Is This Ethereum Challenger A Breakout Crypto Investment?

Ever since its launch in 2020, Close to protocol (NEAR -1.34%) has attracted the attention of some big names in venture capital (VC) and hedge funds. In April, it raised a monster $350 million in a funding round led by Tiger Capital, and just months before that it raised an impressive $150 million. So it clearly has a lot of financial backing to develop into a top blockchain project. But does it have enough to mount a serious challenge to Ethereum (ETH 2.55%)?

As a top 25 crypto with a market cap of around $3 billion, Near Protocol is arguably in the same class as other, better known Layer 1 blockchain rivals such as Solana (SUN 2.96%) and Avalanche (AVAX 1.63%). However, for Near Protocol to be a breakout crypto investment, a few things need to happen.

1. Continue to outperform Ethereum

Like Ethereum, the Near Protocol is a Layer 1 blockchain that supports both smart contracts and decentralized applications. To date, its primary advantage over Ethereum has been that it is cheaper and faster.

When it comes to transaction processing speeds, for example, there is simply no comparison. Near Protocol can handle as many as 100,000 transactions per second, while Ethereum (before The Merge) has only been able to process 15 to 20 transactions per second.

In part, Near Protocol has been able to achieve these superior speeds by focusing on technical innovations such as sharding, which is a process of breaking down blockchains into subchains. This reduces the computational load on the blockchain and increases throughput capacity.

Image source: Getty Images.

Vitalik Buterin, an Ethereum co-founder, has promised similar types of transaction processing speeds once The Merge is finally complete. However, it could take years as Ethereum has already warned that transaction speeds are not going to improve overnight. There is still a long process known as “Surge, Verge, Purge, and Splurge” before we can expect 100,000 transactions per second from Ethereum.

So, if Near Protocol is ever to become a true Ethereum contender, it must continue to outperform Ethereum.

2. Deliver on its Web3 promise

In mid-September, Near Protocol developers met in Lisbon, Portugal, for the annual NearCON event. One of the most interesting news to come out of the event was the launch of a new $100 million VC fund for the Near ecosystem.

In collaboration with Caerus Ventures, the Near Foundation will search for interesting Web3 culture and entertainment projects for future funding. This is likely to include projects related to sports, music, film, fashion and art. The only caveat here is that the new fund will focus on “seed round” deals, which typically involve projects that are still in the concept stage.

The hope here is that some of these nascent Web3 projects can develop into something significant. Right now, there are already more than 800 Web3 projects deployed on the Near Protocol blockchain, so there is a strong base in place.

In addition, there is one showcase project, called Armored Kingdom, which has already attracted a significant amount of buzz, mainly due to the involvement of Hollywood actress Mila Kunis. Still in development, Armored Kingdom promises to offer an unparalleled metaverse gaming experience. This is exactly the kind of high-profile project needed to put Near Protocol on the radar of casual investors.

Is Near Protocol a buy?

Thanks to a new one Coinbase Global (COIN -5.50%) listing, Near Protocol is in a position to attract more mainstream crypto investors. In fact, on news of the listing, Near Protocol rose more than 12% in a single day. It is clearly an interesting blockchain project with a lot of money behind it. And it seems to be gaining traction as a potential up-and-coming crypto.

But for now, a lot more needs to be built before I can recommend Near Protocol as an immediate buy. The tagline for the recent NearCON conference in Portugal was “Building Beyond the Hype” and I think that sums up where things stand now for crypto. For example, while some of the Web3 projects coming out of it sound enticing (especially the Mila Kunis project), many are still in the seed or concept stage.

So for now I’m taking a wait-and-see approach with Near Protocol. I’ve added it to my watchlist of interesting cryptos that could pop up in 2023, but I just need to see more build on top of the blockchain before I start buying.