What is NEO?
NEO is a blockchain-based cryptocurrency and smart contract platform. The native currency of the blockchain is the non divisible NEO token which generates GAS tokens. GAS is used to pay for transaction or smart contract fees on the network. NEO is often called the “Chinese Ethereum” because it is deveolped in China.
NEO exists since 2014, it is formerly known as AntShares. The platform offers very similar features to Ethereum. Both platforms offer smart contracts and decentralized applications which run on virtual machines. However, there are some important differences between the two platforms.
NEO vs Ethereum
One key difference between the two platforms is that NEO supports up to 10,000 transactions per second while Ethereum still supports only 15 transactions per second. This means that NEO is far more scalable than Ethereum. That means that you can make faster transactions with less transaction costs on NEO. One of the reasons for the good scalability of NEO is because it uses proof of stake as a consens mechanism. Ethereum is still transitioning from proof of work to proof of stake.
Another advantage of NEO is that it supports more programming languages than Ethereum. Smart contracts have to be programmed using a specific language. Ethereum offers solidity as the only programming language for smart contracts on the Ethereum platform. NEO, on the other hand, supports multiple common programming languages like Java and C#. This makes programming on the NEO platform easier than on the Ethereum platform.
NEO and Ethereum both need developer communities which support the development of the network. Compared to Ethereum, NEO has a rather small community of developers.
NEO consensus mechanism
NEO uses a consensus mechanism called Delegated Byzantine Fault Tolerance (DBFT), which is an improved version of proof of stake. With DBFT you can determine the true outcome of vote. The mechanism is based on the Byzantine Generals Problem. The problem is described like this: 12 generals of the Byzantine Empire have circled the encircled the city of Rome with their armies. In order to successfully overthrow Rome, the armies have to attack together. If the 12 generals don’t attack together, the armies will fall. The decision when to attack is put on a vote and whichever decision receives more than 50% of the votes is performed. However, there could be bribed generals who don’t follow the orders.
This problem transists over to the computer technology. How is consenus reached when faced with bad actors? NEO solves this problem with their DBFT consensus mechanism and allows for better scaling than existing mechanisms such as proof of work or traditional proof of stake. Every NEO holder has the right to vote for a delegate. Delegates are consenus nodes and they are responsible for reaching consensus on a transaction. One delegate is randomly selected as a speaker. He has to transmit which transactions the delegates have to put in a block. The delegates vote on the command that the speaker gives. If 66% or more of the delegates agree, then the action is performed. If less than 66% agree, a new speaker is randomly selected and the process continues until consensus is reached.
NEO smart economy
NEO’s technology allows to digitize any real asset. Bonds, stocks, real estate and basically any asset with value can be represented as a digital asset on the NEO blockchain. Ownership of assets can be distributed among others. Digital assets can also be traded using the rules of smart contracts. Another feature of the NEO blockchain is the introduction of digital identities. This feature is called NeoID. With digital identity, it allows institutions and governments to support trading rules and ensure the trades are fair. Institutions can restrict trading to blockchain users with a digital identity, so that they know who they are trading with. This way, the abusement of trading deals can be punished.