Neo3: Empowering the Smart Economy
Da Hongfei, founder of Neo, shared the latest progress in Neo3 from governance, ecosystem growth and interoperability at Consensus Distributed 2020.
Hello everyone, I am Da Hongfei. I’m the Founder of Neo. Consensus is one of the most anticipated event within the blockchain industry I’m very happy to join CryptoAsia Summit. I think it’s a very good opportunity to keep projects connected with the international community, especially under the current circumstances. Today, I’d like to share my thoughts on how blockchain can help to solve some of the challenges the world is facing, and what Neo is doing as an enabling platform to achieve that goal.
Where are we at?
To understand what the future will look like, we need to first understand where we are, and how it became the world we are living in now. So we need to look at the past human history.
Since the start of the 16th century, people have been exploring the globe — the whole world — discovering new corners, new lands, and the globalization progress had started very, very early. And it’s an upward — steadily upward trend — but still, we will see some setbacks. After the Age of Discovery, we saw the 1st and 2nd Industrial Revolution with inventions of new technologies like steam engines, machinery, and electricity, but then suddenly, it was interrupted by war — two major wars — World War I and World War II. And then we saw the continuing of the 2nd Industrial Revolution, and then the globalization, the industrialization period just somehow interrupted again by the collapse of the USSR.
So what we are seeing is an overall- it’s an upward growth, but it’s not like a straight line. It’s a cyclical growth line. So we see upwards, we see setbacks.
But now, we are at a junction of a special time. We are seeing the popularity of protectionism, we are seeing the popularity of tribalism, but we are also seeing the emergence of new technologies that are enabling us to form a free, more global market. So we’re seeing two forces that are dragging society into two separate directions. One, towards a globally unified, free market place. The other forces are trying to pull back all the economic activities into segregated, protected boundaries. So it is indeed a special time.
Why are we talking about this? Because I see blockchain as a solution. But is today’s blockchain technology ready to become the empowering infrastructure for the digital economy? To be honest, my answer is, at least, not yet.
Is Blockchain ready?
I think today’s blockchains, especially public blockchains, lack three major capacities to become that kind of infrastructure. I will explain it one by one. So these three capacities are adaptability, tokenization capacity, and interoperability.
So the first attribute I want to discuss is adaptability. This is mostly about design philosophy, the choice of governance model, consensus mechanisms. Since the inception of Bitcoin, the whole Bitcoin and blockchain community have been talking a lot, debating a lot about centralization and decentralization, Proof of Work versus Proof of Stake — there are so many debates on these topics. But to me, to the Neo community or maybe to Neo’s design philosophy, we believe it’s not a binary choice. It’s not even a 2-dimension or 1-dimension spectrum — it’s a multivariate spectrum. You can make choices and different grades of centralization or decentralization. You can make choices about permissionless or permissioned — how many transactions should happen on-chain or off-chain on a layer-2.
There are so many design choices, and you shouldn’t make these decisions based on your ideologies or your preferences. Instead, you should make these choices based on different scenarios. What kind of business, what kind of applications is this blockchain intended to be used for? So you should be adaptable. It is good news to see that Ethereum is finally moving from Proof of Work to Proof of Stake, and there are also different choices for consensus mechanisms these days compared to Proof of Work alone. So to be adaptable is really a key factor of winning the competition of public blockchains and to get ready for mass adoption. So, we need to upgrade our protocol — and this is what Neo is also doing. We’re upgrading from Neo2 to Neo3 because we see there’s need for a different kind of design, so we made that decision.
And the second characteristic that a blockchain should have is the capacity of tokenization. Or in other words, how to digitize physical assets into digital assets.
Asset tokenization is a crucial step in digitizing the economy. If we are moving to a truly digital economy, we need to digitize those physical properties into digital forms. There are many different ways to digitize assets, many different categories. Let’s say, so-called NFTs — non-fungible tokens — can be used to digitize collectibles like tickets, art. And also, we can used STs — security tokens — to digitize securities including stocks, bonds, derivatives, and maybe real estate writs, different kinds of securities. And also, many central banks and start-ups are trying to digitize money or FIAT like Tether and other different stable coins and also the Chinese Central Bank is a pioneer in this realm, they’re doing the so-called CBDC — the Central Bank Digital Currency — they’re already doing many tests in China with digitized FIAT. And we can even digitize physical properties including cars, phones, TVs, IoT devices. When all of these different categories of assets can be digitized, we are truly moving to a digital economy.
So that’s the second ability that blockchain needs to improve in the future. The first one is adaptability, the second is tokenization, and the third is interoperability.
I mentioned that blockchain will be the infrastructure underlying a network for a future, global free market. But it’s very weird that today’s blockchain systems — different blockchains — they actually don’t talk to each other. They’re not linked to each other. They’re separate, independent information silos. So, to make blockchain a true solution for the global market, I truly believe that we need better interoperability.
And within interoperable blockchains, all the blockchains can form an Internet of Blockchains, and assets can flow freely between different blockchains. With some new technologies — new cross-chain technologies — we can even see a cross-chain smart contract. A smart contract on blockchain A can call a smart contract on blockchain B, and they can interact with each other. It’s like they’re working in the same network.
Neo in 2020
So now we’ve discussed the three attributes a public blockchain needs to have to become the infrastructure. The three attributes are adaptability, tokenization, and also interoperability. So now, we’re moving to the last session of my speech, which is what to expect from Neo in 2020? And what, especially, we will do in these three aspects.
So first of all, we’re expecting a new version of Neo — Neo3. As an upgrade, from Neo2 to Neo3, will be the most important upgrade in Neo’s history. We have done a lot of optimization, architectural changes, and also governance model change within Neo3. We will still use BFT-style consensus, but a new version — dBFT 2.0. We will upgrade our Virtual Machine. We will upgrade the entire architecture of the core blockchain, and also, there are many optimizations. Most importantly, we will tweak our governance and also our economic model, which I will cover a bit later.
And also, on top of the core protocol, we will have three major new functions which are NeoID — so you can a digital identity on Neo blockchain — NeoFS, which is developed by a dedicated team in St. Petersburg, the distributed storage. So you can store your video, any data, within the Neo blockchain system. And then we will also have a built-in Oracle, so that means if you’re a Smart Contract developer on Neo, you can visit any URI or URL on the Internet. Neo will be the first blockchain system to allow you to do that, to directly visit the Internet.
And we’re also providing funding and technical support for infrastructure providers like wallets, like blockchain explorers, like developer tools such as SDKs. So we’re making sure that when Neo3 launches, all these infrastructure service components are completely ready.
With our EcoBoost project, our ecosystem is booming. We’re seeing new projects building on top of Neo. We will launch a new project soon called the “Early Adopter” project. If you’re willing to develop on top of Neo3, stay tuned for more information on what kind of support we will provide.
Okay, so now, let’s talk about these three aspects I previously mentioned from Neo3’s perspective. So for the adaptability part, Neo3 will adopt a new governance model, a new economic model that is quite different from the one in Neo2. Let’s have a closer look at it.
Here is a picture that explains the new governance model within Neo3. You can see there are 21 committee members who are voted in by Neo token holders. Neo token — NEO — is the governance token of the Neo system. If you are simply holding Neo tokens within Neo3, you will be awarded a little amount of GAS, which enables you to use the network, but you can only do very few things with that amount of GAS. But, if you actively participate in the governance of Neo, you vote and you vote correctly for the 21 committee members, you will be rewarded with more GAS. Within the 21 committee members, the top 7 most voted members will have the ability to run consensus nodes. So there will still be 7 consensus nodes.
Those 7 consensus nodes are responsible for generating new blocks by reaching consensus block-by-block using a BFT style consensus. And together, with the other 14 committee members, those 21 members will be responsible for proposing parameter changes for the Neo blockchain so that the blockchain can adapt to different demands.
And like I said before, different amounts of newly generated GAS will be distributed to different roles. NEO holders will get 10%, voters will get 85%, and 5% will go to the committee. So basically, that’s how Neo3’s governance will work.
Okay, let’s now move to the second aspect — tokenization. For Neo to be a platform for digital assets, for the digital economy, we need to have a full spectrum of tokenization services, and I highlighted three of them that are in the Neo ecosystem. The first is Switcheo Network.
Switcheo Netowrk is a decentralized, non-custodial exchange, and they’re about to launch a new version of Switcheo Exchange that will be a stand-alone blockchain, so it means it will have very good performance. This stand-alone Switcheo blockchain will be connected to the Neo blockchain through our cross-chain interposable protocol, and so assets in Neo can be transferred to the Switcheo Network to do exchange, and even assets from other blockchain like Ontology, Ethereum, BitCoin, or USDT can be moved in and out freely. So it will be a very important exchange infrastructure for the Neo ecosystem.
And also, the second project is Liquefy. Liquefy is a security token offering service provider. They’re one of the best in Hong Kong, and now they’re integrating NeoID, the digital identity component of Neo3. So people who are doing STOs on Liquefy, they have the ability to use digital identity with Neo.
And the third partner is NeoLine. NeoLine is one of the most popular wallets within the Neo ecosystem, and they’re also supporting new standards including NFT and Neo DAPI, all these new technical features.
So that’s the tokenization part. Now we came to the third and last aspect, interoperability, which is — personally, I think is the most intriguing feature of Neo3 blockchain. Why am I saying that? Like I said before, the upgrade from Neo2 to Neo3 is the most important one. And there are many proposals on how to do it. One of them is very intriguing. The proposal is like this. We will keep running the Neo2 MainNet, and at a certain point, when Neo3 is ready, we will launch Neo3 MainNet. So Neo2 and Neo3 will be running concurrently together for a period of time, and during that period of time, people can freely convert or transfer assets and smart contracts from Neo2 to Neo3. And then, we will talk to exchanges and other ecosystem partners to ask them to convert, to shift on a given date when Neo3 is completely ready, and then when the time comes, everyone in the Neo ecosystem will do the conversion, the migration from 2 to 3. At that point, we will completely move from 2 to 3, and we will keep Neo2 running for another period of time, and it will be wound down after that period of time.
So with that cross-chain approach, we see a potential for different blockchains to evolve from their current status to a new status. We even see the possibility for new blockchains to merge together, for 1 blockchain to split into 2 blockchains. So personally, I think it’s a very intriguing idea.
So this is how Neo3 ecosystem will interact with other blockchains and networks.
Okay, basically that’s what my speech is about. My last words will be “May the fittest blockchains survive” I believe with Neo3, we have the adaptability, the capacity of tokenization, and we also have an open mind for interoperability. I believe Neo3 will be at least one of the winners in the competition of public blockchains. Thank you.