NEO, frequently nicknamed within the cryptocurrency community as The One, Chinese Ethereum or Ethereum ‘‘killer’’, is a blockchain platform that implements digital assets, dApps and smart contracts, and tries to solve some scalability and regulatory issues of its competitors. With strong partnerships and support from the Asian cryptocurrency community, NEO is one of the most promising currencies in the crypto-assets space, with the ambitious goal of becoming the main “smart economy” of the world during the next few years.
A word to the wise. All cryptocurrencies, including NEO, are still largely considered to be in the experimental stage and as such should be treated as high risk assets. In any investment account, high risk assets should only represent a small portion of your overall portfolio.
NEO was introduced in 2014 under the name Antshares by China-based company Onchain, a blockchain-specialized company founded in 2014 by Da Hongfei and Erik Zhang. Two crowdsales in late 2015 provided the founding for the project. On these crowdsales, 17.5 million and 22.5 million NEO were sold for $550,000 and $4.5 million, respectively.
On 22nd June 2017, in an event at the Microsoft Headquarters in Beijing, the rebranding process from Antshares to NEO took place, what vastly increased the renown of the project that was soon to become one of the most prominent projects in the whole cryptocurrency sphere.
- Crypto-asset type: Utility;
- Maximum supply: 100,000,000 NEO;
- Circulating supply: 65,000,000 NEO;
- Inflationary cryptocurrency - Non-circulating supply periodically released until max supply is reached;
- Protocol: Delegated Byzantine Fault Tolerance (dBTF).
Ethereum changed the whole cryptocurrency sphere by introducing a new layer when compared to Bitcoin by developing a platform where smart contracts and other tokens and ICOs can be developed. On Ethereum, smart contracts are written using special programming languages like Solidity. NEO, on the other hand, allows programmers to use a variety of already established languages, like C# and Java, making software development much more approachable.
A smart contract is analogous to a traditional contract between two parties, with the difference that the enforcement of the contract is guaranteed by the underlying blockchain and therefore there is no need for a central authority or legal system to enforce it. Smart contracts were first proposed in 1994 by Nick Szabo and found their first largescale implementation on the Ethereum network.
An Initial Coin Offering (ICO) is the equivalent in the crypto-sphere of securities’ IPOs. Unlike IPOs, which are harshly regulated, ICOs are still lacking significant regulation and allow average Joe investors to support their favourite projects from a very early stage. Some ICOs have been extremely successful, raising hundreds of millions of dollars.
The goal of NEO is to establish itself as the main smart economy of the world. A smart economy implements digitized physical assets whose ownership is stored and guaranteed by the blockchain. The NEO environment, and the different dApps built on top of it, allows users to identify themselves on the blockchain, store and trade digital assets or create decentralized organizations, among many other things.
NEO implements a modified Proof-of-Stake model named Delegated Byzantine Fault Tolerance (dBFT), as opposed to the more classical Proof-of-Work model used by Bitcoin and Ethereum.
In the Proof-of-Work consensus protocol, computers in the network compete to solve mathematical problems in order to obtain rewards in the form of coins, while securing the network. A downside of this is the high costs in terms of energy associated with this protocol.
Meanwhile, in the Proof-of-Stake protocol, token holders are the ones in charge of validating transactions and securing the network, by staking (locking up) their coins temporarily in exchange of a reward similar to a dividend. Many people believe this new protocol will become the new standard for cryptocurrencies. Ethereum is actually scheduled to transition from Proof-of-Work to Proof-of-Stake in the future.
The NEO network can be thought of as a two-tier system. All token holders are able to vote on the consensus nodes that will validate the network. These consensus nodes will then be the ones that validate each block in the blockchain. These consensus nodes are identifiable and can even be contacted if necessary. This makes the system different from the majority of the most popular blockchains, and especially attractive for regulation.
Even though the design of the system is delegated, an important criticism of NEO is that its implementation is very centralized. All nodes are currently owned by the NEO Foundation, but they will soon start to be run by relevant foundations, organizations and communities. All consensus nodes will also go through rigorous identification that could hold the owners legally liable.
Many argue that this system goes against the decentralization principles of blockchain technology, but it will make it easier for regulators and institutions to interact with the network, undoubtedly one of NEO’s main goals. However, the fact that in general only Chinese companies and institutions are holding the nodes make the network geographically very centralized and potentially less secure than a truly decentralized blockchain.
As stated before, smart contracts are a revolutionary concept that eliminates the need for a centralized third-party during the definition and enforcement of a contract. NEO in particular aims to make smart contracts more approachable, scalable and regulatory compliant.
The range of industries that can benefit from the implementation of smart contracts is vast. Some examples are:
- Financial Services: smart contracts can be used to automatically execute commercial transactions, payments and agreements, eliminating any delays and any needs for a middleman, while maintaining any compliance authority involved.
- Real Estate: in an industry with such a vast number of legal contracts and third-party agents, smart contracts could greatly simplify and reduce the costs of many operations. Property rental or transfer of ownership is a great example, with the possibility of automatic payments in a completely traceable way.
- Government: governments are studying the possibilities of blockchain technology for a huge variety of issues. A good example is voting, West Virginia is currently implementing a pilot for a blockchain-based online voting system. The African country Sierra Leone recently executed a successful democratic election in a country where election results were frequently disputed and led to violence.
- Supply Chain: several companies are introducing projects to make tracking of goods during the supply chain automatized thanks to blockchain technology, with the goal of preventing fraud and theft.
- Accounting: Managing budgets and reconciliation of expenses.
All these applications and many others are made possible by the use of smart contracts and can be readily implemented on the NEO network. As stated before, NEO wants to focus on making the digitalization of assets efficient and compliant with regulatory institutions, with the goal of becoming the smart economy that will be trusted by institutions and organizations world-wide.
The team behind the development of the cryptocurrency is one of the first things cryptoassets investors research before taking investments decisions. Da Hongfei is the most recognisable face behind the project and now one of the most respected experts in cryptocurrencies in the world, particularly in China. His good relationships with the Chinese government can be a key factor for the upcoming development of NEO.
Erik Zhang is CoFounder of NEO and CTO of the associated company OnChain. He is the mastermind behind the dBTF consensus algorithm, one of NEO’s cornerstones.
Onchain is the main company behind NEO. Their Distributed Network Architecture (DNA) system aims to become the main blockchain contractor in East Asia and uses NEO as its foundation. They have strong partnerships with companies like Alibaba and Microsoft.
Current & Upcoming Projects
NEO is experiencing a surge in the number of dApps developed for the platform that could bring the possibilities of the network closer to or even surpass Ethereum. For instance, some extremely popular platforms that have already proven successful on Ethereum are now being supported by the NEO Global Capital fund and might find some integration on the NEO network.
- Bluzelle is a decentralized database service that allows people to rent their computer storage for dApps and developers to use.
- Zilliqa is a high-speed blockchain that uses a new technique called “sharding” to greatly increase the speed of the system.
Native ICOs and dApps on the system are also flourishing. Some of the best examples are:
- Redpulse, which can be thought of as “decentralized Bloomberg”, was the first ICO on the NEO network.
- Switcheo is NEO’s first decentralized exchange and has already become the fourth largest decentralized exchange by volume. It will provide easier access to NEO-based tokens in the future.
- NEX is another decentralized exchange built on the NEO network that is gaining a lot of traction with their upcoming ICO.
- Thor provides a blockchain-based market for contractors and freelancers.
- Thekey is an identification verification service that will provide a means to verify government-issued personal identity online.
These and many other projects, which implement their own NEO-compliant tokens, will give further utility to the blockchain and will likely bring more adoption and value to the NEO network. Despite this extensive number of ICOs and community support, only 32 smart contracts have been deployed on the NEO main net most of which are inactive.
The number of ICOs and projects described on the previous Section show the great potential of NEO in the future.
On January 2018, during the NEO DevCon, CEO Da Hongfei presented “NEO’s New Vision” and set up the objective to further scale up the platform and become the most important blockchain by 2020. If these ambitions are to become true, the room of growth for NEO is certainly huge.
Source: eToro Market research