Deep Dive Review into NEO (August 2018) - Crush Crypto

Deep Dive Review into NEO (August 2018)

Summary

  • Project name: NEO
  • Ticker symbol: NEO
  • ICO date: September 2016

What is NEO?

NEO (previously known as Antshares) is a smart contract development platform that aims to automate the management of digital assets and provide a scalable network of decentralized applications (dApps).

The non-profit project was established in 2014 and has accumulated more than 65 community-built dApps on its platform, including NEX, Moonlight, Red Pulse, and Zeepin, which can be accessed at http://ndapp.org.

NEO is often compared with Ethereum and is referred by some as the “Chinese Ethereum” due to their similarities. Smart contracts, ICOs and dApps can be hosted on both blockchains.

However, there are key differences – for example, NEO supports multiple code bases such as Java / Kotlin, .NET C # / VB, JavaScript / Typescript, Python, and Go, while Ethereum is based on Solidity, its proprietary language.

There are also technical differences in the type of consensus mechanism used, transaction speed, inflation schedule, etc.


Key Features

  • Consensus algorithm: NEO uses the delegated Byzantine Fault Tolerance (dBFT) mechanism, which is an improved form of the traditional proof-of-stake consensus mechanism. It ensures the system keeps its finality/availability as long as Byzantine fault occurs on less than one-third of the nodes. Once confirmations are final, the transaction cannot be revoked or rolled back.
  • Smart contracts: NeoContract, the platform’s mechanism for creating smart contracts, supports multiple programming languages so developers can develop smart contracts without having to learn a new language. 
  • Virtual machine: The Neo Virtual Machine (NeoVM) is a lightweight stack-based contract execution environment with good start up times and versatility, making suitable for small programs such as smart contracts. NeoVM can be ported to other blockchains as well as non-blockchain systems, which increases the utility of smart contracts.
  • Digital assets: NEO enables the P2P exchange of digital assets and currencies without the need for third party exchanges. Digital certificates provide legal protection for digital assets on the NEO platform.
  • Distributed file storage: The NeoFS is a decentralized file sharing and storage service based on Distributed Hash Table (DHT) technology where data is indexed by file content rather than file path. Files can be divided into smaller data blocks that are distributed and stored in multiple nodes. This enables smart contracts the ability to store and access large files on the NEO blockchain.
  • Cross-chain interoperability: The NeoX protocol has two parts: (1) it enables multiple participants to exchange assets across different chains (i.e. atomic swaps) and (2) smart contracts can perform various steps of a transaction across different chains (i.e. distributed transactions).
  • Quantum-proof: The NeoQ is a lattice-based cryptographic mechanism that works to create problems that cannot be solved by quantum computers. This is important as the rise of quantum computing has made cryptographic protocols susceptible to attacks.


Key Milestones

NEO Github Activities
  • February 2014: The NEO project is established.
  • November 2015: Testnet launch.
  • April 2016: ANTSHARES-GUI integrated with the consensus node voting system.
  • September 2016: NEO ICO.
  • October 2016: NEO mainnet launched; 7 consensus nodes hosted by NEO Council voted.
  • July 2017: ANTSHARES-GUI was renamed to NEO-GUI.
  • August 2017: Completed rebranding to NEO; released NEO 2.0 including full smart contract compatibility.
  • September 2017: NEP-5 token issuance documentation; preparation for decentralization of consensus nodes.
  • October 2017: Red Pulse successfully conducted the first token sale on the NEO blockchain.
  • December 2017: NEP-5 support for exchanges; NEP-6 testing.
  • January 2018: Voting algorithm optimized; node hosted by City of Zion (CoZ) begins to run on the NEO testnet.
  • April 2018: Nodes hosted by KPN (one of the largest telecom companies in the Netherlands) and Fenbushi Capital (China-based VC) begins to run on the NEO testnet.
  • May 2018: NEO and Ontology Foundation publicly announced a MoU on strategy and technology integration; NEO Council reorganized into the NEO Foundation.
  • July 2018: Election of new consensus nodes initiated; NEO Foundation voted for new consensus node CoZ.

For more details, please check out the monthly update reports from NEO which is available on their blog: https://neo.org/blog.

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Future Development

Development of NEO 3.0 began in Q2 2018 and remains under development. This will be a new version of the platform built for large-scale enterprise use cases with higher transaction speed and stability, expanded APIs for smart contracts, optimized economic and pricing models, etc.

By the end of 2018, NEO Foundation plans to vote KPN and other partners as mainnet consensus nodes. In 2019, NEO plans to open public campaign for election of all consensus nodes. For more information on what’s next for NEO, please take a look at the article published on July 10, 2018 by the team: https://neo.org/blog/details/4091.


Token Economics

NEO has a dual-token system comprised of a management token, NEO (symbol NEO), and the utility token, NeoGas (symbol GAS).

NEO tokens are non-divisible and give token holders management rights including voting for bookkeeping, network parameter changes, etc. The total supply is 100 million NEO, which were all generated in the genesis block of the NEO network.

GAS tokens are used to fuel the smart contracts and tokens on the NEO blockchain. The total supply is 100 million GAS but the maximum supply will not be reached until an estimated 20+ years.


Team

The core team is currently comprised of more than 65 people, including 28 in the NEO Global Development (NGD) team, 34 on the NEO Community team. The biographies of the co-founders of NEO are summarized below:

Da Hongfei, Co-Chair, NEO Foundation – The Founder of NEO and also the Founder & CEO of Onchain, one of China’s leading blockchain companies. Prior to that, he was the CEO of IntPass Consulting for 9 years. He obtained his Bachelor of Arts in Technology and English from the South China University of Technology in 2001.

Erik Zhang, Co-Chair, NEO Foundation – The Founder and core developer of NEO and also the Founder & CTO of Onchain. He was the developer behind the dBFT consensus mechanism. He graduated from Shanghai University in 2014.


Analysis

Strengths

  • Developers do not need to learn a new programming language to create a smart contract as NEO supports multiple widely-used languages. This reduces the learning curve for developing smart contracts.
  • NEO runs a dBFT consensus mechanism where users will earn GAS by holding NEO in their wallets, essentially earning passive income assuming NEO price doesn’t decline.
  • It is one of the few blockchain protocols to have ICOs conducted successfully, which helped built a large community and awareness of NEO. 
  • Transactions on NEO are free.
  • NEO is supported by Onchain, another company founded by NEO’s co-founders. According to Onchain’s LinkedIn profile, the company is a governing member of the Ministry of Industry and Information Technology (MIIT) blockchain development forum in China and is working with the Chinese government to establish blockchain technology standards for the country. Companies that are reportedly working with Onchain include Hyperledger, NASA, Microsoft China, Alibaba, and Fosun Group.
  • The project is supported by a large development community from City of Zion.

Weaknesses

  • NEO has a theoretical speed limit as the dBFT consensus mechanism takes approximately 15 to 20 seconds to generate a block with transaction throughput measured up to about 1,000 transactions per second (versus 15 for Ethereum).
  • While NEO has the potential to reach 10,000 transactions per second through further optimization, there is still a limit and there are blockchain solutions out there that are working on the ability to process hundreds of thousands of transactions per second.
  • NEO currently has only 8 nodes running (7 nodes run by the project’s team and 1 by an independent party). This is considered centralized and not permissionless, but the team is gradually decentralizing the protocol and is planning to have 7 more independent consensus nodes to be voted in by the end of 2018.
  • As transactions on NEO can be free, it is susceptible to spams. In order to counter spams, users can add GAS to their transactions as a priority fee to avoid delays.
  • Network have been down or even experienced outage during heightened activities, for example, during ICO crowdsale hosted on NEO.
  • The fee to deploy NEO smart contracts is high – it takes 500 GAS, or around $4,500 at current GAS price, to deploy a smart contract on NEO. As a result, only 10 smart contracts have been deployed on NEO in June 2018 and 8 in July.
  • There are a lot of upcoming smart contract platforms that will compete with NEO that claims to be superior, such as Quarkchain, Fantom, Hashgraph, ICON, aelf, etc.
  • Inflation is fairly high in the next few years. Currently, there are 65 million NEO in circulation. The number will increase to 80 and 95 million in each of the next two years, which is equivalent to an inflation of 23% and 18% per year. The number of NEO in existence is capped at 100 million.
  • NEO is non-divisible. This means that while a fraction of a NEO can be purchased or sold on an exchange, only whole units can be transferred between wallets. At current price, users cannot transfer less than $29, making micro payments impossible.

Conclusion

Overall Rating: B

NEO had a successful rebrand in 2017 and conducted the most ICOs after Ethereum out of any blockchain protocols. This helped built a large community and awareness around the project.

However, the market awareness is waning compared to last year partly because there are so many new projects coming up.

As a smart contract platform, there are a lot of competing projects that promise better scalability/decentralization/security.

Even if NEO’s throughput reaches 1,000 transactions per second as promised by the team, it is not considered high in today’s standard.


Video Summary


Additional Resources

* The information contained in this article is for education purpose only and not financial advice. Do your own research before making any investment decisions.

Our rating system is based on 5 tiers: S/A/B/C/D, with S being the highest and D being the lowest rating.

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