What is NEAR?
NEAR is a decentralized layer-one blockchain that was created as a community-run cloud platform that looks to mitigate some issues facing other blockchains like congestion caused by low transaction speeds, low throughput, and poor interoperability. NEAR uses its block generation scheme (consensus mechanism system) Doomslug, in tandem with its proposed shading design Nightshade in an effort to solve these congestion issues and scale the network. NEAR also seeks to be developer and user-friendly with features designed to accelerate the application development and user-onboarding processes. For instance, the protocol is designed to utilize human-readable account names, unlike the cryptographic wallet addresses common to Ethereum.
The NEAR Blockchain was created by the NEAR Foundation and is presently being built upon by the developers in the community (NEAR Collective). Its mainnet went live in April 2020, and network validators voted to unlock token transfers in October 2020. NEAR's bridge to Ethereum (called the Rainbow Bridge) launched in March 2021.
What is NEAR token?
NEAR is NEAR’s native token serving two primary functions within the network: the token is used to pay for transaction fees and to execute smart contracts. Users can also stake NEAR as part of the proof-of-stake consensus mechanism to receive rewards for validating transactions. By design, there is a maximum supply of 1,000,000,000 NEAR units.
How does NEAR compare to Bitcoin?
NEAR differs from Bitcoin in a few key ways.
First, NEAR powers the underlying proof-of-stake process for NEAR, a blockchain entirely separate from the Bitcoin blockchain. Since NEAR uses proof-of-stake instead of the proof-of-work method of Bitcoin, NEAR tokens are staked as part of the validation mechanism, in contrast to BTC which are mined as a result of the proof-of-work algorithm.
The second major difference between NEAR and Bitcoin is their age. NEAR’s mainnet beta was launched in 2020, compared to Bitcoin which launched in 2009. Although still significantly behind Bitcoin, NEAR has reached a level of competitive market capitalization and token distribution.
Although NEAR is different from Bitcoin and operates independently from it, it may still be affected by Bitcoin. Bitcoin, the coin with a larger market (by a long shot), can influence the price of all other cryptocurrencies. If Bitcoin crashes, there’s a good chance that NEAR will feel the burn too (not directly as they operate entirely distinctly, but through overall market sentiment.) It is not clear, but unlikely, that a significant drop in NEAR’s value would have a material impact on Bitcoin.
Before trading any crypto assets it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset. First and foremost:
No Canadian securities regulatory authority has expressed an opinion about NEAR, including an opinion that NEAR is not itself a security and/or derivative.
Wealthsimple has performed a legal assessment of NEAR prior to making it available on Wealthsimple Crypto and has concluded that NEAR is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future and the impact of this on an asset’s value is outlined in our Product Disclosure.
We evaluated NEAR based on publicly available information, including (but not limited to):
- The creation, governance, usage and design of NEAR, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created NEAR;
- The supply, demand, maturity, utility and liquidity of NEAR;
- Material technical risks associated with NEAR, including any code defects, security breaches and other threats concerning NEAR and its supporting blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and
- Legal and regulatory risks associated with NEAR, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of NEAR.
Like all other crypto assets, there are some general risks to investing in NEAR. These include short history risk, volatility risk, liquidity risk, demand risk, forking risk, cryptography risk, regulatory risk, concentration risk, electronic trading risk and cyber security risk. Each of these risks are described in more detail in our in-app Product Disclosure.
NEAR also presents an elevated short history risk, and in contrast to networks like Bitcoin and Ethereum, where multiple parties participate in development, NEAR Inc. and the NEAR Foundation direct ongoing development of the software underlying the NEAR network.
Further, NEAR Inc., the NEAR Foundation, and the NEAR community are not under any legal or regulatory obligation to disclose material information to the public regarding their activities. Holders of NEAR have no recourse to NEAR or Wealthsimple if NEAR declines in value for any reason.
We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading NEAR. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.
WDA is offering Crypto Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Wealthsimple Digital Assets Inc. dated June 18, 2021. Please be aware that the statutory rights of action for damages and the right of rescission in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Statement.
Last updated: August 4th, 2022