A Whole NEO World
Have you ever wondered what a blockchain world would look like? What it would really mean to be decentralized? I pick up my phone in 2025 and open my storage settings. My phone is currently at 50% capacity, so I open an app and share my extra storage in exchange for a few storage tokens. I now have enough tokens to rent an apartment by the beach for the weekend. I exchange my storage tokens for hospitality tokens and book my weekend getaway. I then log into my NEO account and approve some transactions before work. I work as an arbitrator for a blockchain legal firm. Since I am educated in finance, I am able to get paid more for solving financial disputes. At the end of the work day I check my cold wallet and see the fruits of my labor already in my account.
Before I continue, I will reiterate that I am not a cryptocurrency expert, I simply enjoy researching and sharing my opinions like most millennials do. So please, I urge you to do your own research, as I am not qualified, nor do I intend to be qualified to give you investment advice.
Now that you have a glimpse into the near future, I would like to introduce you to my favorite alt coin, NEO. NEO, formerly known as Antshares, is the Ethereum of China and was founded by Da Hong Fei and Erik Zhang. It functions very similarly to Ethereum, where you can build decentralized applications and smart contracts on top of the blockchain. A decentralized application (Dapp) is a platform that operates on blockchain technology. What connects the platform to the blockchain is a smart contract. Smart contracts are agreements written in code that trigger a movement of cryptocurrency from one place to another. Smart contracts are active rather than passive, meaning that the contracts self-govern the transfers for you. With code there is no reading between the lines, there is no way to get around the specific functions that make up the contract. The currency stays in escrow until it is triggered by a function. This is similar to a vending machine. You put money into the machine and press Coca-Cola. A Coke will come out if the machine has it in stock, alternatively it will bring you utter disappointment and give you your money back. Either it triggers a function or it doesn’t, there is no room for dispute (although you may have to settle for a Pepsi).
NEO works a bit differently than the other cryptocurrencies. Like Ethereum, NEO has two different types of coins, NEO and NeoGas. You can buy NEO and engage with NeoGas (Although you can also buy NeoGas directly). This means that in order to transfer NEO from one wallet to another, you have to use NeoGas (classic capitalism). This NeoGas will be used to incentivize NEO’s stakeholders to approve transactions. NeoGas can be broken up into smaller bits, whereas NEO can’t. When you transfer NEO from an exchange into your wallet, you can only move whole coins. NEON wallet, among a few others, allows you to collect NeoGas as dividends by holding the currency in the wallet. It is not much, but you can sell it on Binance or Poloniex for Bitcoin once you collect enough.
Another aspect that differentiates NEO from other cryptocurrencies is that NEO created its own mining system called Delegated Byzantine Fault Tolerance and solves the cryptocurrency energy and scaling problem. Although the system is a mouthful it can be abbreviated to dBFT, and creates a democratic way of governing the cryptocurrency, that does not have the scaling or energy problems that Bitcoin and Ethereum currently have. Unlike the mining system for Bitcoin and other cryptocurrencies, dBFT operates on proof-of-stake instead of proof-of-work. Proof-of-work (Bitcoin’s system) operates by having the majority of miners agree upon transactions by verifying them after solving intensive algorithms that ensure the transactions aren’t a result of double spending. For more on this, read my first article. Proof-of-stake, stems from the Byzantine Generals Problem. It means that the miners who own more coins, or stake in the system, have more mining power. If one person has 3% of all the NEO, then they are allowed to verify 3% of all NEO transactions. The more stake you own, the more incentive you have to operate in the best interest of the network. This process makes the system more scalable than Bitcoin’s.
In the Byzantine Generals Problem, a group of generals surrounding a city have to agree on attacking or retreating in consensus. If some generals attack and other retreat, the effects could be detrimental. Since the generals are not in the same place (like a distributed ledger), they have to rely on messengers to communicate. However, the generals could try to sabotage by saying they will attack and then retreating, or the messengers could act treasonously and pass the wrong message on to the generals. NEO’s dBFT stems from solving this problem. The generals in dBFT are called nodes, and are NEO’s form of miners; they are in charge of validating block transactions. The nodes are voted in by the users and can be impeached at any time. The nodes also have to stake some of their currency in order to be elected, however this amount is fixed for every node and is weighted equally. One node validates a transaction that the others have to agree upon in consensus. The nodes are paid in transaction fees for their service, just like miners. The important thing to get from this system is that they have to work in consensus, just like in the Byzantine Generals Problem.
It is fair to say that NEO differentiates itself from its competitors in quite an attractive manner. These factors lead Srikanth Raju (Microsoft’s G.M of Developer Experience and Evangelism for the Greater China Region) to say, “that Onchain, the company that founded NEO, is ‘one of the top 50 startup companies in China’” and he “offered his support for their endeavors going forward.” NEO also gathered over 200 attendees at the Microsoft headquarters in Beijing last June, to announce their rebranding from Antshares to NEO (don't you wish you had bought NEO when it was Antshares?). Now you may have heard the rumors that Alibaba and Microsoft are partnered or partnering with NEO- whether they are true or not, it is fair to say there is a lot of interest in NEO from top companies in China and around the world.
If you are interested in reading more about NEO, check out my sequel article on NEO and the cryptocurrency ban. If you are not sure how to begin your journey with NEO, feel free to send me a message and I am happy to help explain the process of going through Coinbase, Bittrex and NEON wallet (which is what I do). In the meantime, I will be claiming my Gas and watching my Blockfolio.
Martin Hauge and Sophia Noel