What is NEO cryptocurrency?
Chinese market, which currently has rather tricky position in crypto space, has introduced NEO platform to the world. NEO is known as Chinese Ethereum and was rebranded from Antshares in June 2017. As it officially stated on the website, Neo in translation from Greek means “novelty”. In this article, we are going to consider in detail this cryptocurrency and its specific functions. The creators of Neo platform Da Hongfei and Erik Zhang from OnChain Company announced that this project is designed to combine the traditional and digital economies to create a new "smart economy". After two rounds of crowdsale, NEO project sold 40 million NEO tokens and received $5,050,000. The total issue of NEO coins is 100 million.
WHAT IS NEO SMART ECONOMY?
Neo ecosystem combines three main components: digital assets, digital identification and smart contracts. Integration of such functions aims to organize the transfer of assets from point A to point B with minimal costs.
- Digital Assets. Digital asset exists in binary form. We can call digital asset both Bitcoin and a photo on a computer. In order for a digital asset to remain “digital”, it must have the right to use it. Usually, these assets are stored on electronic carriers or in another centralized environment, which may be unsafe. Blockchain technology makes the digitization of the assets transparent, free of a third party and, as a result, safer.
- Digital Identity. Digital identity is information that computer systems use to confirm that a person really owns an asset. The agent that is needed to be identified might be a person, organization, application, or device. Every day we leave a huge digital footprint on the network when we register on websites, buy goods on Ebay or receive transfers via PayPal. Digital identity seeks to protect users from the leakage of personal data. In order for our personal data not to fall into the hands of third parties, we need secure digital IDs. Neo network suggests using identity verification using fingerprints, voice, facial features, sms and some other multifactor methods.
- Smart Contracts. A smart contract is a condition that is executed automatically when users sign it. After confirmation, it allows them to share assets without any intermediaries.
WHAT ARE THE TOKENS OF NEO ECOSYSTEM?
Neo blockchain uses two types of tokens: NEO and GAS. The difference between them is as follows:
- NEO gives the user certain rights in the network. It allows the holder to make decisions for the network and vote for the choice of nodes that support the functioning of the network. NEO can be called a kind of digital share.
- GAS is an autonomous digital coin that fuels smart contracts. It is required to perform online operations.
The difference between NEO and GAS is also that there are 100 million NEOs already formed in the first block of Neo blockchain - in genesis block. However, 100 million GAS have not been produced yet. They will be generated in accordance with the 100 million NEOs through the attenuation algorithm in about 22 years. Nevertheless, GAS will be generated to the address containing NEO. That is, if you transfer NEO to a new address, then the generated GAS will also be credited to the new address.
WHAT ARE NEOCONTRACTS?
Neo smart contract system consists of three parts:
Neo Virtual Machine (NeoVM). This universal virtual machine allows running and processing commands quickly. The developers claim that the machine can process an unlimited number of transactions per unit of time. NeoVM digital IDs comply with the X.509 Public Key Infrastructure standard, and the machine is suitable for both small programs and combination with the Integrated Development Environment (IDE).
InteropService. This feature can be described as a virtual machine for a virtual machine. InteropService downloads blockchains, digital assets, digital identifiers, and other major services. Thanks to this feature, smart contracts gain access to all these facilities at runtime to extend functionality. It also allows combining NeoVM with any block and non-block networks.
DevPack. DevPack compilers allow Java byte code and .NET MSIL to be assembled into a NeoVM instruction set. This enables Java/Kotlin and C# developers to start developing smart contracts in VS, Eclipse and other familiar IDEs without learning new languages.
WHAT CONSENSUS MECHANISM DOES NEO ECOSYSTEM USE?
Neo Blockchain initially abandoned the Proof-of-work cost algorithm and developed its own Delegated Byzantine Fault Tolerance algorithm (DBFT). Its fundamental difference is that the blockchain records the block only after it is approved by two-thirds of the nodes. For example, with the proof-of-stake algorithm, after the node has formed a block, it immediately records it to the blockchain and sends it to other nodes. DBFT protects the network from sudden forks when part of the network is working on one chain, while other nodes reject it and work on another version of the blockchain. This consensus mechanism allows supporting up to 10,000 transactions per second.
WHAT FEATURES DOES NEO PLAN TO IMPLEMENT IN THE NEAR FUTURE?
NeoX that aims to enable cross-chain compatibility. This feature allows carrying out transactions between different networks and transfer various digital assets.
NeoFS Protocol that use distributed hash tables. This file storage protocol indexes data through the contents of a file header (hash), rather than the path to the file (URL). Large files will be divided into fixed-size data blocks. These blocks will be distributed and stored in different nodes. NeoFS also plans to create reference nodes to balance between data security requirements and the reliability of their storage. This will allow users to select file security requirements. With low reliability requirements, files will be saved and accessible at a low price. With a high degree of reliability, backbone nodes will provide files.
NeoQS that offers protection from quantum computers. Despite the fact that such computers are likely to appear in a few decades, they will definitely appear. Many experts call this day the death of cryptocurrency. NeoQS algorithm focuses on security and cryptocurrency preservation in the era of quantum computers.
It is also worth noting that Neo was able to create and organize the management of digital assets using the blockchain according to all legal requirements. This fact is important because cryptocurrency in general does not have a solid legal field and in many countries is rejected solely for this reason.
Neo looks like a rather strong project from the technological side: it has developed with its own unique services and uses a universal programming language that is convenient for programmers. Additional interest it aroused thanks to the approval of the project in China, what is its main advantage in this Asian country.