NEAR Protocol explained: how sharding and 2.5 percent staking work

NEAR Protocol is a standalone first-layer blockchain that splits its work across several sections running in parallel and is secured by stakes of its own coin. The matching currency is also called NEAR, and it pays for transactions, storage and the operators of the network. How the price behaves alongside that is tracked continuously in our NEAR forecast.

This text explains the architecture, the purpose of the coin and the points where a holder has to decide something themselves. Every figure carries a date, because on a living network they change.

NEAR Protocol at a glance: first layer, sharding and proof of stake

The developer documentation describes NEAR as a layer-1 blockchain that works in a split manner and is secured by the staking method proof of stake. Layer 1 means the network stands on its own and is not built on top of another blockchain. Everything running on it inherits its security.

In figures, as of Tuesday, October 27, 2026: around 1.25 billion NEAR are in circulation out of a total supply of about 1.31 billion, so a good 95 percent. The market value stands at roughly $5.8 billion, and one NEAR cost about $4.41 on Tuesday morning. The highest price ever paid was $20.44. Since launch the network has processed more than 5.4 billion transactions, and 412 nodes were active that morning.

The documentation names two properties as the core: blocks appear roughly every three quarters of a second, and a transfer counts as final after a good second. The fee for that, according to the project, is under one US cent.

What sharding means at NEAR and how the work is divided

Sharding describes splitting a blockchain into several sections that work at the same time. Instead of every machine tracing every transaction in the whole network, each one handles a piece. NEAR's method is called Nightshade, and its core idea sits in the term chunk: a block consists of parts, one per section.

Block producers, chunk producers and chunk validators

The documentation distinguishes two roles. The hundred largest operators produce blocks and chunks; as a rule each of them is assigned to exactly one section and processes only its transactions. All the others work as chunk validators and verify the parts without holding the state of a section themselves. That very separation lowers the requirements for hardware and stake and opens operation to more participants.

The practical gain is that the load grows with the number of sections without the individual machine having to get more powerful. The price is complexity: the more parts have to be assembled, the more ways there are for something to go wrong.

Named accounts instead of character strings: the account model

Most blockchains address accounts through long strings of characters. NEAR allows readable names in the form alice.near instead. Sub-accounts can be derived from them, much like subdirectories.

On top of that come access keys, that is, graded keys for access. One account can carry several of them, and a key can be limited to individual applications and amounts. In practice that means a key for one application does not need the same power as the main key, and a lost secondary key does not cost the whole balance. Through chain signatures, a NEAR account can also control accounts on other blockchains.

Gas, fees and the burning of transaction costs

Every action costs gas, a computing unit for effort that is paid in NEAR. The particularity sits in the documentation for operators: the fees collected over a period are burned by the system, minus the share that goes back to applications as a rebate. Burned means permanently removed from circulation.

A tension follows that shapes the token: on one side new coins are created for the operators, on the other fees disappear. Which side prevails depends on usage. The switch to burning gas fees in full is something we covered separately on October 1, 2026.

A second peculiarity concerns storage. Anyone storing data on NEAR has to deposit NEAR for it; release the space and the deposit comes back. Storage is therefore tied-up capital rather than a one-off fee.

What the network is used for today

NEAR is built as a platform for applications meant to withstand many users at once. The documentation highlights low fees and easy access for that, and names applications with user numbers in the millions. Through the Aurora sub-project, contracts originally written for Ethereum can also be executed.

Then there is a focus that has shaped the project in recent years: services that move balances across several blockchains without you keeping a separate account for each. These cross-blockchain services are at the same time the place where the network is most exposed, because third-party funds pass through there.

The NEAR token: supply, issuance and purpose

The NEAR token has three jobs that separate cleanly. It pays gas, it backs storage space, and it is locked as a stake to secure the network. There is no fixed maximum supply as with Bitcoin; the supply grows each year by the amount paid out to the operators and shrinks by the fees burned.

The documentation puts the annual issuance to operators at 2.5 percent of the total supply. That rate is not a given: in October 2026 a cut to 1.6 percent was put to a vote, and we reported on the outcome and the consequences for the yield on October 19. For a holder, the rate is the benchmark: anyone not taking part in staking loses weight proportionally, because the new coins go to others.

Staking and delegation: how the 2.5 percent come about

Staking means depositing NEAR as security so that an operator may take part in the network. Anyone not running a machine themselves can delegate their coins to an operator and share in its yield. The security is real: if an operator behaves maliciously, its stake is burned in whole or in part, and that hits delegated coins too.

The threshold for a place among the active operators follows, according to the documentation, from the three-hundredth largest bid, but at minimum from 25,500 NEAR. Block and chunk producers as well as chunk validators are promised a minimum yield of 2.5 percent per year. If less than the entire supply is staked, the yield can come out higher, because the same amount is spread over less stake.

What an epoch is

The operator list changes block by block rather than continuously. One epoch covers 43,200 blocks. At the target block time that works out to a good seven hours; at the speed actually measured it is closer to nine. This matters above all when exiting: staked coins are not available again immediately, but only after several epochs. To see the terms of individual providers side by side, look at our comparison of staking platforms.

Custody: wallets, keys and the shutdown of MyNearWallet

For NEAR there are applications in the browser, on the phone and on hardware devices. What matters is the separation that beginners overlook most often: the coins sit in the network, not in the application. If the application disappears, the balance remains, as long as you hold the keys.

That exact case is coming up now. MyNearWallet, long one of the widely used browser applications for NEAR, is shutting down on October 31, 2026; our report of October 8, 2026 puts the move into context. Anyone still keeping a balance there should check the details with the provider and test the switch with a small amount before the whole holding moves. Which applications work as a destination and how they differ is shown in our comparison of software wallets.

For larger holdings, the same applies at NEAR as everywhere: a device that keeps the keys offline protects better than a browser. The recovery words belong neither in a photo album nor in a chat.

Buying NEAR: trading venues and licensing

NEAR is one of the larger assets and can be found at most of the well-known trading venues. In the European Union what counts above all is whether the provider holds the permission under the MiCA regulation, which has set a single framework for crypto service providers since 2024. A licensed provider is subject to obligations on own funds, complaint channels and the separation of client money.

Before buying, three points are worth a look, and they determine the price more than the advertised fee: the spread between the buying and selling price, the cost of a withdrawal to your own address, and the question of whether the provider hands the coins over at all. Our exchange comparison puts those details side by side. Anyone simply leaving the coins at the trading venue also carries its default risk.

Risks that come with NEAR

The price swings hard, and the gap between the all-time high of $20.44 and the recent price of about $4.41 shows the order of magnitude. That is the obvious risk, but not the only one.

Technically, the split into sections remains demanding: more moving parts mean more possible sources of error, and the cross-blockchain services have already been the target of attacks in the past. Economically, the issuance of new coins each year stands against the value of the existing ones, which is why the level of that rate is discussed regularly. With staking there is the additional point that delegated coins share the liability and are not available during the exit period. And competition among the layer-1 blockchains is tough; usage cannot be held onto.

For tax, the general rules for crypto assets apply in Germany. Income from staking and sales have to be recorded separately, and the documentation of the acquisition later decides the size of the taxable gain.

NEAR Protocol: October 31 sets the first deadline

Three points follow from this profile that can be worked through concretely:

1. Check the trading venue. See whether your provider holds a MiCA permission, what a withdrawal to your own address costs and how far the buying and selling prices sit apart. Those details are collected in the exchange comparison.
2. Settle the custody question. If your balance still sits in an application whose operation is ending, the move is due before October 31, 2026. Which applications are candidates is shown by the software wallet comparison.
3. Do the maths on staking. Compare the promised minimum yield of 2.5 percent with the operator's fees and the period after which you get back to your coins. The terms sit in the comparison of staking platforms.

The details on the architecture and the operators come from the project's documentation: the overview of NEAR and the page on operators and yields.

(As of October 27, 2026. This article is not investment advice. Prices and fee structures change; check the terms with the provider before you buy.)