Cryptocurrency NEO – analysis of features


Cryptocurrency NEO: Overview

NEO cryptocurrency is a large-scale blockchain project, which was conceived as a “smart economy” with the ability to digitally identify and automate business processes.

Every day, at least a few new cryptocurrencies appear in the crypto space, however, only a few of them reach the stage of a full-fledged product, become even less famous and become in demand. But cryptocurrency Neo managed to achieve success and occupy a high position in the ranking.

The NEO cryptocurrency is often called the “Chinese Ethereum”, most often due to the fact that it also provides advanced opportunities for creating smart contracts, like Ethereum. In this article, we will examine in detail whether this cryptocurrency corresponds to its nickname and whether the Neo cryptocurrency can be a real competitor to Ethereum.

Purpose of creating NEO

Unlike cryptocurrencies, which were created on the model of bitcoin (their main task is to act as a means of payment), the Chinese cryptocurrency NEO followed the path of Ethereum – the developers created an entire ecosystem, and not just a coin to pay for goods and services.

The NEO project system includes three components:

  • A platform for creating and launching smart contracts;
  • A peer-to-peer environment for the exchange of any cryptocurrencies and digital assets directly without the participation of a third party;
  • Platform for digital identification (physical assets and personalities);

In fact, Neo should become a kind of ‘bridge’ between the real and virtual economies, which operates on the basis of smart contracts.

History of creation

The history of this coin began a few years earlier, before the crypto community first heard its name. This Chinese cryptocurrency was created as an Antshares project in 2014 by Chinese developers Da Hongfei and Erik Zhan. Three years later – in July 2017 – the project was renamed Neo. In addition, the creators launched an ICO, which lasted from July 1 to July 9, 2017. In total, 100 million NEO tokens were issued. Half of all tokens were allocated for crowdfunding, the creators decided to leave the second half virtually under their control. In general, the coins were distributed in this way:

  • 40% – to investors of ICO NEO;
  • 15% – in case of force majeure;
  • 15% – for the development of the NEO blockchain ecosystem;
  • 10% – for future developments;
  • 10% to early investors;
  • 10% to the development team.

The price of $ 0.036 per 1 NEO coin was set at the ICO, and as a result, the project raised $ 1.8 million. The second 50 million, which are intended to “manage the platform’s advice”, were initially frozen for 3.5 months from the start of the ICO NEO. On October 16, 2017, the “freezing” period ended, and the funds were “released” for use in the interests of the platform and developers.

Neo Team

The project team is small and consists of executives, developers, specialists in public relations and in creating a business strategy. The main composition includes:

  • Da Hongfei is a co-founder and CEO. He was educated at South China University of Technology with a degree in Technology and English. Prior to founding his own companies, Onchain and Neo, he worked at IntPass Consulting in Shanghai, where he served as CEO and member of the board of directors. Since he got carried away with Bitcoin technology in 2011, he decided to create his own blockchain project.
  • Erik Zhang is a CTO and chief developer. He graduated from Shanghai University with a degree in computer science. He is an expert in the field of blockchain technology and computer security and, in addition, a certified auditor of information systems (CISA). It was Eric who developed a special consensus algorithm for the Neo blockchain.
  • Tony Tao is the secretary general. He is also a partner of NEO Global Capital (NGC), vice president of strategic planning at Onchain and founder of the X-Order project.

Consensus algorithm

Consensus in the Chinese cryptocurrency network is achieved through the dBFT (Delegated Byzantine Fault Tolerant) algorithm, which is based on the Byzantine fault tolerance protocol. The difference between dBFT and Proof-of-Work or Proof-of-Stake is that it does not allow creating parallel branches on the blockchain or canceling transactions after verification. This greatly improves network security.

The principle of this algorithm is that token holders delegate their right to confirm transactions and create blocks to the so-called bookkeeper – a group of nodes that is responsible for achieving consensus on the network. Voting is conducted in real time.

It is noteworthy that only holders who have verified their identity, i.e. Registered under their real name and provided the relevant documents. For this, the ecosystem uses its own digital identification technology, which we will talk about below. This approach provides a high level of security and protection against intruders, but there is no need to talk about any anonymity in this case. It is also worth noting that at the moment virtually all nodes are owned by Neo.

On the network, it takes from 15 to 20 seconds to create one block, i.e. On average, about 2 million blocks are created per year. At the moment, the blockchain speed is 1000 transactions per second – a very good indicator for an open decentralized network. And, in addition, according to the developers, the potential of Neo is 10,000 transactions per second after the qualitative optimization of the protocol.

 Smart Contracts NEO

The Neo cryptocurrency smart contract system is called NeoContract and runs on the NeoVM virtual machine, which was created by developers from scratch. Its peculiarity is that, unlike, for example, the Ethereum virtual machine, it is very light and, in addition, very similar to the JVM (Java virtual machine). Due to its lightness, NeoVM can execute all instructions of smart contracts in real time without delay. In addition, its functionality in the future can be expanded through the integration of some JVM options (perhaps this is how the developers hope to achieve a network speed of 10,000 transactions per second).

Another advantage of NeoVM is that developers can create smart contracts in several languages, including also popular languages, such as, for example, Java, C #, Go and Python. This is a significant advantage of the Neo cryptocurrency over Ethereum, whose virtual machine supports only smart contracts written in the special Solidity language.

Smart Neo contracts can be made very functional due to the compatibility of NeoVM with the digital identification service, cross-chain medium and the distributed storage protocol. When launching a smart contract, NeoVM connects to the corresponding services, which also resemble a kind of virtual machine. This allows you to achieve almost unlimited functionality and create even the most complex dApps. Created projects comply with the NEP-5 standard token.

Cross chain environment

Cross-chain compatibility is achieved through the NeoX protocol, which consists of two parts:

  • Environments for the exchange of digital assets between different blockchains – users can exchange any cryptocurrencies or digital assets without involving a third party. In addition, the functionality of this part of NeoX can be used to create smart contracts – the NeoX protocol is a kind of “bridge” between NeoVM and a certain blockchain if the latter is directly incompatible with the virtual machine.
  • Distribution Protocol – it allows you to increase the speed of smart contracts. In simple words, the principle of operation can be explained as follows: a smart contract is divided into several parts that run on different blockchains. At the same time, consistency and integrity is maintained. The algorithm of this protocol is similar to the sharding technology on which the Zilliqa cryptocurrency (ZIL) is based.

Distributed data storage

Distributed storage is called NeoFS and provides maximum security. Large files are divided into parts of a fixed size and sent for storage to different nodes.

However, NeoFS has a serious and yet unresolved problem – there is no balance between the increased storage requirements and the need for this. Those. Not all files require equally high storage security.

To solve this problem, it is planned to introduce additional support nodes that will coexist with trunk nodes – the former will be used to store ordinary files that do not require a high degree of security, and the latter to store important files that require the highest level of security and reliability. It is noteworthy that the first function will be available for free or almost free.

NeoFS is compatible with the NeoContract system, which allows you to include large files in smart contracts and access them directly from NeoFS. In addition, it is also integrated with a digital identity service.

Quantum technology protection mechanism

The developers took care of the future of the Neo ecosystem and created a mechanism for protection against quantum computers called NeoQS (Quantum Safe). At the moment, the quantum “threat” is irrelevant for technologies built on the basis of RSA and ECC open source algorithms. However, Neo – well done, because they think at least a few years in advance.

Token system

Cryptocurrency Neo has a special system of organizing tokens – there is a main token, which is the main asset (NEO). Interestingly, it is indivisible, the minimum unit is 1 NEO. NEO is used to vote, and is also required for the extraction of the second type of token – NeoGas. The latter is used to launch smart contracts and pay commissions within the network.

As we said above, all NEO cryptocurrency coins were mined using premine, i.e. All at once. Emission of NeoGas occurs through PoS mining – a certain amount of GAS is “released” when each block is generated. A total of 100 million GAS was created, the last of which will be produced in 2039 (from the moment the network was launched, 8 GAS were mined for one block, and this amount will decrease by 1 GAS every year).

As a holder of NEO on a wallet, you can receive NeoGas tokens (note that storage on exchanges is not considered). The minimum number of coins you need to have is 2000 NEO, which will bring you 1 GAS every 24 hours, i.e. If you have 10000 NEO on your balance, then you can receive 5 GAS daily.

Mining NEO

In the community, cryptocurrency Neo is “famous” as one of the most centralized currencies. Currently, only seven nodes are involved in the creation of blocks in the network, five of which are owned by Neo Foundation, and the remaining two are telecommunications company KPN from the Netherlands and the City of Zion community, which are partners of the Neo Foundation.

At the end of last 2018, the leadership of Neo announced its plans for the upcoming “decentralization”.

Firstly, it is planned that by the end of November 2019, five of the seven nodes that belong to the Neo Fund will be replaced by nodes of other organizations that have successfully passed the audit. The selection procedure for node operators will be by voting. Neo representatives said that if this plan is successfully implemented, then from the end of 2019 the number of nodes will be increased in the same way.

Cryptocurrency Neo rival Ethereum

Neo is often compared to Ethereum, calling it another ‘Ethereum killer.’ However, if you dig a little deeper, you can see that although these two projects intersect, they ultimately have different goals.

The idea of ​​creating Ethereum is to implement a cheaper, more affordable and secure Internet, which many have already named the ‘Internet 3.0’, by providing developers with a convenient platform for launching dApps. Neo is more focused on the state and companies, since the main goal of the creation was to implement a “smart economy” with a digital identification function.

The orientation of the Neo cryptocurrency towards the creation of a “smart economy” is a prerequisite for creating an entire ecosystem of the exchange of various digital assets among themselves. Cross-chain transactions are a “natural” feature of Neo. On the Ethereum platform, atomic swap functionality has not yet been developed.

However, Ethereum is an absolute leader in the ranking of platforms for launching dApps and conducting ICOs, and Neo is still far from it. However, as we said above, developers are constantly working to improve the Nex environment, which allows you to run a decentralized application, and there are already a decent number of companies that prefer Neo Ethereum.

Another important aspect is decentralization. Neo was originally focused on governments, and this fact says it all. The creators openly declare that Neo is not an anonymous platform and never will be.

In addition to the above, these two projects have differences in technical implementation:

  • Consensus Algorithm. At the moment, Ethereum cryptocurrency works on PoW, however, in the near future, the developers promise to switch to PoS, which will make transactions cheaper and the network faster. Consensus in the Neo blockchain is achieved according to the rules of the dBFT algorithm, which we talked about above.
  • Network speed. At the moment, Neo cryptocurrency processes transactions at a speed of 1000 TPS, and Ethereum – only 15 TPS. However, according to the developers, Neo can reach a figure of 10,000 TPS.
  • Create parallel branches. The Ethereum protocol allows multiple parallel branches to occur on the blockchain. In Neo, thanks to dBFT, this situation is excluded, which allows it to be safer and more reliable.
  • Token system. There are two tokens in the Neo network, each of which performs its function – NEO is the main asset, and GAS is used to pay commissions for transactions. Ethereum has only one single token – it is Ether (ETH). Some people think that there is a separate token for paying for “gas”, but this is not so – these are just fractional parts of ETH called Wei (like Bitcoin and satoshi).
  • Programming languages ​​for creating smart contracts. Neo currently supports six languages: C #, VB.Net, F #, Java, Kotlin and Python, and the developers plan not to stop there and expand this list. In Ethereum, you can create smart contracts in only one language that was specifically developed for this – Solidity.
  • Speed ​​of execution of smart contracts. Neo optimizes the contract code before launching it, while Ethereum does not (the developers plan to implement a similar algorithm in the future). However, despite this, Ethereum smart contracts are faster, at least for now (until Neo has brought this technology to the proper level).

Advantages and disadvantages of NEO

The Neo cryptocurrency is one of the most serious projects in the entire crypto space, therefore it is quite natural that this coin has many advantages:

  • The original idea. The creators are developing not just a coin, which will be used only as a means of payment, but an entire ecosystem. This is the first blockchain project dedicated to the “smart economy”.
  • The introduction of advanced technology. Neo cryptocurrency offers a number of innovative solutions, including digital identification, cross-chain medium, protection against quantum hacking.
  • High security. The dBFT consensus protocol does not allow the creation of parallel branches of the blockchain and does not allow the cancellation of already sent transactions.
  • The possibility of passive ‘earnings’. When storing a minimum of 2000 coins, NEO cryptocurrency holders stably receive GAS tokens in passive mode.
  • Availability for developers. Support for popular and common programming languages ​​makes the Neo platform more accessible. Developers do not need to learn a special programming language to write a smart contract.
  • High transaction speed. At the moment, Neo is on the list of projects that have a high network speed indicator (for example, Tron has 2000 TPS, Eos has 1200 TPS).
  • Development of ‘antiquantum’ protection. A special NeoQS protocol will protect the network from hacking with the help of quantum computers (at least, so say the developers).

However, there are also several drawbacks that immediately make this cryptocurrency uninteresting for a whole category of users who value privacy and decentralization:

  •  Pseudo-decentralization. All nodes are owned by Neo and the partner companies that have passed the audit. Moreover, the creators openly declare that true centralization is out of the question.
  • Lack of anonymity. This paragraph proceeds from the first: in order to use the platform, you must confirm your identity by providing real personal data and providing documents.
  • Limited transaction speed. Due to the nature of the dBF consensus algorithm, the maximum potential network speed that can be achieved is 10 thousand transactions per second (at least at the current time of technology development).

The high cost of smart contracts. The launch of a smart contract will cost 500 GAS ($ 1085 at the time of writing). That is why the Neo network in 2018 launched only 87 smart contracts.

  • Inability to make micropayments. The NEO token is indivisible, the minimum amount that can be transferred is 1 NEO.

Prospects Neo

Neo is an ambiguous cryptocurrency. On the one hand, it offers advanced technical solutions, but on the other hand, the Chinese cryptocurrency Neo is absolutely centralized. The main audience for this project is corporations and state governments. So, in the fall of 2017, the media reported that the founder of Neo was advising the Chinese authorities regarding the ban on ICOs. Paradoxical as it may sound, Da Hongfei supports this idea and calls ICO a “dot-com bubble 2.0”, despite the fact that his own platform was created to launch tokens.

But China is not the only one interested in Neo technology. At the beginning of winter 2019, rumors appeared in the network that the Russian government would also cooperate with the platform. Although this news was not officially confirmed by potential partners, the NEO coin then grew by more than 13% per day – and this against the background of a general drop in the market.

Neo is interested not only in the state, but also in individual companies. So, several startups have already conducted their ICOs on this platform, in particular Guardium, Gagapay Network, Asura Coin, Ronaldinho Soccer Coin.

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