NEO 101: A Guide to the Cryptocurrency NEO
As any competent business person would tell you, a foundation is critical for any viable product. With Bitcoin steadily growing in price and reputation, its foundation is not as strong as its competitor, Ethereum, and even further behind NEO, a coin modeled after Ethereum.
NEO, like Ethereum, is modeled behind smart contracts. This allows its blockchain system to work and act as the base for other cryptocurrencies and applications. To put it clearly, the more applications developed on the NEO platform, the more significant the platform becomes.
Definitions associated with NEO
Before we begin, it's essential to look at terms associated with NEO coin that we may not elaborate on in this article.
- NEO: the name of the NEO cryptocurrency coin means new or young.
- NEO X: This is a system that will allow the NEO blockchain to function across multiple blockchain systems.
- NeoFS: this is NEO’s decentralized cloud storage unit.
- NeoMessage: this is their encrypted and decentralized messaging system that users can use as a communication network.
- NEOQ: is a security protocol set up by a lattice-based cryptographic mechanism that cannot be broken with quantum computing.
NEO is referred to as the “Chinese Ethereum”
Like we mentioned above, NEO was built on a similar concept to Ethereum. In fact, many would argue that the founders of NEO (Da Hangfei and Erik Zhang) copied Ethereum to a large extent. However, NEO was created much later than Ethereum, giving its founders the opportunity to study Ethereum's flaws and improve on it.
The reason it’s called the "Chinese Ethereum" is that it was developed in Shanghai, China. Since it heavily relies on smart contracts, like Ethereum, it quickly adopted that name as a result.
What are smart contracts?
The notion of smart contracts is not new; Nick Szabo, who invented BitGold in 1998, first talked about it in 1994. Szabo defined smart contracts as a computerized protocol executed by code.
In fact, many people believe Szabo may be Satoshi Nakamoto the founder of Bitcoin but remains anonymous to this day.
To put it lightly, smart contracts execute traditional contracts via code. A contract can be defined as a set of rules laid down for each outcome. Therefore, if situation “A” arises, protocol “1” will be executed. A smart contract is essential for the blockchain technology to be successful. It’s the main reason blockchain technology is called a disruptive technology.
Cryptocurrency is not understood well by many. It does not help when new coins come up designed in new and unfamiliar coding. With NEO, on the other hand, you don’t need any further kind of coding to use its smart contracts.
The NEO code is compatible with traditional coding languages such as Java, C++ or any other mainstream language, making it easy to use its smart contracts.
What is a Smart Economy?
The whole basis behind NEO is to create a smart economy. The company has described a smart economy as the integration of digital assets, digital identity, and smart contracts.
Digital assets are assets that are in digital form or traditional assets that are turned or stored in digital form. While digital identity will help identify organizations, applications, and individuals on the blockchain, smart contracts will allow the smart economy to have fluidity, trust, and transparency.
What sets NEO’s smart contracts apart from the rest?
Cryptocurrencies are famous for being decentralized and anonymous but these are also the qualities that make them highly volatile and resisted by many governments. China is one of the most anti-cryptocurrency nations out there, and yet they seem to be embracing NEO.
A big reason for the acceptance and support of the Chinese government is how evolved NEO's smart contracts are. NEO offers validation contracts where the system itself checks if the agreement is valid and can hold legally, reducing many forms of fraud.
The system also provides applications, which are contracts where the software reviews the applications built on the NEO blockchain for bugs and authenticity.
Most importantly, NEO’s smart contract is exceptionally light and can do over 1000 transactions a second compared to Ethereum, its closest competitor, which can only hold 15 operations per second.
NEO and GAS
There can be some confusion between NEO and GAS (GAS is NEO’s alternate token). This is because of how similar they are regarding what they do. Both are capped at 100 million with all the NEO having been pre-released. GAS, on the other hand, is still being released, but at a reduced rate.
A user can acquire GAS in different ways: by obtaining rewards for purchasing NEO, by purchasing the GAS itself, or by getting awarded for transactions over the blockchain system. GAS is used as ‘fuel’ for operations such as smart contracts, running the applications and resource management.
NEO, on the other hand, is used mainly in network changes and system management.
The most significant difference between NEO and GAS is that the former cannot be divided to be smaller than one, and one is its smallest value. GAS is divisible by a tenth of its eighth power of one.
Advantages of NEO’s location
China seems to stay in its tech bubble. They have their own Google named Baidu. They use Alibaba instead of Amazon and now have focused on NEO instead of Ethereum, the coin the rest of the world is focusing on.
In China, the government is always heavily involved in developing and crafting new tech and establishes strict rules; this is no different for NEO. The Chinese government is very involved in developing and steering the direction of NEO. Such strong government support and oversight has only worked to NEO’s advantage, helping it grow into one of the best cryptocurrencies in the market today.
A significant advantage that NEO now has over other cryptocurrencies is the government backing, which makes it more stable, hence an opportunity to grow in value tremendously. Think of it this way – if the U.S. government were to support a small, unknown company, odds are the stocks of that company would skyrocket. This is exactly what is happening with NEO.
Differences between Ethereum and NEO
- Ethereum is not backed by any nation or company while the Chinese government and Alibaba back NEO.
- The fuel powering Ethereum's blockchain is called Ether while the fuel running NEO’s blockchain is GAS.
- The consensus mechanism powering Ethereum is called the Proof of Work (PoW) blockchain algorithm which is assumed to be bulky, slow, and power consuming. NEO uses delegated Byzantine Fault Tolerant (dBFT) consensus mechanism. This is a proof of stake mechanism which is a more fluid, lighter, and advanced consensus mechanism.
- With Ethereum the only coding language for its smart contracts is called Solidity. With NEO you can use traditional coding languages like C++ and Java.
- Ethereum is focused on becoming the world’s first blockchain supercomputer, while NEO is focused on creating a smart economy.
Advantages and disadvantages of NEO
- The NEO blockchain is super light. You can do over 1000 transactions in a second. As mentioned above, Ethereum can only do 15 actions per second.
- The NEO blockchain can support multiple coding languages. You don’t need to learn any new coding language to use its smart contracts.
- NEO has a clear vision: to make a smart economy. Having such a sound strategy helps build confidence in developers, investors, and users, giving the impression that NEO is a stable crypto in the cryptocurrency market.
- Having the Chinese government support the coin only helps to cement their stability in the industry.
- All the NEO coins were pre-mined and distributed via a crowdfunding exercise. This removed some elements of decentralization to the currency.
- The inner workings of the company are still very vague to many. With the company also being involved with the Chinese government experts, it’s believed that the company may be holding some secrets from the public.
- Unlike Bitcoin and other cryptocurrencies, a NEO coin cannot be subdivided. At the moment this may not be a problem, but once all the coins are in use and there is a need for more coins they may have to create new coins, which may result in inflation, or allow coin subdivision.
- NEO coin is still relatively new in the cryptocurrency trading market, making it a difficult crypto to predict and invest in.
NEO has experienced a very steady rise even through a period when other cryptocurrencies are in limbo. With a name change and clear vision in sight, many investors are loading it as the next influential investment. After an in-depth analysis of this new digital asset, it's quite clear why NEO is so popular.