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Neo is a software network that seeks to serve as a platform on top of which anyone can transact and create decentralized products and services.
Neo is sometimes referred to as the “Ethereum of China” due to it sharing many similar features with its more popular counterpart, such as the ability to write decentralized applications (dapps) for decentralized exchanges, prediction markets and social networks, among others.
Further, the Neo network also offers a host of other features to its users, including a decentralized file storage system, an identity system, and an oracle system for feeding external information to it (like price data).
Neo uses a unique governance system called Delegated Byzantine Fault Tolerant (dBFT) as its consensus mechanism for the computers that run its software.
Central to running operations on its blockchain are two native cryptocurrencies, NEO, for voting on protocol changes, and GAS, used to pay for computation on the network.
Who Are The Founders Of NEO?
The co-founders of Neo, and its predecessor Antshares, are Da Hongfei and Erik Zhang. Both serve as chairmen of the Neo Foundation, which aims to promote the blockchain’s adoption.
Da Hongfei has said that, although the internet is a great invention, it has many flaws — and this means that everyday consumers don’t always have control over their own data. The entrepreneur believes blockchain applications will eventually go mainstream.
Erik Zhang was the author of the Delegated Byzantine Fault Tolerance algorithm, which aims to deter untrustworthy participants from taking part in the blockchain’s operation. This technology went on to be used in the Neo blockchain. He also served as the core developer for this network, and is playing an instrumental role in the development of Neo 3.0, the next iteration of the project’s infrastructure.
The Neo blockchain has two native tokens for its ecosystem: GAS and NEO. The GAS token is used to represent the right to use the Neo blockchain, and its NEO token represents the right to manage the blockchain.
NEO token holders can participate in both on-chain and off-chain governance structures. For on-chain governance, holders can use their NEO to vote on network protocol upgrades and receive GAS as an incentive for participating. Off-chain governance decisions can be voiced to the Neo Council. The council is responsible for making strategic and technical decisions and for implementing changes.
As outlined in the project’s white paper, the total supply of NEO was minted at the first block and capped at 100 million. Neo held an initial coin offering (ICO) throughout August 2017, raising over $28 million for the project and distributing 50 million tokens to ICO participants. The remaining 50 million tokens were held by the Neo Council for the long-term support of Neo projects.
Of the 50 million NEO retained by the Neo Council, the team guaranteed that the council wouldn’t use more than 15 million tokens per year and that tokens would be distributed as follows:
- 10 million NEO are used as an incentive for Neo developers and the Neo Council;
- 10 million NEO are used as an incentive for developers working within the Neo ecosystem;
- 15 million NEO are used for investing in other Neo Council blockchain projects;
- 15 million retained as a contingency.
The NEO token reached its all-time high of $196.85 in January 2018 following the platform’s rebranding from Antshares and release of the Neo NEP-5 token standard. The project’s token dipped to an all-time low of $0.07229 in October 2016 just after the launch of the Antshares mainnet.
Like the prices of many other cryptocurrencies, NEO’s price stagnated for most of 2018. Then, it failed to rise above $25 in 2019 and 2020. But during the crypto bull run in May 2021, NEO’s price surged to $140, which was the highest price in more than three years.
NEO IS NEW AGAIN
How Does NEO Work?
Neo’s platform allows developers to use its software to run smart contracts (known as NeoContracts) and design new programs (dapps) meant to replicate real world products and services.
NeoContracts differ from other smart contract-based protocols in that developers can build applications using a variety of popular existing languages (like C# and Java), rather than learning a new language.
Thus, NeoContract’s ability to work across various programming languages can be attractive to a larger pool of developers seeking to create dapps, or support existing ones.
Delegated Byzantine Fault Tolerant
To secure its blockchain and keep its distributed network of computers in sync, Neo employs a consensus mechanism method called delegated byzantine Fault Tolerant (dBFT).
dBFT works similarly to the delegated proof of stake (DPoS) and leverages a real-time voting system to determine which computers running the software can create the next block on the Neo blockchain. This means anyone who owns NEO can help operate the network.
Each NEO token (sometimes referred to as a Neo coin) can be locked, or “staked,” to represent a vote (the more staked NEO, the more voting power.) All owners who stake NEO then vote for the consensus nodes, who are responsible for creating blocks.
For proposing and adding new blocks to the Neo blockchain, consensus nodes receive the network’s transaction fees (paid in GAS cryptocurrency).
Digital Equivalents On The NEO Platform
NEO theoretically describes its Smart Economy System as (Digital Assets + Digital Identity + Smart Contract = Smart Economy).
Assets can be easily digitized on the NEO blockchain in an open, decentralized, trustworthy, traceable, and transparent manner that is free of intermediaries and their costs.
Users are able to record, buy, sell, exchange, or circulate various kinds of assets. The NEO platform allows for linking the physical asset with an equivalent and unique digital avatar on its network. NEO also supports the protection of assets. Those assets registered on its platform have a validated digital identity and are protected by law.
Digital identity enables verifiable key information about participating individuals, organizations, and other entities that exist in the digital context.
Smart contracts allow the execution of transactions and agreements among different parties without governance by any legal system or central mechanism. The execution of such contracts is based on the programming code of the network, and the coding allows traceability, transparency, and irreversibility of transactions.
NEO supports two crypto coins, NEO and GAS. It supports programming in all mainstream languages including C#, Java, Go, Python, and Kotlin, which facilitates a large community of developers to easily contribute to its platform.
How Many Neo (NEO) Coins Are There In Circulation?
At the time of writing, there are 70.5 million NEO in circulation — and a total supply of 100 million. NEO tokens aren’t mined, and indeed, all 100 million of them were generated when the blockchain launched.
These tokens were distributed on a 50/50 basis — with half going to participants in a token sale, and the other half being split among developers and the NEO Council. At the time, it was confirmed that these funds would be used to invest in other blockchain protocol that the organization supports.
Meanwhile, GAS is generated every 20 seconds or so, whenever a new block is created. The number of tokens created gradually reduces every year, and it’s estimated that it’ll take 22 years for the total supply of 100 million to enter circulation.
How Is the Neo Network Secured?
As we mentioned earlier, Neo uses Delegated Byzantine Fault Tolerance, and it’s estimated that the blockchain is capable of processing thousands of transactions per second.
According to Neo, the dBFT mechanism has been inspired by the Practical Byzantine Fault Tolerance algorithm.
There are a couple of similarities with delegated proof-of-stake, given how both consensus mechanisms allow token holders to vote for the delegates who will process transactions.
Through dBFT, blocks are added to a blockchain as long as at least two-thirds of delegates reach consensus — and it’s hoped that this helps prevent bad actors from undermining the smooth running of the network.
Focus On Regulatory Compliance
NEO maintains a clear distinction from other standard blockchain platforms in its focus on being regulatory-compliant. While digitized assets and smart contracts are popular on other blockchain platforms like Ethereum, the third key feature of what it calls its “digital identity” separates NEO from the rest.
Every individual, business, or other entity operating on the NEO platform is required to have a unique digital identity that can be verified. People, businesses, and projects have the option to transact among themselves only if the other party has the required identity, which makes the NEO network regulatory-compliant.
Even the various nodes on the NEO network may need to have identification before they can contribute to the transaction verification and other activities like accounting and bookkeeping.
While working on NEO, the cryptocurrency’s founders, Da Hongfei and Erik Zhan, won the interest of various enterprises looking for private blockchain solutions. That led to the creation in 2014 of Onchain, an independent technology company that works with the necessary financial and legal frameworks and provides blockchain solutions to various enterprises.
While NEO works like Bitcoin and Ethereum, Onchain focuses on the creation of private and consortium blockchains to meet the specific needs of the industry.
Onchain’s major product, Distributed Networks Architecture (DNA), uses digital asset applications to help businesses by creating private and public blockchains. DNA is believed to be the blockchain platform that can be customized to address all sorts of different problems in the private and public sectors.
How NEO And Onchain Differ?
NEO and Onchain are separate entities that exist independently, and neither owns the other. NEO targets the business-to-consumer (B2C) segment —where the “C” can refer to a customer or even a community—while Onchain focuses on business-to-business (B2B) enterprise services.
NEO is funded by a public community, while Onchain is backed by China’s largest private conglomerate, called Fosun.
When asked why he chose Fosun as an investment partner, founder Da Hongfei said: “The three major arms of their portfolio include finance, medical science, entertainment, and lifestyle, which has good synergy with blockchain tech. This is why we chose Fosun Group as an investment partner, because we highly value the Enterprise resource that Fosun provides, a platform for Onchain to display blockchain technology.”
NEO And Onchain: Their Vision
The common founders of NEO and Onchain envision that they will be able to achieve cross-chain interoperability in the future. That is, a mechanism will be developed to connect and share information between blockchains, whether they are public like NEO or private such as those operated by businesses.
As the number of blockchain-based systems continues to grow in both the public and private domains, there will eventually be a need for interoperability among them. The teams at NEO and Onchain hope to fill this gap through their ongoing work.
However, to enable such interoperability, trust and identity become important. That gap will be filled by the intrinsic Digital Identity feature which is an integral part of the NEO blockchain platform.
Essentially, NEO and Onchain may pave the much-needed middle path between completely decentralized, unregulated, and anonymous blockchain systems like Bitcoin and the conventional KYC-compliance of today’s bank accounts and credit cards.
By taking an all-inclusive approach that attempts to involve and serve the needs of all parties—individual users, network contributors like miners, transacting participants, private businesses, and even regulators—NEO and Onchain may be best placed to provide a holistic solution to the ongoing rift between closed-economy regulators and open-system cryptocurrency enthusiasts.
A Solution For China?
The NEO platform acts as the foundation of Onchain’s DNA concept. NEO provides decentralized, public blockchains while OnChain’s DNA fills the need for private blockchains. Linking these systems may enable the best of both worlds.
Onchain has already received an endorsement for DNA from the government of Guiyang, the capital of Guizhou province of Southwest China.
Despite its hard stance on the various decentralized cryptocurrencies and ICOs, rumors are swirling that the government may be looking for an alternate solution and it remains open to working with companies that are willing to play by its rules. Being local Chinese ventures, NEO and Onchain would be the top contenders if this is true.
If the promising Onchain technology can be accepted and integrated with the Chinese government and businesses enabling an all-inclusive solution, it will greatly increase widespread adoption of NEO.
NEO Token Distribution
The cryptocurrency NEO It has the capacity to issue 100 million tokens. This issue is divided into two parts. The first part are 50 million tokens distributed proportionally among NEO supporters during crowdfunding. This portion has already been distributed.
The second part is 50 million NEO administered by the NEO Council. These tokens serve to support the development, operation, and long-term maintenance of the platform. The plans for its distribution are as follows:
- 10 million tokens (10% total) will be used to motivate developers and Board members.
- 10 million tokens (10% in total) will be used to motivate developers in the ecosystem.
- 15 million tokens (15% total) will be used to cross-invest in other blockchain projects, which are owned by the Council and used only for projects NEO.
- 15 million (15% total) will be retained as a contingency.
- Annual use of NEO in principle it should not exceed 15 million tokens.
GAS, The Other Token In NEO
In addition to this, the GAS. The GAS is generated with each new block and is used to pay for transactions within the platform. The initial total amount of GAS is zero. With the increasing rate of generation of new blocks, the total limit of 100 million GAS will be reached in about 22 years.
Every year around 2 million blocks will be generated and the initial generation will be 8 GAS per block. There will be an annual reduction of 1 GAS per block, per year, to coincide with the passage of every 2 million blocks. The reduction will continue to only 1 GAS per block and will remain at that rate for about 22 years. After block number 44 million, the total GAS generated will have reached 100 million and, from this point on, there will be no more generation of GAS from new blocks.
In accordance with this launch curve, 16% of the GAS will be created in the first year, 52% of the GAS will be created in the first four years, and 80% of the GAS will be created in the first 12 years. These GAS will be distributed proportionally according to the NEO retention ratio, registered in the corresponding addresses. NEO holders can initiate a claim transaction at any time and claim these GAS tokens at their retention addresses.
Among the main advantages we can mention:
- Its consensus protocol offers tremendous scalability in contrast with PoW o PoS. This fact has allowed NEO has been able to hit peaks of 2400 TPS so far.
- Your NeoVM virtual machine is highly flexible. The option of programming smart contracts in well-known languages allows developers to focus on developing rather than learning a new programming language.
- It offers interoperability with public or private digital and blockchain services.
- It allows to quickly deploy private networks with different associated services. For example, it is possible to deploy sovereign digital identity services or voting systems in a simple way.
- Thanks to NeoQS, NEO is capable of resisting quantum computing attacks that undermine the security of its encryption systems.
- It has a highly dynamic working and programming environment thanks to its extensive development.
On the other hand, among its disadvantages can be listed:
- dBFT it is an unproven protocol compared to PoW o PoS.
- Its network does not currently have a high level of decentralization that guarantees its security and more community governance.
- Many of the platform options are not yet usable, such as the case of neofs. However, these capacities will be completed with the arrival of NEO 3.0 for the 2020 year.
- It is a little-known project in the West, which has led to very little technical information written in Spanish and even in English.
A virtual machine used for general purposes, NeoVM functions like the central processing unit (CPU) of computers. Apart from performing several complex processes on the blockchain, it also reads and executes instructions on the blockchain in the order in which they were logged.
Thanks to its versatility and speed, it’s easy for smart contracts to be run effectively, and to be transferred to other external platforms that may not necessarily be blockchain-related.
The Neo ecosystem consists of two tokens: NEO and GAS. As the governance token, NEO confers on a user the right to vote on the network, while the GAS token is used to pay for transactions carried out on the network.
This feature functions through static analysis to create what is known as a “call tree,” used to run smart contracts smoothly.
This feature ensures that the blockchain ledger is updated regularly. The blockchain ledger contains information such as digital identity, number of digital assets, storage details, and more.
NeoX is a protocol that facilitates interoperability between cross chains.
This protocol is mainly used for storage purposes. It does this by using the distributed hash table (DHT) protocol.
Fast Transaction Speeds
Neo can perform about 1,000–5,000 transactions per second (TPS).
This program makes use of a cryptography system to ensure that the Neo blockchain is kept safe from external threats like the quantum computing threat. NeoQS is lattice-based, and it keeps Neo’s protocol “quantum safe” — hence the name.
This program simplifies the development processes carried out on the blockchain and makes integration faster.
Different computer programming languages like Java, C#, and C++ can generate codes and perform transactions using smart contracts on the Neo platform. This makes it easy for developers to perform transactions effectively on the Neo blockchain in any language. It also enables Neo to integrate smoothly with other blockchains.
The digital identity confidentially holds all data records concerning the individual users and business organizations on the platform. This digital identity confers on users the license to access, trade and register either physical or digital assets on the Neo blockchain. These digital assets are of two types, namely global and contract.
- Global Assets
These assets have their data displayed on the system space and are easily accessible to smart contract users and customers, which enhances the identification of the asset.
- Contract Assets
These assets have their data displayed on the system space in a private storage part of the smart contracts. Only qualified users and customers are granted access to these assets on the Neo blockchain.
Is Neo (NEO) A Good Investment?
Neo has attracted several high-profile investors, such as Alchemy Pay (ACH) and Shopify. It has many attractive features, like reduced gas fees, outstanding blockchain technology, multiple languages, and interoperability. Perhaps the most noteworthy of all is the launch of Neoverse, a brilliant medium for the creation of non-fungible tokens on the N3 platform.
An increase in the usability of Neo will certainly lead to an increase in its price. If Neo can successfully implement the goals, objectives and features that it’s set out to attain, NEO will not only be the best buy option for short-term investments, but a great crypto to HODL as well.