What is cryptocurrency NEO and how does it work?

What is Neo (NEO)?

Neo (NEO) is an open-source decentralized blockchain-based platform that enables anyone to create blockchain services and products while offering near-instant transactions. Neo is often compared to Ethereum as the two networks share numerous similarities, including the capacity and tools for creating decentralized applications for various purposes, which, among others, include decentralized exchanges and price markets.

Aside from dev tools, Neo offers additional features for users so Dapps can be powered with external data. Neo hosts decentralized file storage, an oracle system, and a system for digital identity that allows users to create their own tokenized identities based on real-life identity, thus offering compliance with AML and KYC.

The Neo platform is powered by two native cryptocurrencies, NEO and GAS. NEO is an integral part of network governance as it allows users and network participants to stake their NEO balances and participate in network governance with proposals and votes on proposed changes. GAS is another token native to the network, and it serves the purpose of paying for computational power on the network.

How Does Neo Work?

Neo runs on the Proof of Stake consensus mechanism with a unique protocol known as delegated Byzantine Fault Tolerance. The dBFT protocol enables the processing of a greater number of transactions – up to 10,000 transactions per second – while operating between centrally approved nodes.

Thanks to the combination of the PoS protocol and dBFT consensus mechanism, Neo ensures scaling of the network, faster transactions, and smooth operations with smart contracts and Dapp creation. There are two native tokens on the network, NEO and GAS. NEO is non-divisible and GAS can be divided into the smallest fraction of 0.00000001. NEO generates GAS and represents the main crypto for payment settlement on the platform, while GAS is used to pay transaction fees. NEO is also used in network governance as holders can stake NEO to vote for consensus nodes. Consensus nodes generate new blocks, receiving rewards in GAS fees in return.

Developers can use smart contracts dubbed NeoContracts, and create and develop Dapps based on real-life products and services. NeoContracts are different from smart contract protocols on other networks for Dapps as developers can use a stack of well-known programming languages like Java, instead of having to learn a new language to build Dapps.

Who Are the Founders of Neo? (History of Neo)

NEO was first founded in 2014 under the name Antshares. The project was created and developed as a way to establish the “smart economy”, and rebranded to Neo (NEO) in 2017. Neo was founded by Da HongFei and Erik Zhang who organized an initial coin offering for Antshares (ANS) in 2014, and raised over 6,000 BTC during the ICO. ANS was later converted to NEO and users could exchange their ANS tokens for the new rebranded version in 2016.

The name of the brand is based on the Greek word for “new” or “young” and Neo was presented as the gateway to the new and improved smart economy with the capacity to process 10,000 transactions per second.

Neo 3.0, the next protocol update, was announced in 2018, and is likely to be officially launched in September 2021.

What Makes Neo Unique?

Neo creates a favorable ecosystem with excellent technical capacity for developers who work with all sorts of languages, so the chances are that a wider demographic of Dapp developers could choose Neo due to the wide offer of well-known programming languages. Instead of having to learn a new language, developers can use NeoContracts to develop Dapps with familiar languages such as C# and Java, which increases the chances that Neo will become a popular choice for Dapp developers around the globe.

Neo also uses a unique combination of Proof of Stake and delegated Byzantine Fault Tolerance to enable fast transactions and manage real-time governance. Although Neo does not have a fully unique use case as there are many platforms that enable smart contract operations and Dapp development, Ethereum being the first, Neo certainly introduced unique features to optimize Dapp creation.

What Gives Neo Coin Value?

Neo’s technical capacity is what gives intrinsic value to the project, while NEO coin has value through its utility. NEO coins can be staked, spent, used for sending and receiving payments, and can also be held as an investment. The value of NEO in the market is determined by a great variety of specific factors that can influence the price of NEO, while it is also affected by the volatility in the cryptocurrency market.

NEO also finds its value in technology and the rate of usage – if Neo becomes a popular choice for developers, its value would naturally rise as a consequence of increasing demand. NEO value also depends on the total supply, which is limited to 100 million NEO created at the genesis block.

How Many Neo (NEO) Coins Are in Circulation?

NEO has a limited supply of 100 million NEO coins, which were created all at once at the genesis block. Out of 100 million, 50 million were distributed to early investors and the remaining 50 million are locked, with 15 million NEO being distributed every year in an automated fashion.

The limited total supply acts as an anti-inflation mechanism and means that NEO could potentially be a good store of value in the long term. The number of coins in circulation multiplied by the current price of NEO equals the market cap.

Other Technical Data

Neo uses PoS in combination with dBFT, which works similarly to delegated Proof of Stake. The protocol ensures that all computers distributing data across the network are in synchronization, and uses a real-time governance system to determine which nodes can create new blocks on the platform. Anyone on the network can run a node.

NEO can be staked, while each staked, or locked, NEO grants voting power to the holder. The voting power on the Neo platform is proportional to the number of locked NEO coins – the more NEO one user has for staking, the greater their voting power.

How Is the Neo Network Secured?

The Neo network is secured through the use of a Proof of Stake protocol and a delegated Byzantine Fault Tolerant protocol to ensure democratized and decentralized governance where NEO holders can vote on the nodes that create new blocks on the chain. By leveraging real-time governance, the Neo platform ensures that users are in charge of the network in a transparent way, while keeping malicious activities at bay with top security through staking.

How To Use Neo

The Neo platform is used by developers who can create smart contract-based applications with NeoContracts based on real-life products and services. Developers can work with well-known languages to program their Dapps and host these applications on the network. The NEO cryptocurrency is used for staking and payments on the network, while it can also be held as an investment and used for voting when staked, or locked.

NEO unlocks access to apps hosted on the platform by acting as a form of payment for network participants. NEO also generates the platform’s second native cryptocurrency, GAS, which is used for paying transaction fees and as a reward for node operators.