The future is NEAR
Old alt-L1 or AI chain of the future?
For many people, the last thing they will remember of NEAR is the legendary tweet in which “NEAR Co-Founder Illia was touched on the arm by Jensen Huang, Founder of Nvidia”:
While this was certainly a hilarious tweet and one which will go down in the Crypto Hall of Fame, it hints at something deeper which is that NEAR are actually building towards something very interesting which is what this article seeks to uncover.
Reminding ourselves of Illia’s background
Despite many of these Crypto projects enjoying valuations larger than some household brands whose stocks trade publicly, it is important to remember that they are mostly still start ups in which the founder plays an extremely important role.
Illia was one of the original people behind Large Language Models and sits alongside Sam Altman as being one of the OG AI researchers having co-authored a paper about the Transformers model which gave birth to ChatGPT, Gemini and other such AI use-cases. Reminding ourselves again of the tweet above, this is likely why NEAR was the only Crypto project to be featured at Nvidia’s flagship AI conference:
Having co-founded the protocol in 2017, Illia returned as the CEO of NEAR in November 2023 which coincidentally closely marks the point at which NEAR/BTC and NEAR/ETH bottomed.
NEAR x AI
Much of the NEAR x AI thesis hinges on Illia’s provenance as a founder and the notion that if anyone can build a blockchain optimised for AI it would be Illia. For now there are no widely adopted AI use cases built on NEAR but rather plenty of promises and initiatives - note that this isn’t a negative point but rather an objective statement of where things stand currently.
NEAR announced in a town hall that they are actively hiring AI scientists which implies that they intend to build AI use case in house on NEAR as opposed to other L1s which are going down the route of partnering or giving grants to AI projects to build on their L1. Just this week, Illia announced an AI R&D lab which he will co-lead with Alex Skidanov (NEAR Co-Founder who also spent some time at OpenAI) to incubate and invest in projects to build out an on-chain AI ecosystem (compute, data, agents) all on NEAR.
This is a pretty significant signal in terms of how NEAR are seeking to position themselves, the success of this R&D lab will undoubtedly be instrumental in NEAR’s success in cementing itself as the prominent AI chain.
Chain Abstraction
Another interesting piece of technology which NEAR have been focused on is Chain Abstraction and Chain Signatures which allows ownership of assets and transactions/function calls of smart contracts on other chains to be done from NEAR. Practically what this means is that a NEAR wallet can have control over addresses on other chains. For example, on the basis you have BTC in a BTC wallet, that BTC could be traded by transferring control of the BTC wallet to another NEAR wallet. This seems abstract in principle but there are actually teams already building products on top of this primitive with HotDao being a prominent example.
With accounts being able to be transformed into NFTs and traded on NEAR, accounts (and therefore balances) on other chains will all be able to be traded on NEAR which could create some interesting dynamics in terms of on chain trading and OTC transactions. More broadly, the ability to interact with any chain and own assets on any chain would effectively make NEAR’s Chain Abstraction the ultimate interoperability tool. The NEAR wallet in this case would be the only wallet any Crypto user would ever need - if this were to achieve widespread adoption it has the potential to significantly improve Crypto UX.
Current Metrics on NEAR
Putting all of NEAR’s future initiatives and innovative technology to one side, let’s take a look at the state of the chain today.
Daily Active Users on NEAR continues to make new highs with the majority of usage being distributed between SweatEconomy, KaiChing and Hot Game.
There is a consistent trend in new wallets being created (with at least 1 tx):
On-chain trading volumes don’t show a similar growth story but are consistent over time:
$NEAR
With a $8.3bn market cap, $9bn FDV, NEAR is almost fully circulating (91%) and sits in 13th place in terms of L1s on an FDV basis:
L1 valuation is always a finger in the air type of an exercise in that there is no widely accepted valuation methodology with everything being priced against each other and against ETH on a relative basis. Despite this, considering what we have laid out in this article, NEAR being priced at less than 10% of SOL and below coins like APT/SUI does not seem correct in our view. Not only does NEAR have a very promising story, one can also make the case that it is relatively undervalued.
Conclusion
It is easy to say that NEAR is a bunch of fancy technology and promises and that wouldn’t be too far from the truth. One could also argue that Solana was in a similar position in late August/early September last year. Funnily enough NEAR is sitting at a valuation not too far away from where SOL was sitting before it began the killer run up.
The argument is not that NEAR will embark on a SOL arc but moreso that often to make outsized returns one has to imagine some future scenario before it plays out. If NEAR already had multiple successful AI use cases and mass adoption of NEAR wallets as an interoperability layer, it would not be trading at a sub $10bn FDV...
NEAR represents an attractive bet on good technology, an extremely competent founder and a very strong narrative (Crypto x AI) at an attractive valuation. I have a hunch that this is not a chain or an ecosystem to ignore for much longer and if I had to guess, I would guess that we are closer to the start not the end of NEAR outperformance.
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