Neo: An open network for the smart economy

Paradigm
Paradigm
Published in
10 min readDec 11, 2019

TL;DR on our full review on Neo

Introduction

Neo (formerly Antshares) is an open-source blockchain decentralized application platform that was started in 2014 by the same duo who founded Shanghai-based blockchain company OnChain — Da HongFei and Erik Zhang. The project’s vision is to realize a “smart economy” by utilizing blockchain technology and smart contracts to issue and manage digitized assets.

Consensus mechanism: dBFT

The dBFT (Delegated Byzantine Fault Tolerant) algorithm is based on pBFT (Practical Byzantine Fault Tolerance) algorithm, which is more suitable in blockchain than the latter. PBFT algorithm can solve distributed network consensus effectively, but the more nodes join consensus, the quicker the performance drops, as the time complexity is O(n2). For this reason, Neo proposes an algorithm named dBFT, which combines the characteristics of dPoS. By voting on the blockchain, it decides the name list of consensus nodes for next round, namely authorizing a few nodes to reach consensus and create new block, the other nodes will act as ordinary nodes to receive and verify blocks.

  • Consensus (bookkeeping) Node: This node participates in the consensus activity, make a block proposal and vote.
  • Ordinary Node: This node can transfer, make a transaction, but does not participate in the consensus activity.
  • Speaker (Unique in each round): The Speaker is responsible to create and transmit a proposal block to the system.
  • Delegates (Multiple): Delegates are responsible for voting on the proposal block. The proposal will be accepted if more than 2f+1 consensus nodes vote it. f is the limit of Byzantine nodes.
  • Validator candidate: Nodes participating in elections. Candidate nodes for consensus activity.
  • View: The dataset used during one consensus activity. The view number start from 0 in each round, and the number will increase when it failed to reach consensus in a round.

Source

The Neo system also uses cross-chain interoperability (NeoX), the distributed file storage system (NeoFS), quantum-safe lattice-based cryptographic mechanism (NeoQS), and other original technologies, as the infrastructure for the intelligent economy of the future.

NEO3

The cornerstone of the team’s efforts is NEO 3.0, which will be a robust blockchain implementation with high throughput, enhanced stability and security, an optimized smart contract system, and a feature-packed infrastructure set for diverse business application scenarios.

New features in NEO 3.0

a) dBFT 2.0

In dBFT 2.0, the team added a recovery mechanism that greatly improved the stability of the consensus algorithm. In the rare occurrence of a network failure or a node failure, a quick recovery is expected.

The development of dBFT 2.0 began in Q4 of 2018 and was completed in Q1 of 2019. It will soon be deployed to the main network of NEO 2.x.

b) Pricing Model

In NEO 3.0, the team will address this issue by significantly reducing the deployment and execution costs of smart contracts, thereby expanding the application scenarios of gas and increasing the number of DApps. Prior to the NEO 3.0 implementation, credible projects can apply for grants from the Neo Foundation with contract deployment costs.

c) Internet Resource Access

NEO 3.0 will have a built-in oracle implementation that allows smart contracts to access Internet resources during execution. Inconsistencies between nodes when accessing Internet resources can be resolved thanks to the security and efficiency of dBFT 2.0.

d) P2P Protocol

In NEO 3.0, the team will redesign the P2P protocol, add support for the UDP communications protocol, and enable compression options. This is expected to greatly improve the TPS and stability of the network.

e) NeoVM

In NEO 3.0, NeoVM will be completely decoupled from the blockchain and become a pure virtual machine. In addition, NeoVM will also include some new features, such as support for static members, exception handling, and more.

f) Simplified Architecture

In NEO 3.0, all assets are created in smart contracts, including neo and gas. By removing global assets, it becomes possible to unify all transaction types. The team has also proposed a simplified validation model that will greatly improve the speed of transaction verification, and allow these validations to be performed concurrently.

g) NeoFS

NeoFS is intended to be primarily used by DApps for data storage and as a Content Delivery Network. Moreover, NeoFS can be used to create private distributed storage systems for SMEs, which use regular servers or clusters, and for storing large amounts of unstructured IoT data.

h) NeoID

NeoID is a decentralized identity protocol built on Neo. It empowers users and organizations to have better control of their identities and delivers a higher degree of trust and security to the smart economy.

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Ecosystem

With thriving partners and projects, the Neo ecosystem is slowly growing and developing. Neo has more than 10 developer communities globally to support Neo infrastructure building and lower the entry barrier for Neo development.

Ecosystem is the vitality of the open-source community. In order to achieve the goal of an intelligent economic network, Neo is committed to the development of its ecosystem, providing mature development tools, improving development of documents, organizing education and training activities, and providing financial support. The team supports the following Neo-based applications and ecology and to reward improvements to the design of the experience:

- Node Program

  • A fully functioning Full node PC program
  • A light node PC program with a better user experience
  • Web / Android / iOS clients that do not need to synchronize with the blockchain
  • Hardware wallet

- Blockchain Explorer

- SDK Development Kit

Support Java / Kotlin, .NET C # / VB, JavaScript / Typescript, Python, Go

- Smart Contract Compiler and IDE Plugin

  • C# / VB.Net / F#, Visual Studio
  • Java / Kotlin, Eclipse
  • C / C++ / GO
  • JavaScript / TypeScript
  • Python / Ruby

- Decentralized Applications

  • Smart fund
  • AI-assisted legal smart contract
  • Social networking
  • Automated tokens liquidity providers
  • Decentralized exchange
  • Secure communication protocol
  • Data exchange market
  • Intellectual property trading market
  • Prediction market
  • Advertising market
  • Hashpower market
  • NeoGas market

Source

According to the Neo website, its infrastructure is powering over 100 dApps enabling real use cases for digital assets.

The stateofdapps.com shows 17 of them:

The dappradar.com shows 11 dApps in Neo ecosystem. None of them are in the top 100 by the number of daily users, and only one of them (Switcheo Network) is in the top 100 by daily $ transaction volume.

Source

Check out the Neo dApp List here.

Token Mechanics

Economic Model

Neo has two native tokens, NEO (abbreviated symbol NEO) and NeoGas (abbreviated symbol GAS).

NEO, with a total of 100 million tokens, represents the right to manage the network. Management rights include voting for bookkeeping, Neo network parameter changes, and so on. The minimum unit of NEO is 1 and tokens cannot be subdivided.

GAS is the fuel token for the realization of Neo network resource control, with a maximum total limit of 100 million. The Neo network charges for the operation and storage of tokens and smart contracts, thereby creating economic incentives for bookkeepers and preventing the abuse of resources. The minimum unit of GAS is 0.00000001.

In the genesis block of the Neo network, 100 million NEOs were generated, GAS has not yet been generated. 100 million GAS, corresponding to the 100 million NEO, will be generated through a decay algorithm in about 22 years time to address holding NEO. If NEO is transferred to a new address, the subsequent GAS generated will be credited to the new address.

The Neo network will set a threshold by voting to exempt GAS from a certain amount of transfer transactions and smart contract operations to enhance the user experience. When a large amount of spam transactions occur, NeoID can be used to prioritize transactions and smart contracts with qualified identities. Transactions and smart contracts with no qualifying digital identities can get priority by paying GAS.

Neo uses dBFT consensus which yields 15–20 second block times. There are currently seven consensus nodes, five of which are run by the Neo Foundation. These nodes are delegated by the network and earn GAS through the block reward. Other nodes are simply users of the network. User nodes can earn GAS by holding NEO in a wallet, a process similar to staking.

Each year around 2 million blocks will be generated and the initial generation will be 8 GAS per block. There will be an annual reduction of 1 GAS per block, per year, to coincide with the passing of every 2 million blocks. The reduction will continue down to just 1 GAS per block and will be held at that rate for around 22 years. After the 44 millionth block the total GAS generated will have reached 100 million and from this point there will be no further generation of GAS from new blocks.

According to this release curve, 16% of the GAS will be minted in the first year, 52% of the GAS will be minted in the first four years, and 80% of the GAS will be minted in the first 12 years. These GAS will be distributed proportionally in accordance with the NEO holding ratio, recorded in the corresponding addresses. NEO holders can initiate a claim transaction at any time and claim these GAS tokens at their holding addresses.

NEO 3.0 will have more detailed discussions on the incentive models of the network. There will be continuous updates in the future.

Check out How To Become Neo Consensus Node.

Governance mechanism

The governance of Neo’s network currently consists of two methods: chain governance and off-chain governance.

Chain governance: NEO token holders are the network owners and managers, managing the network through voting in the network, using the GAS generated from NEO to utilize the functions in the network. NEO tokens can be transferred.

Off-chain governance: Neo Council consists of the founding members of the Neo project, under which the management committee, technical committee and the secretariat, respectively, are responsible for strategic decision-making, technical decision-making and specific implementation. The Neo Council is responsible to the Neo community for the promotion and development of Neo ecosystem as its primary objective.

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Summary

Team: Mainly consists of specialists with tech background. No team members graduated from the top universities, or members with working experience in the top companies.

Idea: An open distributed network that combines digital assets, digital identities, and smart contracts.

Development stage: Mainnet. Transition to NEO 3.0 is expected to be completed in Q2 of 2020. No decentralization.

Whitepaper: Well composed, but outdated. No information on NEO 3.0.

Roadmap: Neo development team hasn’t been on time for some of the communicated milestones. The features, promised earlier, is now to be implemented in the third version (NEO 3.0).

Neo is an open-source project that utilizes blockchain technology and digital identities to digitize and automate the management of assets using smart contracts. Using a distributed network, it aims to create a “Smart Economy” by building infrastructures of the Next Generation Internet and creating a solid foundation for mass blockchain adoption.

Neo proposes an algorithm named dBFT, which combines the characteristics of dPoS. The network is quite centralized: there are currently seven consensus nodes, five of which are run by the Neo Foundation.

Neo is often known as the “Ethereum of China”. While similar to Ethereum, it has some interesting features which deserve a close examination. The biggest advantage that it has over Ethereum is the relatively low barrier to entry. Since the developers don’t have to learn a new language to create smart contracts it can definitely look appealing.

Nevertheless, the project is still inferior to the Ethereum in terms of the number of DApps in its ecosystem. While there are about thousands dApps in the Ethereum ecosystem, Neo infrastructure is powering only a hundred dApps enabling real use cases for digital assets. According to dappradar.com, there are 11 dApps in Neo ecosystem, none of them are in the top 100 by the number of daily users, and one of them (Switcheo Network) is in the top 100 by daily $ transaction volume.

However, Neo actively onboard partners who are able to launch dApps, and increase the ecosystem further. Now the project is investing USD $100 million through its EcoBoost program to accelerate the realization of large-scale commercial blockchain solutions by empowering developers and projects in the ecosystem.

Also, the project continues to improve, the development is in the full swing. The cornerstone of the Neo team’s efforts now is NEO 3.0, which will be a robust blockchain implementation with high throughput, enhanced stability and security, an optimized smart contract system, and a feature-packed infrastructure set for diverse business application scenarios. NEO 3.0 will launch as a new blockchain network from a genesis block. The development of NEO 3.0 began in Q4 of 2018 and is expected to be completed in Q2 of 2020. Who knows, maybe with the implementation of the new features Neo will soon be able to reach the level of its competitors.

Check out our full review on Neo to know more about the team, partnerships, token metrics and more!

This is not financial advice.

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