What is Neo? (NEO)

Cryptocurrencies are not only growing in value at a rapid rate but also improving its underlying technology with new forms of the application being introduced to the market almost monthly. The key to these crazy adoption rates has been the fact that the original concept founded in Bitcoin was open-source. While those who have build projects around it like Litecoin and Ethereum have honoured that tradition by remaining open-source and contributing to the community as a whole.

When concepts and code are shared in this manner new projects are inevitable as eager developers run with the idea, try to improve on it stamp their own mark on it. One such digital currency is NEO, not to be confused with Keanu Reeves character in the Matrix, NEO a Chinese based cryptocurrency with some unique properties.

What is NEO?

Neo began life in 2014 and was known back then as Antshares. It was founded by Da Hongfei and Erik Zhang and has been referred to as ‘China’s first blockchain platform’. Its popularity really only kicked off in 2016, supposedly in response to growing interest in the space and a need for blockchain solutions that meet the requirements of both government regulators and private companies.

In 2017, AntShares was rebranded as Neo. NEO is seen as an iteration of the Ethereum’s smart contracts concept along with a unique blockchain algorithm that improves upon Ethereum’s model.

While the basics still apply, it also supports decentralized commerce, identification and digitization of several assets. NEO also closes loopholes that have caused some Ether contracts to be vulnerable to hackers. Apart from the NEO cryptocurrency, NEO has one more crypto-token called GAS (formerly know as ANC-Antcoins).

Why should you pay attention to NEO?

SegWit

Segregated witness (SegWit) was a Bitcoin blockchain event in which miners and users voted on block-size changes to make the chain more useful as a transacting platform. They succeeded overwhelmingly, giving the untested system more credibility and boosting the price. For those not in the know surrounding Segwit, it is an extremely controversial subject. It is a different take on the transaction protocol that speeds up transfers by splitting the transaction into two segments, removing the unlocking signature (“witness” data) from the original portion and appending it as a separate structure at the end.

Ethereum Valuation

Markets draw obvious parallels between NEO and Ethereum. While ETH is the West’s smart contract player, NEO is a far East powerhouse. If Ethereum can hit $400 per coin, then its speculated that NEO could see a similar run, especially since it has a bigger market to play in.

China Crypto Support

Fiat troubles and technological prowess have made China one of the largest crypto markets in the world. NEO looks to take a piece of their fervour, and many believe the sky is the limit.

Superconducting Transactions

In a traditional currency exchange, orders are placed and matched in a centralized marketplace. The process is efficient, but it requires that the user release control of their funds to the exchange. By automating the placement and matching of orders across a consensus network, you can ensure that orders are matched and processed fairly and transparently, effectively creating a decentralized exchange. But this has trade-off as it results in slower transaction times with adjustments having to be validated across the network.

Neo proposes a system whereby exchange transactions are settled on the blockchain, but order matching is handled off-chain by a central exchange. Neo calls these transactions ‘Superconducting Transactions’. This is intended to provide the efficiency of centralized exchanges with the security of a decentralized exchange.

NeoX

NeoX claims to allow transactions to traverse blockchains. Similar protocols involve generating smart contracts that serve to lock funds on one blockchain in return for access to funds on an alternate chain.

NeoFS

NeoFS allows large files to be divided and distributed across the network. Users can specify the level of reliability they expect of a file. Files with low-reliability requirements can be stored and retrieved at minimal cost. For a higher fee, data can be stored on more reliable nodes.

NeoQS

Quantum computers threaten the security of certain cryptographic techniques. Neo uses a lattice-based cryptographic mechanism that it calls NeoQS (Quantum Safe) which is theoretically resistant to attacks from quantum computers. It’s not likely that quantum computing will affect cryptographic systems in the near future, but it does offer some peace of mind.

Byzantine Fault Tolerance

With dBFT and some other key optimizations, Neo claims to be able to handle over 1,000 transactions per second, with a goal of optimizing to over 10,000 transactions per second

Smart Contract

The smart contract was first proposed by the cryptographer Nick Szabo In 1994. NEO has a decentralized, highly reliable, independent and tamper-resistant smart contract system called NeoContract.

What is NEO being used for?

1. Dapps

Programmers can code and build dapps over the NEO platform. NEO will support the development of dapps by providing more latest and up-to-date development tools and techniques.

2. Products and services

Many merchants providing their products and services online are already accepting bitcoin and they often also take NEO, if not you can use services like shapeshift to convert your NEO into BTC or ETH which are more widely accepted.

Can you mine NEO?

This is one of the major technical differences between NEO and Ethereum (as well as other cryptocurrencies).Cryptocurrencies that use Proof of Work (PoW) to validate transactions allow anyone to mine their currency as a reward for supporting the network while Proof of Stake (PoS) is a consensus mechanism that rewards users for holding a currency that is network support, both have their pros and cons. The problem with PoW is that it requires a lot of electricity to ensure network security by making nodes compete against each other to solve cryptographic puzzles by hashing.

PoS, on the other hand, lowers this electricity requirement by making validating nodes stake their currency in order to verify transaction incentivizing honest behaviour. But PoS still suffers from the possibility of a chain split in the event that a subset of nodes disagree with administrative decisions – like the split we saw last year which resulted in the creation of Ethereum Classic.

NEO instead uses Delegated Byzantine Fault Tolerance alternative (dBFT) as it’s consensus mechanism which offers lower electricity costs and removes the possibility of a chain split which makes it useful for its goal of digitizing real-world financial assets. Participants in the system are able to designate certain nodes as bookkeepers. A bookkeeper node must maintain a minimum balance of NEO and meet certain performance requirements. Bookkeepers are tasked with verifying the blocks that are written to the blockchain.

If two-thirds of the nodes on the network can agree with a bookkeeper’s version of the Blockchain, the 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. Because this consensus only needs to be replicated across a subset of the network, it is said to be more efficient than classic “Byzantine Fault Tolerance”. The network as a whole consumes fewer resources and can handle higher transaction volumes.

Can you earn NEO?

You can earn GAS a token built on the NEO network, simply by hodling NEO. All You will have to do is create a native NEO wallet, purchase NEO from an exchange and then send the NEO coins to your native NEO wallet. You will be rewarded daily with Gas for staking the network. Neo doesn't automatically credit Gas into your account because this would spam the blockchain.

Instead, you must claim the NeoGas when you want it by transferring your Neo to yourself. You can either continue to hold your GAS or sell your GAS on a few of the popular exchanges.

Should you invest in NEO?

NEO has a great team behind it, a large market to expand in and some really novel ideas that will take it forward. Unfortunately, it lacks mainstream appeal and adoption which it really needs to address in order to survive.

NEO still has a long way to go to create a superior product but their cooperation with Microsoft has put them in more favourable position as they look to syndicate their software within the software giants distribution channels. These are good signs for the currency's future in a growing market, however, cryptocurrency market is very much the wild west at the moment and no one knows which currency will become the superior product we choose to run with in the future.

For more on NEO check out their official website

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Disclaimer: This article should not be taken as, and is not intended to provide any investment advice and is for educational purposes only. As of the time posting the writers may or may not have holdings in some of the coins or tokens they cover. Please conduct your own thorough research before investing in any cryptocurrency as all investments contain risk.

Tags: Cryptocurrency, blockchain