Antshares to Neo

Cryptocurrency NEO: Why ants became something new and produce GAS

Tobias Frank

With over 1000 actively traded cryptocurrencies, it is easy to lose track and easily overlook exciting projects. One of them is NEO: There was a re-brand in August and now they want to revolutionize the smart contract market.

EnlargeNEO is one of the so far lesser known cryptocurrencies
© Fotolia / Akarat Phasura

The cryptocurrency market is now more than $ 145 billion. Bitcoin still holds the absolute majority of the total volume, but more and more renowned projects are establishing themselves.

One of them is NEO. Currently at number 8 in the Coinmarketcap list, it wants to be much more than just another cryptocurrency. This first public chain project in China was originally founded by Da Hongfei (CEO) and Erik Zhang (CTO) under the name Antshares in June 2014. It was China's first public open source blockchain project. The focus was on creating a smart asset platform. Assets are assets owned by a person or legal institution such as cash, shares in the stock market or real estate or raw materials such as oil and gold. The transfer of digital assets is recorded at NEO in so-called e-contracts.

NEO is often referred to as the Ethereum of China. This is because NEO has a strong focus on smart contracts. These contracts automatically process agreements between two parties with several conditions, usually these are also subject to a time limit. The advantages over regular contracts:

  • No manual contract review

  • No coordination with third parties

  • No manipulation through decentralization possible (blockchain)

  • Automated contract processing in real time

This sounds abstract at first sight and is made easier with an example.

Anyone who needs a rental car today has to go through many steps: scheduling and checking availability, driving license and contract review in a rental car station, signature, key handover, etc. The rental car station can be closed, the planned period of use can change. Many factors cost time and in the worst case lead to the contract not being concluded.

With a smart contract, all required variables can be brought together and anchored here. The customer can check availability directly at the rental car park and agree to the terms of the contract in real time. The car is only released if the renter has the required amount of money and releases it. Thanks to the decentralization of the blockchain, it is not possible to manipulate the contract or liquidity.

The difference to Ethereum Smart Contracts

Ethereum is the pioneer in the field of smart contracts. First attempts in this area are mainly made in this currency. It is better known, has a longer lifespan and a significantly larger market volume (as of October 6th .. according to Coinmarketcap: 2nd place with over 28 billion US dollars). Still, it has weaknesses. You have to learn a specially developed programming language. It's not particularly difficult, but it creates obstacles.

This is exactly where NEO comes in: Right from the start it was possible to work with the .NET Framework from Microsoft, and NEO has created an interface that allows programmers to work in Javascript, a common programming language. We are still working on C # and Python to make it easier for the masses to access.

Practical use of smart contracts

In theory, there are innumerable scenarios that should make life easier with smart contracts. Nevertheless, smart contracts can only be used in a few scenarios and many companies are still reluctant to use this technology.

But there are notable pioneers: The city of Zug in Switzerland (30,000 inhabitants) offers its citizens a digital ID. This can be used via the app and is encrypted via the blockchain and stored decentrally. According to the incumbent mayor Dolfi Müller, this identity should not only be used for fees, room rentals or city services. Votes are also possible. The first of its kind is due for 2018, but initially only to measure the use of this new technology. Smart contracts are used, but those from Ethereum.

EnlargeThe city of Zug in Switzerland offers citizens a digital ID

How wallet users are motivated to serve as a node

In addition to the smart asset technology and the easily accessible smart contracts, NEO also had to think about how to set up the decentralized network. In contrast to the pioneering coin Bitcoin and its big brother Ethereum, NEO's virtual coins are “premined”, which means that they are available from the start.

The disadvantage: With the classic mining concept, millions of miners, so-called nodes, are in use. These represent the decentralized system. Every transaction is confirmed by the miners - the millions of nodes ensure security. When mining is eliminated, there needs to be some other incentive for a multitude of users to act as a node.

The scenario is not new, many Altcoins work here with the Proof of Work (high power consumption) or the Proof of Stake (risk of a fork). Neither high power consumption nor the risk of a hard fork (the blockchain is split and in the worst case there are two coins at once) were not acceptable to the developers. So they developed a new technology: delegated Byzantine Fault Tolerance (dBFT). As complicated as the name is, the solution is ingenious: low power consumption and no risk of a fork.

Another difference to the other two technologies: If NEO is stored in the original wallet, it does not generate NEO, but GAS.

10 percent return for clever users

Cryptocurrencies are often only perceived as a speculative investment. Those who do not deal with the supposedly profitable currencies are missing out on additional profits. GAS generates NEO exclusively in the original wallet. To do this, you have to buy NEO at one of the connected marketplaces (Bittrex, Bitfinex, Crytopia, Binance, Yobtc or Yubni) and transfer it from there to your own wallet.

The software for this is available as a free download, but the user is again responsible. Because anyone who has access to the wallet has access to NEO and can transfer it as desired. When installing, the wallet therefore generates a long random value as a password that cannot be changed. This should be saved safely, as there is no way to restore the password.

The user also has to update the wallet himself. Old versions are switched off: If you log in here, you will see an empty wallet. With the generated key and the current software, however, the virtual money is retained. The incentive is better than with any house bank.

NEO automatically generates approx. 10 percent GAS per year, with 10 NEOs the user gets a little more than 1 GAS for free. According to Coinmarketcap, this is currently in 24th place and worth around 24.58 dollars (as of October 6, 2017). Since GAS is generated exclusively in this way, only 8.4 million GAS are currently in circulation.

EnlargeOriginal NEON wallet that generates GAS independently