NEO is China’s first open source blockchain that uses blockchain technology to produce a smart contracts ecosystem. Founded by Da Hongfei and Erik Zhang, Neo was previously known as AntShares (ANS) in 2014.
NEO is very similar to Ethereum and enables developers to build decentralized applications (DApps). However, it has other innovations such as a Consensus Mechanism, Quantum-Computer-Proof Technology (NeoQS) and Cross-chain Interoperability Protocol (NeoX) already built in.
NEO Smart Contracts
Smart contracts in NEO are known as NeoContracts. They allow developers to build decentralized applications on the blockchain. Smart contracts are stored on the blockchain and are automatically executed when required criteria are satisfied. Whereas Ethereum smart contracts are written only in Solidity, NeoContracts can be written in all the major coding languages such as C#, Java, and Go.
Smart contracts in NEO have some useful features:
- Timestamps are registered on new blocks which are created every 15 seconds. Smart contracts can be hence used to execute automated payments and other time-related agreements.
- By inserting a random number into the Nonce field of every new block, Smart contracts have access to random numbers that can be identified by every node on the blockchain.
- Data can be stored privately or publicly on the blockchain and can be referenced by the smart contracts.
NEO’s smart contracts ecosystem allows for the automation of the storage and the exchange of digital assets. It makes it possible with the use of digital identity, digital certificates, and superconducting transactions. Chinese regulation gives equally and binding status to Digital signatures and allows for the formalization of a digital identity.
Digital certificates tackle the issue of untrustworthy users on the network. Through the use of digital certificates, anyone can register and trade assets on the blockchain and have it regulated and protected according to domestic legal rules.
The cryptocurrency also utilizes superconducting transactions that make trustless digital exchange a possibility. With the use of this mechanism, buyers and sellers of digital assets are matched off-chain, on a centralized exchange. However, actual transactions involving digital assets are settled on the blockchain itself. It is intended that this mechanism will make transacting on the blockchain an efficient one.
NEO’s Smart economy maintains a trusted link between digital identities, digital assets and physical entities along with digital certificates.
NEO and GAS are the tokens that drive the network. Both are capped at 100 million tokens each. It can be used in the exchanging of digital assets on the blockchain.
NEO tokens give voting rights and ‘dividends’ in the form of GAS. The smallest NEO unit is 1 NEO and cannot be divided. Be sure to plan for your exchanges fees when transferring NEO.
GAS tokens have an emission rate of 8 GAS per block. The rate of emission is reduced by 1 token for every 2 million blocks generated. Sometime around 2039, GAS circulation will reach 100 million and production will cease. Unlike NEO, GAS can be divided.
Users pay in GAS to deploy and run smart contracts. Fees are proportional to the computing resources consumed by the contract. These fees are distributed to ‘bookkeepers’ as a reward for their actions on the network.
The consensus is achieved through a mechanism called Delegated Byzantine Fault Tolerance (dBFT) which makes use of Digital Identification. Users in the system designate certain nodes as designated as bookkeepers. Bookkeepers must satisfy condition like a minimum balance of NEO, performance standards etc.
Bookkeepers validate blocks that are to be written into the blockchain. Two-thirds of the nodes need to agree for consensus to be achieved. The consensus process is repeated until consensus is achieved. As this process is more computing resource efficient, a transaction rate of 1,000 s per second is possible. Ethereum’s current rate is 15 transactions per second.
Digital Identification and dBFT achieve scalability but lead to more centralization.
NEO token holders are network owners that manage the network by voting on bookkeepers/ consensus nodes. BookKeepers set the transaction fees and to continue as one they need to set low transaction fees.
NEO holders gain their extra gas from registration and changing of assets, and not from transaction fees. Bookkeepers earn from transaction fees. Currently, the transaction fees are very low as Gas tokes are released as block rewards.
As more users join the blockchain, more assets will be registered and they pay a service fee in GAS which will be distributed to NEO holders proportionately.
An NEO holder will receive it even if he is offline (paper wallet) since confirmations are done by the consensus nodes and recorded in the blockchain.
NEO’s off chain governance mechanism, known as the NEO Council is accountable to the community and is responsible for promoting and developing the ecosystem.
Special Features Of NEO
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 as the private key are always with the users themselves.
NeoX serves as a Cross-chain Interoperability Protocol. This means that the network provides a means for digital assets to be exchanged across different blockchains (cross-chain assets exchange protocol) and make it possible for a smart contract could be executed on across multiple blockchains (cross-chain distributed transaction protocol).
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.
Quantum computers threaten the security of certain cryptographic techniques. Neo uses a lattice-based cryptographic mechanism that it calls NeoQS (Quantum-Computer-Proof Technology) which is intended to stop the blockchain from being compromised by quantum computers.
The underlying aim is for the digitalization of real-world assets. With the use of Digital Identities and smart contracts, NEO is building a smart economy for tomorrow.
Digital Identity + DIgital Assert + Smart Contracts = Smart Economy