Why Near Protocol Could Be a Buy During This Period of Crypto Instability

The cryptocurrency market is tumbling right now, but that might present buying opportunities for investors seeking high-growth crypto picks at more reasonable prices. On this Jan. 19 episode of "The Crypto Show" on Backstage Pass, Fool.com contributors Chris MacDonald and Jon Quast discuss why Near Protocol (NEAR 1.92%) could be one such pick to consider right now.

Jon Quast: Let's do Near and we'll save Cosmos for next week. The Near Protocol, $17.50ish, $10.8 billion market cap. What's the bull case? Real quick, what is Near?

Chris MacDonald: Yes. Near is a layer one protocol. It's essentially one of the projects that's been raising money.

What's interesting about Near is, its a delegated proof-of-stake blockchain. A lot of other, maybe Ethereum competitors, it's got smart-contract capabilities as well as a proof-of-stake blockchain which allows for more efficient transactions, cheaper transactions, and faster transactions than what we're seeing on Ethereum. Basically with Near, there is a cost and speed argument that's being made with this blockchain.

But, one of the other interesting factors that investors are looking at are the interoperability piece with this one. Essentially with Near, they've launched a cross-chain bridge protocol. What that allows for is for Near to work with other blockchain such as Ethereum, there's the Rainbow Bridge there, and there's other bridges with other networks. For developers that are looking to build projects across different blockchains, Near is one blockchain project that's gaining a lot of attention.

It recently completed a $150 million funding round, and I know the token spiked on that news. A lot of these projects are raising money to build out their ecosystems and encourage developers to build on their platform. For the reason that the bigger an ecosystem on a given blockchain network is, the more valuable the underlying token so in Near protocol's case it would be better the larger the token becomes. The projects that they are investing in are Web3 projects, and essentially Near has maybe marketed itself as a blockchain network focusing on the mass adoption of Web3.

Quast: The way I saw it talked about, was they're trying to replace the current internet structure.

MacDonald: Yeah. I think Web3 is a nebulous term. I know we talked about that last week. The actual projects themselves that are being built on there, I won't to dive into those a little bit more, but there's definitely that angle with it as well.

In terms of the bear case for this token, it is inflationary, so the Near protocol team is working on a token burn to try and deal with some of that. I was reading a piece that there's an argument that as the transactions increase on the Near network because of the token burn fundamentals and tokenomics, it could result in a deflationary environment for this token.

Whether it's inflationary over the long term or not remains to be seen. But another thing that investors have, maybe a little bit of concern with is, the fact that the NEAR Foundation currently holds the keys to the community treasury. There's decentralization concerns for a lot of tokens, and this is one that might fit that profile as well.

Quast: Very good. One of the things that I saw with this, Ethereum has human readable addresses. You can get your name with a .ETH domain, but that costs money. We are seeing with this is that with Near, you can get a .NEAR address with your name but it is free. I thought that was interesting in terms of what could possibly be a driver of adoption here.

MacDonald: That is very interesting. I didn't actually read that. I know with Near the transaction fees are very low, near-zero, so that might be the case of why they're able to do that at no cost. But when you think about all the potential for whether it's NFTs or other purchases that are smaller dollar amounts, having a cost structure that's near-zero rather than Ethereum is a huge benefit.