Called the “Chinese Ethereum” NEO has a lot of hype but, does it live up to it?While similar to Ethereum, it has some interesting features which deserve a close examination. In this guide we are going to do a deep dive on NEO.
The History of Neo Blockchain
According to their website, Neo is a “non-profit community-based blockchain project that utilizes blockchain technology and digital identity to digitize assets, to automate the management of digital assets using smart contracts, and to realize a “smart economy” with a distributed network.”
Neo’s main aim is to be the distributed network for “smart economy”. As their website states:
Digital Assets + Digital Identity + Smart Contract = Smart Economy.
Neo was developed by Shanghai-based blockchain R&D company “OnChain”. Onchain was founded by CEO Da Hongfei and CTO Erik Zhang. Research on Neo started around 2014. In 2016, Onchain was listed in the Top 50 Fintech Company in China by KPMG.
The Neo Project was funded by two crowdsales. The first crowdsale took place on October 2015 lasting for 10 days during which 17.5 million NEO tokens were sold for $550,000. In the second crowdsale, the remaining 22.5 million NEO tokens were sold for $4.5 million.
For those that don’t know what smart contracts are. Smart contracts are automated contracts. They are self-executing with specific instructions written on its code which get executed when certain conditions are made.
Anything that runs on a blockchain needs to be immutable and must have the ability to run through multiple nodes without compromising on its integrity. As a result of which, smart contract functionality needs to be three things:
The NEO system includes:
- Delegated Byzantine Fault Tolerance (DBFT) algorithm — This is a consensus mechanism (instead of the traditional proof of work/stake) that allows the system to resist the Byzantine Generals problem and maintains consensus even if some nodes bare malicious intentions
- NeoX — This system will create the ability to execute and operate across various Blockchains
- NEO Contract — Is the mechanism for creating smart contracts seamlessly in scalable, high performance environments that integrates pre-existing codebases (e.g. C#, VB.Net, F#, Java, Kotlin)
- NeoFS — This is a service which allows decentralized storage (like a peer to peer Dropbox)
- NeoQ — A lattice-based cryptographic mechanism which creates problems that cannot be solved by quantum computers and ensuring being quantum-proof
NEO is often called the Ethereum of China, but why?
NEO is positioned as a “public cloud” and is part of a much bigger strategy by the Chinese government in establishing pre-eminence as a Blockchain platform industry leader. They want developers, in general, to use their tools and platform and develop the ecosystem. We are already seeing this with the City of Zion team.
How is NEO different than Ethereum?
NEO supports many additional code bases (e.g. C#, VB.Net, F#, Java, Kotlin) while Ethereum has it’s own proprietary language called Solidity, which requires developers to learn that before any development can take place. This means a longer learning curve and barrier to entry which could hinder the number of developers that can enter the ecosystem.
Critiques concerns and weaknesses
NEO essentially has a 100% pre-mine as well as proof of stake model which allows users to derive additional coins (in the form of GAS) by holding them in a wallet. NEO “distributed” coins through a crowdfunding event which allowed people to invest but, NEO still made money from the sale. Since there was no mining and only issuance of tokens this greatly centralizes the distribution.
As mentioned in our previous article, NEO was divided into two batches: 50 million which were sold via crowdfunding (and given to early contributors) while 50 were reserved to be “managed” by the NEO Council.
The “lock out” period ended on October 16, 2017 releasing funds for use for development and other purposes:
- 10 million NEO go to NEO developers and NEO Council members
- 10 million NEO as incentives for developers in the NEO ecosystem
- 15 million NEO invested in other auxiliary Blockchain projects used by NEO
- 15 million NEO earmarked for “contingencies”
Some may feel that these multiple millions of NEO are in the hands of the developers could cause dumping on the market and other actions that might affect the price or morale of the economy.
Also, some of the areas mentioned above are a bit vague and could be hard to distinguish if funds are being used to those exact parameters. (Which may end up changing as the project evolves.)
In addition, as with all cryptocurrency initiatives, there must be a network effect of adoption for anything substantive to happen long term. This has not fully taken place yet on a developer use level with NEO despite all the hype and potential offered by this initiative.
The Two Tokens: NEO vs GAS
The Neo ecosystem has two tokens:
- NEO — formerly known as Antshares (ANS).
- GAS — formerly known as Antcoins (ANC).
Image Credit: Coin Market Cap.
NEO has a total of 100 million tokens.
Ownership of the NEO gives the holder rights to manage and make decisions for the network. These rights include bookkeeping, NEO network parameter changes etc.
The NEO token can’t be subdivided into decimals with the least possible unit being 1.
The 100 million NEO tokens is divided into two portions. The first portion of 50 million tokens was distributed during their ICO.
The second portion is 50 million was locked up for a year (till October 16 2017) and is to be used only for long-term growth and support of NEO projects and for the long-term development, operation, and maintenance of the NEO ecosystem. The plans for these 50 million tokens is as below:
- 10 million tokens will be used to motivate NEO developers and members of the NEO Council
- 10 million tokens will be used to motivate developers in the NEO ecosystem
- 15 million tokens will be used to cross-invest in other block-chain projects, which are owned by the NEO Council and are used only for NEO projects
- 15 million will be retained as a contingency
- The annual use of NEO in principle shall not exceed 15 million tokens.
If you want to see a video where the founder of NEO talks about the differences between Ethereum and NEO.
It is too soon to say whether it can live up to the moniker or not, but the biggest advantage that it has over Ethereum is the relatively low barrier to entry. Since the developers don’t have to learn a new language to create smart contracts it can definitely look appealing. How it fleshes out in the future remains to be seen. However, Neo is backed the Chinese government and bigshots like WINGS and Alibaba.
We are not sure whether it will “kill” Ethereum or not, but what we do know is that it presents an amazing platform for developers to add to the ever-expanding cryptosphere.
CryptoMeNow is on a mission to make cryptocurrency easy for everyone to understand.
Our core product is our free daily newsletter where we send you need to know information about cryptocurrency that everyone can understand in less than 3 minutes a day.
Please subscribe to our newsletter and share it with your friends! You can subscribe directly at CryptoMeNow
You can also follow me on Twitter @itswilson8