What is Neo (NEO)? The All-In-One Blockchain Network
What is the Neo blockchain?
Neo is a decentralised network of computers powered by blockchain technology. It is a platform for hosting special types of applications, called DApps (decentralised apps) and for storing both private and public files.
Neo is similar to Ethereum, but throughout the years, it continuously added many new features that Ethereum still currently lacks.
The creators behind Neo are Erik Zhang and Da Hongfei, who both founded the China-based blockchain company OnChain. They both operate the Neo Foundation, to enable continuous upgrades to Neo and create partnerships with businesses to expand the Neo network.
Curious about Neo? Read until the end to familiarise yourself with this unique blockchain network.
How does blockchain work? Here’s a beginner’s guide to blockchains.
What’s so special about Neo?
Many modern networks have implemented innovations that outpace Ethereum technologically, such as Proof of Stake, interoperability, and decentralised governance. However, these blockchains began to exist some time in the year 2017.
Neo was launched shortly after Ethereum mainnet was launched, making it one of the oldest second-generation blockchains ever to exist. In addition, it was already quite advanced for its time.
For example, it was the first to implement Byzantine Fault Tolerance to prevent forking that was experienced by Ethereum and had introduced a dual token system before VeChain and Theta.
Here are some of the technologies that have
Learn more: What is Proof of Stake?
What is the NEO coin?
NEO is one of two native cryptocurrencies of the Neo blockchain. It was first issued to the public in 2016 through an Initial Coin Offering (ICO), which helped raise 6119 BTC (approx. 2.6 million US dollars) for its future developments. Like any other cryptocurrency, NEO can be stored inside a crypto wallet for investment and traded in the open market.
Of course, NEO is more than just a crypto asset for “HODLing”. NEO was designed to govern the development of the network in a decentralised way. Each holder of NEO has the right to vote for or against an improvement proposal, and NEO can also be used to submit a new proposal.
NEO is dubbed as the most scarce crypto asset ever created because the smallest unit anyone can ever own is 1 NEO. This means the maximum number of wallets that can ever hold a NEO coin is 100 million, each holding exactly 1 NEO.
All 100 million NEO coins are already issued at genesis (the first block of the blockchain), and 50% of the supply is locked by the Neo Foundation to incentivise the development of the Neo ecosystem.
Learn more: What is an ICO?
What is Neo GAS?
Since one NEO coin is not divisible, it would indeed make a very poor medium of exchange, and this was by design. NEO cannot be used to pay for the transaction and computational fees.
Instead, another cryptocurrency called GAS (or Neo Gas) was created alongside NEO to fuel the network economy. GAS is divisible up to 0.00000001(one hundred-millionth) GAS.
GAS can be earned with NEO through an activity called staking. This means locking up NEO into a special wallet address in order to secure the network through the network’s Proof of Stake (PoS) and Byzantine Fault Tolerance (BFT) protocol. If you’re wondering what PoS/BFT are and how it benefits Neo, it will be explained shortly!
So, in summary, GAS is used as “fuel” to run applications, execute smart contracts, pay for transactions, and more. NEO is used for governance and securing the network through staking.
Learn more: What are smart contracts?
Why does Neo use two cryptocurrencies?
You may know that it’s not necessary for blockchain networks to have more than one cryptocurrency. Cardano is capped at 45 billion ADA coins, and ADA is used for everything — staking, voting, transaction fees, and smart contract fuel. Polkadot’s DOT is also on similar ground, except that the coin is inflationary.
In both cases, each medium of exchange has a very large supply limit and is issued in a controlled way, to regulate prices. Both Cardano and Polkadot mint new coins regularly to reward block producers.
This gives the coins some resistance to price volatility, where it’s not possible for a wallet to own the market for coins since not all the coins have been issued.
The second reason is to regulate network activity and avoid congestion through the natural supply and demand of GAS, without harming the price of the governance coin NEO. When a transaction is committed or a smart contract is executed on Neo, a portion of the paid GAS is “burned” (or destroyed permanently).
However, to balance the supply, new GAS is rewarded to NEO holders who staked NEO. If the network burns more GAS than it creates, it could result in a price increase in GAS, which naturally buffers additional load. However, when this happens, the price of NEO is not affected. NEO holders will still earn the same amount of GAS regardless.
5 new GAS tokens are created for every block created until the network has released a total of 100 million tokens.
Main features of the Neo network
Although NEO is nearly as old as Ethereum, it has evolved consistently to meet the demands of DApp developers, users, and businesses. Here are the main features of the Neo network:
Unique consensus protocol — the PoS/BFT
Like all decentralised blockchain networks, Neo is a network that is made up of privately owned computers that collectively serve Neo and its users. Each computer (nodes) has the ability to update and store new data on the Neo blockchain (to “produce a new block”), but only one can become a block producer.
A node gets chosen at random to create the next block, based on the amount of NEO staked through the Proof of Stake protocol. Afterwards, the Byzantine Fault Tolerance protocol checks that the node has not been corrupted in some way.
If at least two-thirds of the total nodes agree to the block producer’s candidate block (i.e. it’s free from any errors and inconsistency), the next block can be made official. This ensures that forks cannot happen on the Neo blockchain — either the network agrees to the new block or not at all.
Note: A major fork has happened to Ethereum after a large portion of the network decided to create their own version of the blockchain.
On Ethereum, there are a few oracle (data feeder) networks designed to collect real-world data from a variety of sources in an unbiased manner. The biggest oracle network on Ethereum is Chainlink (LINK).
Realising the importance of oracles, Neo adds an oracle network to its already extensive network to improve the developer experience.
Decentralised file storage
Legacy decentralised file storage networks like Filecoin have existed as a standalone blockchain. Being an all-in-one blockchain network, the developers of Neo were interested in creating a highly accessible, ultra-private and high-security cloud storage on Neo.
On Neo, individuals or groups who have spare storage space have the ability to earn GAS without staking NEO. They do this by earning storage fees denominated in GAS tokens.
For an Ethereum killer network, having an efficient smart contract functionality is a no-brainer. The developers of Neo has immensely simplified DApp development by allowing application developers to deploy smart contracts written in conventional programming languages, specifically C#, Python, Go, TypeScript, and Java.
This is unlike Ethereum DApp development, which requires developers to learn Solidity, Ethereum’s smart contract language.
Domain name service
DApp developers can buy domain names on the Neo blockchain. This works in similar principle with blockchain domain name services such as Unstoppable Domains, deployed on Ethereum. With Neo’s one-stop domain name service, “.neo” is easily obtainable by aspiring DApp developers.
The Neo blockchain is well-connected with the Poly Network, a DeFi platform that operates on three other blockchains — Binance Smart Chain, Ethereum, and Polygon. This platform aids separate islands of blockchains to connect with one another and to enable smooth token swaps across networks.
It has also formed a bridge with Poly Network, but without the usual tradeoff of needing to have a specific token, thus improving the developer experience of having everything in one place.
Self-Sovereign Digital Identity
Perhaps one of the most important features of Neo is the NeoID, which is a service that enables users to create self-sovereign digital identity (SSID).
The idea of SSID is that users can practically prove their identity without giving away too much information. A simple case of logging into an account will no longer require an email address, and opening a new bank account will not require a document such as a national ID or home address.
Simply, all of the information pertaining to that person is already stored on the blockchain, which is only accessible by a unique digital signature that only that person has.
Neo blockchain — the verdict
The Neo blockchain offers many incredibly attractive features for businesses, making it easy for them to adopt the technology for their own unique use cases.
Although decentralised like Ethereum, it has found firm footing in China, one of the world’s toughest environments for developing blockchain innovations.
Neo provides an example case where blockchain technology doesn’t have to be a financial wilderness where regulators cannot reach.
It can be friendly to our already existing legal and economic frameworks, and Neo will continue to add many more features, in line with its vision to create a business-friendly blockchain.
With that said, what are your thoughts on Neo? Would you consider adding NEO to your portfolio?
As an altcoin, Neo’s utility and fundamentals certainly make it an ideal candidate for those wanting to add another altcoin to their portfolio.
Stay tuned for more crypto coin guides! In the meantime, explore our library of crypto coin fundamentals on our Learn Site at Easy Crypto.
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