What is NEO?
NEO shares a lot of similarities to Ethereum, and has been dubbed by many as China’s ‘Ethereum Killer’. Starting out as a cryptocurrency called ‘AntShares’ (weird name, I know :/), it rebranded to NEO for a fresh start in 2017. This gave the project a new look and life and since then it has gained significant traction as one of the most promising blockchain platforms of the future.
As a non-profit community-based project, NEO was the first decentralized, open-source blockchain platform to launch in China. It utilises the blockchain and digital identities to digitise assets and automate the management of these digital assets using smart contracts in what has been marketed as a ‘smart economy’ distributed network.
One of the key advantages NEO has over its main rival Ethereum is its smart contract system called ‘NeoContract’. NEO smart contracts allow developers to use C#, .NET, Java and other mainstream programming languages in their familiar IDE environments (think Visual Studio, Eclipse, etc.) for smart contract development, debugging and compiling. Unlike Ethereum’s Solidity programming language, this flexibility makes development straightforward and rapid.
Use Cases (a.k.a why it’s known as the Etheruem ‘killer’)
One of the reasons NEO is dubbed the ‘Etheruem killer‘ is because it is a multi-featured platform with a focus on managing digital assets in a Smart Economy. Where Ethereum is solely about decentralised applications built on top of the network, NEO is much more. For example, imagine having assets (a car, a house) digitised and effectively on the blockchain and under your own legal ownership. This is the value add for NEO – not simply being a platform for applications but for storing and managing digital assets. Let’s have a look at the various pieces of the NEO puzzle.
Digitising Assets – NEO will convert traditional assets into digital assets using smart contracts. These digital assets will be decentralized and protected by law using digital certificates on the blockchain.
Digital Identity – NEO will enable the creation of identity information of organizations, individuals, and entities. This means you can be assured of who you are trading with through digital identity verification.
Smart Contracts – Smart Contracts on NEO are stored in a decentralized, immutable blockchain and executed according their programmed terms, and exactly at the time agreed upon.
DApps – Much like Ethereum, Neo supports the development and deployment of decentralised applications. Some examples of NEO DApps are NEX, TheKey, Effect.ai and Bridge Protocol.
Recently, Neo has come under some heat regarding an issue that arose on March 3rd, where one of its validator nodes went offline, resulting in a network crash. Many in the cryptocurrency space were vocal of this issue, indicating it was serious. However, the R&D manager of Neo, Malcom Lerider, released a statement shortly after the incident stating that the issue was simply an edge case, and that it would be fixed in an upcoming patch. Further, the City of Zio, Neo’s core team, ran a simulated test where they killed off one consensus node on the network and the consensus mechanism of the network continued to produce blocks. NEO’s founder Da Hongfei also chimed in to explain that the issue was quite technical and that they had been aware of it prior to the outage, and were working on resolving it – having already applied fixes already in their testnet.
NEO and GAS, in perfect harmony
There are two tokens on the NEO blockchain, NEO (the token ticker symbol) and GAS (ticker symbol). Where Ether is both a utility token and the source for GAS on the Ethereum network, NEO is only designed for proof of stake, and is considered more of a governance token. Each NEO token represents a ‘share’ in the network and is indivisible, unlike most other cryptocurrency tokens where fractions can be bought and sold. NEO are used to create blocks and manage the network, and when a user holds NEO in their wallet they are rewarded with GAS, which leads us to…
GAS is the utility token of NEO, used to power the blockchain when any Smart Contract or DApp uses the network. Just like Ether’s GAS, NEO’s GAS on the blockchain is used to pay the fees for transactions (creating economic incentives for bookkeeper nodes and the prevention of network abuse). GAS tokens are divisible, and eventually there will be 100 million of them on the network. With more network demand, there will be increased usage, and thus the cost of GAS will increase, returning more back to the holders of the NEO token. With every new block generated, 8 GAS are distributed for all 100,000,000 NEO in existence. This makes the NEO smart economy a very attractive platform, essentially one of the few that offers dividends to its holders, just like the holding of traditional stocks.
dBFT consensus (say what now?)
Byzantine fault tolerance (BFT) is the resistance of fault-tolerant computing systems, particularly distributed computing systems, towards electronic component failures where there is incomplete information on whether a component has failed. For example, some aircraft systems, such as the Boeing 777 Aircraft Information Management System and the Boeing 787 flight control system use Byzantine fault tolerance to report potential component failure for safety reasons.
NEO uses a consensus mechanism known as delegated Byzantine Fault Tolerance (dBFT) in which certain network nodes on the NEO platform are designated ‘bookkeepers’. A bookkeeper node must maintain a minimum balance of NEO and meet certain performance requirements. The result of this method is NEO offers quick verification of transactions, supporting up to a mind-boggling 10,000 transactions per second (TPS), blowing away Ethereum’s current paltry efforts (around 15 TPS). While its name suggests otherwise, this consensus method is relatively simple. Let’s take a simple look…
Let’s say 10 people are at the pub and they are arguing about what time the AFL Grand Final starts (Australia’s Superbowl). Andy, who’s going to the game, might say it is 12:00 PM (he’s had a few too many beers already), but everyone else around him at the bar disagrees. If we ask another person at the bar, they might say it’s at 2:00PM, and a bunch of other people crowded around him agree. So the consensus is formed; the grand final starts at 2:00PM. This is how Neo gathers consensus (by way of ‘bookkeeper’ nodes) on the network and how the blocks are verified. So essentially, if two-thirds of nodes on the network agree with a bookkeeper’s version of the blockchain, consensus is achieved and the proposed version of the blockchain is validated. If consensus fails, an alternate bookkeeper is called and the process is repeated.
Main Platform Features
- Uses the delegated Byzantine Fault Tolerant (dBFT) algorithm instead of Proof-of-Work to achieve consensus and reward NEO ‘shareholders’.
- Is run by a small council that decides the direction of the network and can make fast decisions.
- Has a core team known as the ‘City of Zion’.
- Potential transaction speeds of up to 10,000 transactions per second.
- Currently has feeless transactions (but this will change)
- Uses a NEP-5 token as the equivalent to Ethereum’s ERC-20 token standard. NEP-5 is a standard that the tokens conform to, allowing them to operate on NEO and be stored in users wallets.
- Energy use is minimal compared to any POW/POS system.
- A high number of promising NEO-based DApps to rival Ethereum-based DApps are in the works or already deploying.
- NEO (formerly known as Antshares) has a current circulating supply of 65 billion (total 100 billion), pre-mined and cannot be increased (the rest of the max supply is currently held by the Neo council).
- GAS (formerly known as Antcoins) has a current circulating supply of XX billion (total 100 billion),
- Wallets; City of Zion’s NEON wallet has Ledger Nano S integration and NEP-5 token integration. NeoTracker is an unofficial webwallet, and NeoGUI is an official desktop wallet.
- With every new block generated, 8 GAS are distributed for all 100,000,000 NEO in existence.
- A fierce and credible competitor to Ethereum with several major advantages over the current Ethereum network.
- Holding the NEO token generates a passive-income as a dividend-paying platform with holders of NEO ‘shares’ paid in GAS (Neo/Gas Calculator)
- The NEO blockchain cannot be forked, unlike Bitcoin.
- Various organisations are switching over to Neo (from Ethereum) due to its advantages (e.g. Gaurdium ICO)
- Developers and users alike may stay with Ethereum due to its first mover advantage.
- Brand awareness is not as large as Ethereum.
- Does not have support from a global organisation such as the Enterprise Ethereum Alliance
- NEO token is indivisible and may deter some investors from buying the token if the price increases too much, since fraction holding is not allowed (fractions purchases are allowed on some exchanges if NEO is kept on the exchange)
- NEO is somewhat more centralised in its governance than Ethereum (and cryptocurrency as a whole) which can be a double-edged sword.
- The NEO official website is lacking detail and polished, slick marketing.
Whether NEO does indeed ‘kill’ Ethereum is unknown at this point in time. It could be argued, there is more than enough room for both platforms to grow and flourish in the future. With a potential audience of billions, it’s hard to see how NEO will not be a major player in the years to come, and perhaps even eclipsing Ethereum in market cap and token price.
It’s no secret China’s stance on cryptocurrency has been hot and cold, and NEO does come under a cloud of doubt if China were to suddenly go cold permanently. However, NEO offers an amazing and flexible ecosystem to drive this ‘Smart Economy’ for the global stage – and we can all safely assume that the digitisation of assets is not an ‘if’ question, but a ‘when’. With an emphasis on developers and making adoption easier, I can see NEO becoming a giant of the cryptocurrency world, with not only a vision of being dominant in Asia, but across the world.
Gary Denne is an Australian-born writer and technology evangelist with 20 years tech Industry exp. Loves crypto, stocks, cats, outdoors & healthy living. Not a fan of gluten ?