ethereum dominates, there will be room for niche players like NEAR and Solana. NEAR’s helping corporations transition from Web2 to Web3. Web3 has several advantages including data-ownership & portability, censorship resistance, privacy, and community governance. This is one of the highest-rated projects according to my Ratings Scorecard. NEAR is valued cheaply as measured by Price/Book Value. Thesis We may or may not be in a Crypto Winter. If we are in a bear market, then it follows that we need to screen for well-funded projects that have staying power. NEAR Protocol (NEAR-USD) is a top funded project that scores highly on my Ratings Scorecard. Yet the coin trades relatively cheaply perhaps due to market inefficiencies. Most L1 projects seem to have similar use cases and designs. However, I think NEAR has a "special sauce" that will help transition corporations and Web2 companies into Web3. This "special sauce" is called BOS for short - meaning blockchain operating system. BOS combines all the advantages of Web3 to those incumbent firms while ridding the issues of both Web2 and Web3. BOS provides organizations the tools that allow killer Dapps to be easily created. While it was only recently introduced, there's evidence showing rising activity related to this software stack. Introduction Bitcoin (BTC-USD) remains in a bear market in my opinion. Patience is a virtue - we must wait for apathy to become the narrative before a true market bottom is reached. For now, I see a host of negatives including weak seasonality, competition from governmental CBDCs, rising Bitcoin Dominance, distribution by larger holders, greedy sentiment, tightening Fed liquidity and negative On-Chain Metrics. Remember, moves in cryptocurrency prices are intractably tied to moves in Bitcoin prices. Well, that's my two Satoshis! Winner Take All? I'm a firm believer of the Pareto Principle, meaning that 80% of Layer 1 transactions will be controlled by 20% of players. My guess is that Ethereum will remain the gorilla, the rest will be shared amongst a handful of chains specializing in certain niches. Maybe Algorand for governments/institutions (e.g., CBDCs) Hedera for corporations, Avalanche for gaming, Cosmos for "make your own meme-coin" and Solana (SOL-USD) for NFTs. I think NEAR Protocol has a fair chance of becoming the operating system as the Internet transitions to Web3 . Web3 has tons of VC-funded greenfield innovation, so why not follow the money? Web3 Advantages vs. Web2 Can you do me a favor? Next time someone condescendingly tells you "crypto has no use case", hand them this laundry list: Decentralization: there is no single central authority controlling the data, enhancing security and transparency. Data Ownership and Privacy: allows users to have greater control over their data. They can own their data and choose who gets access to it, reducing the risk of data breaches and unauthorized usage. Censorship Resistance: ensuring freedom of speech. Interoperability: enabling seamless communication and data exchange between different applications. Smart Contracts: allows self-executing contracts with predefined rules and conditions. Tokenization: enables the creation of digital assets through tokenization of real-world assets ((RWA)). Immutable Records and Auditability. Reduced Middlemen: leads to lower fees, faster transactions, and increased financial inclusion. By the way, 1.7B people are considered unbanked. Hard to believe, no?! Community Governance ((DAO)) thus allowing users to participate in decision-making. Incentives for Participation: via staking, governance rights, etc. Ratings Scorecard NEAR Protocol is amongst the highest-rated project within my scorecard - factors are summarized below: Funding: Excellent . One of the highest-funded of all projects. On 10/2021, announced one of the largest grants ever ($800MM ) for ecosystem development. Treasury is $900MM (excluding the grant) and its management will be fully decentralized via community DAOs. Management team: Excellent . NEAR Protocol is the product of two brilliant minds: Alexander Skidanov and Illia Polosukhin . Illia's a buff dude - think of Vitalik Buterin on steroids. The team includes several International Collegiate Programming Contest medalists and finalists. Technology: Excellent. Most digital asset rating services (e.g., TokenInsigh t) rate NEAR's technology high including its Dynamic Sharding and ability to include zero knowledge/private shards on the chain. Ambitious road-map. Developers: Above-Average . Rapid developer growth over the last two years, though down from 2022. Its programming language Rust is considered the " most beloved language " by coders. Electric Capital User Experience (U/X): Average . User experience is a mission of the team and its Blockchain operating system ((BOS)) will go a long way to achieving that. Use Case: Above-Average : While there's been a large decline in Total Value Locked since 2022, the BOS operating system (i.e., Web2 to Web3) is expected to breathe new life into the project. The network's value is aided by its Aurora, Octopus Network and Rainbow Bridge which facilitate interoperability. Defi Llama Ecosystem : Below-Average: Minimal Dapp diversity ( see gray bar in chart below ). Failure to generate any hype. Sunsetting of the algorithmic USN stablecoin. Leading Dapp: Sweat Economy. Not a leader in Defi applications or NFTs ( see NFT Activity chart below ). Messari Messari Decentralization: Below-Average : NEAR has just 215 Validators (7/2023) and a Nakamoto Coefficient of 8, both are lower than other L1s. Though, the team is aware of the issue and has set up an onboarding program as well as tech-upgrade ("Nightshade Sharding"). Staking percentage is low ( 47% ). (See peer table below.) Pontem Network Tokenomics: Above-Average : Genesis Supply (no Max): 1Bn NEAR coins, Total Supply: 1.15Bn, Circulating Supply: 82%. Inflation , at 5% (according to a schedule) may decline due to transaction fees that are burned. High percentage of Insiders. Vesting schedule was initially steep, but sharply improved; we are at month 36 in the schedule below. Solana Foundation Social: Excellent . High social engagement. Around 1.9 million (though below their 2.2 million goal) Twitter followers, 46k Telegram followers and 210k CoinMarketCap watchlists. Oddly, just 370 Seeking Alpha users follow NEAR. Onboarding the next billion users I've been doing deep-dives into blockchains for years and have to admit these narratives are starting to get old. I can't tell you how many times I've read about a "unique" L1 protocol that has a proof of stake consensus, a native token, a permissionless layer, staking and validators that can be slashed, that's fast, and has 1000 Dapps in its ecosystem. However, in reality, the ecosystems are supported by just a handful of Dapps. Having a DEX that allows for trading of tokens back-and-forth amongst Degens doesn't sound like a real use case to me. We desperately need a killer app (a version of Facebook, TikTok, Grand Theft Auto) that'll onboard the next billion users. After having stared at TVL (Total Value Locked) and transaction data for years, I'm still waiting. Nothing's grown, in fact TVL has plunged since peaking in 2022. What businesses need is someone that will handhold them, helping cross that chasm from the Internet to Web3. This is a scary, time-consuming process for anyone, especially for a traditional company that already has a cash cow from its existing business and feels comfortable dealing with other centralized and regulated businesses like itself. NEAR is the "BOS" NEAR Protocol (Mainnet 4/2020) while being similar in some respects to other L1s, does have a bent towards Artificial Intelligence ((AI)) as it was originally conceived as a machine-learning platform. Once investors realize that NEAR too, has the bright, shiny object of AI, the coin could pump. But I'm not here for that. Instead, I believe NEAR's real long-term value will come from its Blockchain Operating System ((BOS)). Think of it like the ones we're familiar with from the Magnificent 7 of AI: Android, Windows, IOS and Chrome OS. An operating system is a vital piece of software that acts as a middleman between hardware and software applications, thus allowing a layman like myself the ability to use it effectively without banging my head against the wall. The global OS market (excluding servers) is valued at $45Bn as of 2022. In the same manner that OS systems act as an intermediary, NEAR's BOS will try to solve problems associated transitioning into Web3 by acting as an intermediary ( see chart below for details ). Near Foundation The awesome benefits to society from a decentralized technology like blockchain can also hinder incumbents from embracing it. For example, anyone that's done a "deep dive" into blockchain projects can be overwhelmed by the abundance of software programming languages, network architectures, poor user experiences ("U/X") and compossibility issues (i.e., porting applications). Despite being around nearly a decade, these issues have kept crypto from having many killer apps. NEAR Protocol introduced BOS on 3/2023. BOS, which is open-source, effectively allows developers the ability to build on any blockchain using their favorite language. BOS (acting as middleman) provides users the ability to easily connect (and onboard) with many applications without the requirement of owning crypto. BOS, as an interoperable platform, addresses both the weaknesses of Web2 (such as data ownership) and the weaknesses of Web3 (such as fragmentation, technical user experience) while accessing their strengths (e.g., a composable front-end). This is a difficult concept for me to explain, so I used the analogy of an operating system. In reality, NEAR's BOS is far more - it's a software stack that provides a collection of independent components that allow all of this to happen smoothly. Kind of like how sausage is made. For simplicity's sake, I've excluded much of the technical jargon including the key features of BOS such as FastAuth, Developer Enablement, Universal Search, Gateways, Content Moderation and NEAR Tasks. For example, FastAuth (going live 9/2023) will allow mobile users to easily generate a private key for Web3 Dapps using their email and biometrics or PIN. Please see this video from the NEAR Foundation for details. Adoption Metrics for BOS I accessed several third-party analytics sites (e.g., Token Terminal, Artemis) as well as NEAR's explorer and have found weak evidence of growth in NEAR's blockchain since BOS's introduction. Perhaps it's too early? However, there's evidence that developers are ramping up widgets related to BOS. You can think of a widget as a small piece of a web page, or Dapp, that is reusable, configurable, and embeddable. ( See chart below ). Messari, Near Foundation Valuation There are several ways you can value crypto projects including: number of active addresses, daily transactions, price/revenue and price/TVL. However, I believe it's too early to use these metrics as crypto projects are analogous to venture capital portfolio companies which have minimal revenue bases. Also, not all of NEAR's TVL is captured using Defi Llama and Token Terminal. For now, Price/Book Value may be the most appropriate metric and NEAR scores well here. In calculating Price/Book, I assume that NEAR Foundation custodies all its treasury and that the treasury amount equates to book value (i.e., a debt-free organization). I calculated a Price/Book Value of 1.6x , which is 50% cheaper than other blockchain projects and 60% cheaper than the S&P 500's ratio. The beauty of NEAR's treasury , is that unlike most projects, NEAR keeps a large portion invested in securities other than its native coin. So when the price of NEAR declines, the Price/Book also declines . Get it? Near Foundation Technical Analysis of NEAR's chart I believe the cryptocurrency space is inefficient (asset prices do not accurately reflect fundamentals). Once you've done the hard work of finding a good project, technical analysis can be used as a timing tool. I tend to favor traditional charts (e.g., Cup & Handle) and long areas of basing. As they say, "the longer the base, the more it'll rocket into space." NEAR's been basing all year and it's finally showing some relative strength as can be seen in the NEAR-BTC chart below. This is not financial advice, but if NEAR holds at $1 during another bear low, that would be very bullish. TradingView Idiosyncratic Risks "NEAR: we have no marketing team". The joke amongst Crypto Degens is that if only NEAR had a marketing team. That is their only real weakness. A project built by engineers for engineers isn't the best recipe for generating hype. Companies that are successfully run by their engineer/technical founders are a rare breed. Tesla's Elon Musk, for example, is known for brainstorming with his engineering teams as well as wearing the CEO hat. Though, I hear he can be a real jerk to work for. Nonetheless, NEAR's team needs to transition its leadership towards someone that speaks the language of business. Else, it will not be successful. Systemic Risks Intense competition amongst other Layer 1s and Layer 2s (e.g., Polygon, Optimism). Regulatory: The SEC under Gary Gensler has conducted what I would call "regulation by enforcement." NEAR was listed in the SEC's lawsuits against Binance and Coinbase. Crypto-related crime grew to $20Bn (2022) in illicit on-chain transactions (40% sanctions related). Hacking accounted for $3.8Bn stolen. (Source: 2022 Crypto Crime Report (Chainalysis). NEAR Protocol vs. Solana Given that I penned an SA article on Solana, a project whose life has been anything but a beach, I thought I'd quickly compare the two. Solana's OG, Anatoly Yakovenko, once said he would've used NEAR's superior sharding technology, however, he considered it "too complex and didn't have the patience for it." Both Solana and NEAR are based out of San Francisco and I consider them amongst the highest-rated L1s. Both Solana and NEAR flew too close to blockchain blowups, with Solana having a near-death experience thanks to FTX and NEAR suffering from its involvement in Terra (LUNA-USD) and Three Arrows Capital. I would classify NEAR as riskier given that it's less battle-tested, smaller, has less activity, is relatively centralized, isn't well known and has a more complex design (Modular vs Solana's Monolithic). Why we cheer for NEAR NEAR-USD is one of a few coins that may pump again during the next bull run. The well-funded project lacks hype and hasn't had a killer Dapp yet. However, its new operating system sets the stage for strong user adoption as it helps companies transitioning into Web3. The future's NEAR - this project could become BOS . `