Before reading this I recommend reading the general guide HERE for a good understanding of what cryptos are, how they work and what benefits they offer.
Neo (formerly known as AntShares) is China’s first public blockchain. It is attempting to bridge the gap between the digital blockchain and real world goods and services by acting as a platform which will connect many private blockchains. Much like the internet connects many private intranets today. It will become the de facto marketplace of our economy. It calls this “The Smart Economy”.
Neo combines three essential elements to help it achieve its goals.
- Digital Assets: Complying with Certificate Authorities in China, it is creating a platform which allows physical assets to be issued a legally binding digital certificate.
- Digital identity: Working with the same Certificate Authorities has created the possibility of issuing government backed digital identities which, when combined with the digital assets, provide proof of ownership.
- Smart Contracts: These allow transaction of digital assets between digital identities on the blockchain. Many complex financial instruments become possible and fool-proof through the protocol.
The blockchain provides a trustless and secure medium on which all of this can happen.
Let’s look at the benefits of The Smart Economy:
- Elimination of fraud Forgery becomes impossible as nobody can fake ownership of a digital certificate. Scams become much more difficult if people can immediately check if what you are selling is not only legitimate but that it does indeed belong to you and terms of purchase are enforced by the blockchain.
- Dispute settlement If there is a dispute of ownership it is extremely easy to check which digital identity corresponds with the digital certificate of ownership.
- Elimination of middlemen Having a secure and trustless marketplace eliminates the need for lawyers, brokers and other middlemen.
- Increased Liquidity The elimination of middlemen and paper work and the almost instantaneous confirmation of transactions makes buying and selling much easier and cheaper.
- Partial Ownership The elimination of administrative costs and immutability of digital certificates open the way for partial ownership of previously indivisible assets.
- Open Source Big Data Analyze purchasing habits and business operations in unprecedented detail.
This is by no means an exhaustive list but here are some of the more immediate use cases of digital assets and identity:
- Quick and cheap transactions between organisations. The purchase of real estate, stocks or any other type of assets by businesses without the legal and regulatory hurdles as all of this is already built in to Neo.
- Creation of a marketplace for the partial ownership of art of real estate. For example, purchasing a 10% stake in a Picasso painting or a 5% stake in a new mall which pays you your share of rent in dividends.
- Exchange of Intellectual Property. Easily buy and sell IP and automate royalty payments. Partial ownership is also possible.
- Trustless Supply Chain. Payment can be released when ownership is transferred in a similar way to escrow transactions now, only without trusting a third party and processed automatically when the right conditions are met.
- Research and Development. Use open source Big Data to analyze purchasing trends and establish correlations for use in advertising campaigns, psychology and economic studies.
- peer to peer stock exchange.
- peer to peer commodity markets.
This doesn’t include all the use cases it shares in common with Ethereum and other smart contracts/DApp platforms. Other uses listed in the Whitepaper include:
- Smart fund (Already exists in the form of NEST)
- AI-assisted legal smart contract (eg. Agrello)
- Social networking (eg. Alis)
- Automated token liquidity providers
- Decentralized exchange (already incorporated into the OTCGO Neo wallet)
- Secure communication protocol
- Data exchange market
- Intellectual property trading market
- Prediction market
- Advertising market
- Hashpower market
- NeoGas market
How does it work?
So now that you know a bit about NEO let’s get into the nitty gritty. If you’re not technical minded then you can skip to Digital Identity or if you haven’t read up on how the blockchain works and the dBFT consensus method then I’d recommend reading about that here and here first.
Let’s first have a look at how Neo is structured.
Neo is meant to act as a share of the blockchain. Like a share it offers you voting rights and pays dividends in the form of its native currency: Gas.
Many people get Neo and Gas mixed up. Gas is used to pay for transaction fees and for extra service fees such as registering/removing an asset or person’s identity on the blockchain.
Owning Neo let’s you vote on the consensus nodes and earns you a proportional amount of the Gas used to pay the extra service fees.
Neither Neo or Gas are intended to be used as a currency, although if they were to be used as a currency Gas would be the better candidate as Neo is indivisible.
|Total supply of 100 million||Total supply of 100 million|
|All 100 million already in existence||Currently ~10 million in existence|
|Each Neo will create 1 GAS until the 100 million supply is reached||Newly created GAS will be credited to the wallet holding the NEO it was created from|
|Voting rights on consensus nodes||Used to pay transaction fees to the consensus nodes|
|pays dividends to ALL NEO holders from extra service charges paid in GAS||Used to pay extra service charges eg. registering a new asset|
To Clarify, Neo holders will receive Gas as it is created and through extra service charges. Only consensus nodes will receive transaction fees.
Gas in the usual logarithmic decay of cryptos. To quote from the whitepaper:
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.
To put it simply all 100,000,000 Neo are already in existence and each Neo will produce 1 Gas over the next 22 years until the hard limit of 100,000,000 Gas is reached. At the above rate 16% of the GAS will be created in the first year, 52% of the GAS will be created in the first four years, and 80% of the GAS will be created in the first 12 years.
To see how to earn Gas see the section on Wallets.
If you haven’t already, read the section on dBFT for a basic understanding on how Neo achieves consensus. As in every other crypto, nodes are there to achieve consensus and ensure network security. They are rewarded for this with transaction fees paid in Gas. Alternatively they are allowed to accept payment in FIAT currencies outside of the blockchain (I imagine this is to comply with the Chinese government’s stance on cryptocurrencies displacing RMB). In order to become a node you must stake 1000 Gas (current price) to be eligible for election. Every Neo a wallet contains allows it to place one vote so every wallet has the same number of votes as it has Neo. Neo holders can then vote for the wallet address they want to become a node. Game theory would suggest that the nodes offering the lowest transaction fees will be voted in as Neo shareholders have a vested interest in increased usage of the network. Furthermore, if the nodes become centralized or act suspiciously the shareholders will likely vote for other candidates. Suspicious behavior should be much easier to detect with the issuance of digital identities and repercussions for attacking the network will likely be more than judicial.
A unique feature to dBFT is that at least 66% consensus is needed as opposed to 50% of typical blockchains. This means that if consensus is only reached by between 33% and 66% of nodes then the network freezes itself. This is to prevent the possibility of a hard fork which would cause not only the Neo and Gas supply to double, but the digital certificates to double as well. Obviously you don’t want two certificates stating different ownership of the same property. The only case in which security will be compromised is if at least 66% of the nodes are attempting to cheat the system. So the network will have to be compromised before a hard fork can happen.
|0-33% malicious nodes||33-67% malicious nodes||67-100% malicious nodes|
|Network runs as normal||Network freezes until the issue is resolved||Attackers can change the transaction fees as they see fit, reverse transactions they make and delay transactions as they see fit|
- Fast Transaction throughput: currently 1,000Tx/s with peaks of up to 10,000 Tx/s on the DNA private blockchains (See partnerships)
- Fast confirmation times: 15-20s
- Indivisible: Neo cannot be divided into smaller digits
- Multi-signature accounts
- Cocurrent smart contract deployment (Ethereum is attempting to implement sharding to achieve this)
- Compilers for .NET, Java and Kotlin already in place
- Can add functionality without changing the underlying structure.
- Can support Ethereum DApps and ERC20 tokens and has the capability to support DApps written for any platform
Let’s dive a bit into the whitepaper to understand it works.
The protocol has been set up to comply with X.509 standards which allow Certificate Authorities to authenticate someone’s identity and correlate it with a private key. Certificate Authorities in the case of NEO is a government department which deals with issuing identity cards and electronically signing documents. NEO plans on verifying someone’s digital identity through the use of facial features, fingerprint, voice, SMS and other multi-factor authentication methods and aims at creating the new standard to succeed OCSP, which is the current standard cryptographic method of ensuring somebody’s online identity.
With the use of Digital Identities the digitization of assets becomes possible. Assets registered through a digital identity become legally binding and can then be freely traded, bought and sold on the blockchain.
There are two types of digital assets: Global and Contract. Global assets are recorded on the network and are accessible (they can be viewed) by everyone. Contract assets are recorded only on the smart contract and require a compatble client to recognize them (This means that there is room for expansion for the types of assets which can be digitized outside the NEO protocol through DApps and the use of smart contracts. So let’s say there is no current standard for digitizing artwork. Instead of the development team working towards establishing an industry standard and creating the market another startup can build on top of the NEO protocol to fill this niche).
According to the Neo team smart contracts on the NeoVM (Neo Virtual Machine, think of it as the operating system for smart contracts) have several benefits over the EVM (Ethereum Virtual Machine). First of all is high certainty, only one confirmation is required for settlement of the contract; secondly is high concurrency, many smart contracts can be run simultaneously, Ethereum can only run one smart contract at a time, something it is trying to solve with “sharding”; thirdly is high scalability, The main network has been tested with servers across the globe running at 1,000Tx/s, Ethereum is currently limited to around 15 Tx/s.
Futhermore, NeoContracts prohibit the use of non-deterministic functions such as obtaining random numbers as every node must obtain the same answer when running the same function to ensure consensus.
In the whitepaper the price of setting up a contract is set at 500 GAS which is prohibitively expensive at current prices. However simple smart contracts, such as escrow sercices, are free and the team intends to adjust for fluctuations in FIAT pricing. At the time the price of GAS was around $2 so we can assume an intended price of $1000 to set up a Smart Contract. Note that a smart contract can be reused many times so this price is not per transaction. The transaction cost is currently free but future costs have yet to be estimated. They are assumed to be low given how the consensus method is designed.
50 million tokens (50% total) have been sold to investors and are circulating on exchanges currently
10 million tokens (10% total) will be used to motivate NEO developers and members of the NEO Council
10 million tokens (10% total) will be used to motivate developers in the NEO ecosystem
15 million tokens (15% total) will be used to cross-invest in other block-chain projects, which are owned by the NEO Council and are used only for NEO projects
15 million (15% total) will be retained as contingency
The annual use of NEO in principle shall not exceed 15 million tokens
NOTE: The 50 million tokens that were retained by the development team have been locked up for the past year and will become unlocked on the 16th of October 2017. These funds will NOT be put on the exchanges but used to invest in the ecosystem as outlined above. It will be interesting to see how the team initially make use of those funds.
As state in the whitepaper and in several interviews with the founders the ecosystem is the lifeblood of a public crypto. The need to establish a strong network of developers and users establishes confidence, credibility and the necessary framework for real world applications.
NEO has seen a large increase in interest across the board, largely due to the huge increase in price since the beginning of August. The team is currently focusing on producing comprehensive developer documentation, providing educational seminars and building a network of developers throughout East Asia.
Furthermore 10% of the total supply of NEO (valued at $200,000,000 at the time of writing) is dedicated to providing incentives for community projects and developers.
Currently the Neo team is focusing on building a community around the Neo protocol. They have been touring China, Japan, Korea, Taiwan running educational workshops and meetups. (See Partnerships and Community)
They have recently released a standard template for releasing an ICO on the Neo network and are working towards having more DApps being built on their platform.
Come 2018 more features will be added: NeoX, NeoFS and NeoQ
NeoX is possibly the single most important advancement that will be made to Neo in the near future. The cross chain protocol which will allow atomic swaps between any blockchain that has smart contract functionality. This means that it will become possible to swap Neo for any other smart contract enabled crypto on the blockchain itself without using an exchange.
Many cryptos are currently focused on a niche such as supply chain management, advertisements, commodity or security markets, etc. NeoX will allow Neo to realize its vision of being the network to connect all of these separate cryptos. This is the key component in Neo creating its vision of ‘The Smart Economy’.
NeoQ looks to make the Neo protocol more Quantum resistant through lattice based cryptography (in a nutshell using a different type of mathematical problem for the hashing that is expected to be harder for Quantum computers to crack)
UPDATE (08/09/2017) The Neo Council (Dev team) has just released a blog update specifiying a number of things including a more detailed roadmap for the next 6 months:
From the roadmap we can see that the technical side is focused on sustainably moving away from the currently centralised nodes and enabling the node voting mechanism.
On the ecosystem side it is encouraging to see they are taking serious preemptive steps towards putting in place a framework around which legally compliant ICOs can be held.
See the full blog post here. The take away points are the following:
- 16 full time employees currently working a the Neo office.
- Acknowledgement of ICO regulation and reiteration that Neo’s scope is much larger than crowdfunding.
- Reiteration on the platform’s focus on compliance.
- Commitment to releasing monthly reports.
Something that is very often overlooked when analyzing Neo is its relationship with Onchain (Registered under “Shanghai Haike Internet Financial Information and Services Co., Ltd.“). Da Hongfei is the founder and CEO of both Neo and OnChain and the role they will play in complementing each other is huge. Onchain is a private company with large VC investors including Fosun (with a market cap of $103B at time of writing) and was deemed one of the top 50 FinTech companies to watch in 2016. It was founded by Da Hongfei (Neo CEO), Erik Zhang (Neo CTO) and three others with experience in the financial sector (a futures trader in Shanghai and an ex Morgan Stanley employee), It aims to provide blockchain solutions for companies and institutions and has developed IdentityChain and LawChain which are the precursors for Neo to implement its legally binding digital identities and assets.
OnChain uses the DNA (Distributed Networks Architecture) framework to build turnkey business blockchain solutions. Where Neo is aiming for adoption at an individual and community level Onchain has its sights on corporations and institutions. This provides many benefits. By separating public and private blockchains Onchain can focus on providing a business centric product without needing to cater to the needs of a public blockchain of decentralized ownership. A company may prefer to have its control of its own “intranet” but won’t trust using the network of another company. Simultaneously, Neo provides the framework for the private blockchains to interact with the broader ecosystem by eliminating the issue of trust through decentralization and integrating this whole process.
LawChain (built from the DNA framework) is already providing backend storage for 800,000 electronic contracts per day for Fadada which offers ready made smart contract templates for employment contracts, partnership agreements, rental contracts, patent applications and more. It operates similarly to Factom except one of the nodes is run by a legal institution in China meaning all contracts stored on this blockchain will be recognised in a Chinese court of law.
OnChain partnered with the local government in Guiyang, a city known for its big data industry, to produce IdentityChain, A child company partially owned by OnChain and partially owned by local government, which is currently working on bringing digital identities to life.
China Clearing is the Chinese equivalent of the DTCC in the USA. It records all transactions made on the stock exchange. OnChain has worked with China Clearing to develop a proof of concept product for equity crowdfunding.
So what does this mean? You can think of Onchain as providing intranets within companies or industries and Neo connecting all of these intranets together allowing trade and collaboration between them. This isn’t just speculation. Let me reiterate that Da hongfei is the CEO of both Neo and OnChain with some developers working on both projects. Neo is part of a broader ecosystem and linking them all together. Here is a still frame from the video taken at their recent Tokyo meetup where they confirm this relationship:
All of that said it is impossible to look at Neo in isolation as any success for OnChain has a direct implication on the success of Neo. There are projects out there such as Factom, Civic and Stratis whose whole objectives are already being met by the blockchain solutions being developed by OnChain with established clients in government, financial institutions and banks.
ElastOS (elastos.org) is developing an Operating System from the ground up to interact with blockchains with online security in mind. It treats the internet as another foundational resource like the RAM or CPU and, as such, applications have no authority to access the internet directly before passing through the OS. Its research has been sponsored by the industry giant Foxconn among others and has funding of over 2 billion CNY ($300 million). ElastOS operates out of Tsinghua University, the top university in China. One of the co-founders of ElastOS, Feng Han, is also the Secretary General of the DACA blockchain summit in Beijing (This was just cancelled). ElastOS and Neo have announced a technical partnership where ElastOS will build their operating system to be compatible with the NeoVM and Neo will make the creation of DApps and smart contracts accessible to developers. A translated article from PR Newswire China can be read here.
Nomura Securities The Neo team’s recent journey to Japan was prompted by an invitation by Nomura Securities, one of Japan’s largest investment banks. Their technical department Nomura Research Institution was interested in doing a “technical information exchange”.
KDDI is the second largest telecommunications company in Japan. Da Hongfei confirms meeting with them and Nomura here.
AdEx (adex.network) The first DApp to be built on Neo. It looks at disrupting the online advertising industry by providing a transparent bidding process, reducing advertising fraud, increasing user privacy and requiring consent to receive sponsored ads. It recently announced it was porting its core code from the Ethereum network to the Neo network giving the reason of improved efficiency. This is obviously great marketing for themselves by being not only the first DApp being developed on Neo but causing a stir over abandoning Ethereum.
Red Pulse (coin.red-pulse.com) The first planned ICO on Neo. It hopes to create a marketplace for market news and research. Independent contributors are rewarded for their market research based on the amount of interest and a content ‘credibility score’. There was recent controversy over the change in plan to prohibit Chinese citizens from participating in the ICO. This decision came about due to the uncertainty regarding ICO regulations in China currently. Be aware that it is only the ICO which has been prohibited, Chinese citizens may still purchase RPX tokens on an exchange and only affects the inital distribution of token supply.
UPDATE (08/09/2017) The Red Pulse has been postponed until the uncertainty around regulation has cleared up.
Alis: Alis was inspired by Steemit to create a social network for sourcing high quality, reliable news by offering economic incentives to its users. They have recently announced technical collaboration with the Neo team which can be seen on their website (see below).
Agrello (agrello.org) Agrello is attempting to create what it calls ‘Self Aware Contracts (SACs)’ that are accepting Neo during the final phase of its ICO. It is being developed to run on the Ethereum network with plans to run on Metaverse, Lisk and Ripple in 2018 before also supporting NEM, Rootstock (Bitcoin), QTUM and Neo in 2019. My understanding is they are prioritizing platforms with good relationships to real world legal and financial institutions due to their dependence on regulations. They have also declared themselves ‘Blockchain Agnostic’ stating that “you can’t simply infer by default that every organization will use Ethereum blockchain, some organization might prefer to use Quantum, Lisk or a variety of other such platforms.”
Neo has also been running training sessions with Microsoft Azure to teach programmers how to write smart contracts on their platform. These have been hosted in part by INNOSPACE+, a well known tech incubator in Shanghai.
On August 10, 2017 Hongfei and Erik attended a meetup in Tokyo with more than 100 attendees.
I have summarized most of the content from the 2 hour long video in this guide but is still worth watching.
The Taipei Neo group currently has 2150 members with over 100 past meetups under their belt. Description by one of the attendees of the recent meetup which Da Hongfei attended can be read here. Some of the members are in the process of creating a non-profit developer camp to teach developers how to code DApps for Neo (www.Blockcamp.io)
On August 20, 2017 Neo ran a joint workshop with Microsoft Azure in INNOSPACE+ incubator in Shanghai to teach people how to write smart contracts.
Da Hongfei is attending a meetup in London on September 27.
City of Zion (CoZ)
An international community of developers has grown to supplement the development of Neo and act as a point of contact between the Neo team and the western community.
So far they have developed a user-friendly wallet called Neon, been involved with unit tests, developed SDKs and translated documentation to multiple languages including English, Japanese, Korean, Spanish, German and Dutch and are in the process of translating to Portuguese.
They are currently working on consensus node voting simulations, SDKs for JS and Go and a mobile wallet among other things. Clearly CoZ is an integral part of the code development.
The team’s work can be seen on Trello
One of their more active members, Canesin, releases weekly updates on their progress which can be seen here
They can be contacted directly on Reddit
Recent News and Controversy
Da Hongfei confirmed talking with 2 of the 3 largest exchanges in Japan about listing Neo. He confirmed Neo would likely become licensed for trading by the end of September or early October. Source
The 3 largest exchanges are:
- Average 24 hour volume: ~36,000BTC ($175 million)
- Currently trades BTC, ETH, ETC, LSK, FCT, XMR, REP, XRP, ZEC, XEM, LTC, DASH and BCH
- Average 24 hour volume: ~13,000 BTC ($63 million)
- Currently only trades BTC, ETH and BCH
- Average 24 hour volume: ~4,800BTC ($21 million)
- Currently only trades BTC, XEM, MONA and BCH
This gives a combined volume of between $84 – $238 million and at least one exchange where NEO will be one of only 4 or 5 coins. Neo’s 24 hour volume at the time of writing is $80 million so a share of this will result in a significant boost.
UPDATE: as of 04/09/2017 the PBOC (People’s Bank of China) released a statement declaring that ICOs are to be stopped immediately and all coins refunded. This is due to the lack of regulatory oversight and investor risk. This should not be seen as negative news, after inspecting many whitepapers Chinese authorities stated that 90% were intentionally misleading and perhaps only 1% intended to use the funds to grow their businesses.
The SEC in the USA recently announced its intent to regulate ICOs as has the Chinese Government. Neo’s first ICO Red Pulse announced it would exclude Chinese citizens from participating in the ICO to avoid having to delay its ICO until Chinese regulations are known.
As a consequence Neo saw a flash crash from $38 to $32 as traders were hoping for a pump during the ICO as Chinese investors looking to invest can only use Neo to pay for the RPX token. The ban doesn’t affect Chinese investors ability to buy RPX on exchanges after the ICO has finished.
The long term value proposition of Neo remains unaffected by this news. Its purpose isn’t to be used as a crowdfunding currency. Red pulse will still be built on the NeoVM using NeoContracts.
Many investors are interpreting ICO regulations as a crack down on cryptos. This couldn’t be further from the truth. Traditionally public fundraising is done either through an IPO or via crowdfunding. Crowdfunding is limited in the amount of money it is allowed to raise and IPOs have strict regulations to protect investors. ICOs becoming regulated is to the benefit of investors as it automatically weeds out anything that is a complete scam. In fact, the Chinese government is very supportive of blockchain technology including it not only in its 5 year plan but has many blockchain projects in the works at both the local government(Guiyang, Wuhai) and national government levels.
ICO regulation is a good thing for cryptos.
This support bodes well with Neo as the more the economy switches to blockchain powered systems the more value Neo has as a technology. Think of it this way, if there are only two or three computers connected to the internet there is very little value in the network. If there are thousands of computers connected the value becomes much more apparent. The industrial, governmental and institutional blockchains are the computers which will be connected to each other via NeoX.
Da Hongfei was set to speak at the DACA Blockchain summit on the 2-3 September but the event was cancelled last minute. An official statement was released informing the public that there was an unexpectedly high number of attendees so for safety reasons the event had to be cancelled. Many people believe the real reason for the cancellation is government related, particularly surrounding the topic of ICO regulation.
Interestingly Da Hongfei pulled out of speaking at the event a few days prior due to ‘personal matters’. This might be the case, but people are speculating that Da Hongfei was informed of the cancellation and the initial reaction seen in the Slack conversation below suggests he may have tried to distance himself and his organisation from the controversy prior to it happening.
A reddit post from on of the people that was supposed to be attending discusses this news article explaining that Chinese authorities concluded that 90% of ICO whitepapers are intentionally misleading and estimate that only 1% of ICOs are legitimately trying to raise funds for their business.
Low Trade Volume on Chinese Exchanges
Given that Neo is a Chinese project it seems strange that on average only 20-30% of the trade volume comes from Chinese exchanges. Let’s compare this to other popular Asian projects:
- QTUM: 85% Asian trade volume
- OmiseGo 30-40% Asian trade volume
- NEM 10% Asian trade volume
- BCH 35% Asian trade volume
Let’s break it down a bit further. If we look at which countries specifically are trading these coins we can see that Korea dominates QTUM and BCH trading at 40% of the total trade volume for each. Neo is not yet listed on any korean exchanges so when adjusting for this we see that only QTUM still has a significantly higher Asian trading volume of all the Asia-centric coins. See Competitors for an analysis on QTUM’s threat to Neo.
There was misinformation being spread around about the nature of Neo’s relationships with Microsoft and Alibaba. In Da Hongfei’s words Neo has a good relationship with Microsoft due to their blockchain being the first to be written in C#. As such Microsoft is interested in seeing their success and has representatives present at the developer workshops. Neo is using Alibaba’s servers. It is OnChain that is developing technology for their Ali Cloud servers. This is as far as their relationship extends for the moment.
Neo aims of having a block time of 15 seconds whereas currently it fluctuates between 20 and 25 seconds. This ultimately creates slower Gas inflation and hence less Gas payout to Neo holders. Da Hongfei has stated that this will change once the nodes slowly become decentralized and fees are introduced to cover the costs of faster servers.
Buying and Selling NEO
In order to buy and sell NEO outside of China you must use either Bittrex or Binance. These exchanges do not let you buy NEO directly with FIAT currencies so you must first buy Bitcoin or Ethereum in order to trade them for NEO (USDT/NEO available on Bittrex and LTC/NEO available on Cryptopia also). Binance currently lets you keep the GAS your NEO generates on your wallet on the exchange. Bittrex has announced plans to implement this as well but doesn’t currently include this feature.
The process of buying and selling on exchanges is discussed HERE. For beginners I recommend using Coinbase, localbitcoins or Coinmama to purchase Bitcoin, then transferring the bitcoin to Binance and trading the bitcoin for Neo. I will be releasing a more in depth guide for complete beginner’s in the near future.
Alternatively you can use Changelly to buy NEO directly with your credit card. This convenience will cost you a premium, however.
The official Neo Team consists of at least 11 employees, 6 of which are full time developers, and at least a dozen community developers. Below I have listed the information I could find about them.
Da Hongfei is the co-founder and CEO of OnChain and the co-founder and face of Neo since January 2014. He has been in the blockchain scene since 2011 and originally intended to set up an exchange. He has worked full time in the crypto industry since 2013 setting up an organisation with six others called Bit Angels Club which organized meetups in Shanghai, Beijing and Hong Kong. From this a system for crypto crowdfunding was born under the acronym DAC (Decentralized Autonomous Company) which was later rebranded to AntShares. The direction of the company changed to digitizing assets and with the incorporation of smart contracts the idea of a Smart Economy emerged and the team rebranded again to Neo. Da Hongfei is a leading voice and evangelist in the blockchain community in China.
Before getting involved in cryptocurrencies Hongfei worked as the CEO of IntPass Consulting under the western name of David.
He graduated from South China University of Technology with a B.A. in Technology and English
Interviews with Da Hongfei:
Former developer at Huobi, a Chinese cryptocurrency exchange. Erik is the lead developer and CTO of Neo. He often travels with Hongfei to meet with the community, present the technology and teach developers how to write smart contracts on the NeoVM.
Erik studied at Sichuan University in Chengdu.
Before starting at Neo Tony was VP at Onchain. He has worked as a researcher on Blockchain technology at the Shanghai International Finance Research Center and as the Business Manager at BTCC, an exchange based in Hong Kong.
Prior to his entry to the blockchain scene he worked at Standard Charters as a Business Analyst for 4 years, Executive Manager at Union Pay for a year, Strategic Project Manager at Happy Payment (环迅支付) for one year and Deputy Business Planning Manager at Enterprise Mobile Network (擎动网络).
Tony has published articles such as “Block chain: from digital currency to credit society” in 中信出版社 (CITIC Press) and “Block Chain: New Economic Blueprint and Guidance” in 新星出版社(Nova Press).
He graduated from East China University of Science and Technology in 2005 with a B.A. in Finance.
Tony clearly has extensive business experience in the electronic payment industry and finance.
Johnson currently works as the Director for business development at OnChain and Neo. He has 6 years experience working as a marketing manager in remittance services with many major Chinese banks (Bank of China, ICBC, Bank of Communications, CITIC, CIB), 3 years experience as Brand Manager for CMB and another 5 years experience working with Citroen, Peugeot, Yili, Intel, UPS and Siemens on their marketing campaigns.
Johnson looks to bring financial marketing and industry links to the table.
Peter has worked as a blockchain developer at Neo and Shanghai Distribution Information Technology (上海分布信息科技有限公司) since April 2016. Previous to this he worked at Beijing Fanuc Mechatronics Co. for close to 3 years before working at Huobi with Erik and Zhitong as a PHP developer for a year.
He graduated from Tongji University in Shanghai in 2011.
Chen Zhi has worked at Onchain since 2014 and started working on Neo at the beginning of 2017. He worked with both Erik and Peter at Huobi prior to this.
He graduated from Heilongjiang University with a B.A. in Engineering in 2015 and has been a MIIT licensed software engineer since 2014.
Fred worked as a Senior Software Engineer for Ipedo Inc., a Silicon Valley based company, for 3 years before moving into Sales and Marketing for a several technology companies over the course of 7 years. He is now involved in the marketing operations for Neo.
Fred studied at the prestigious Fudan University.
A self-prescribed programmer, researcher, and blockchainer at the University of Michigan. Alan has been working on the CoZ website, its governance, the Neon wallet and community resources.
From Canesin’s Github profile he looks to be attending or has attended Harvard and has been involved with blockchain programming since at least April 2017. Speaks Portuguese and has been involved with the Portuguese documentation translation and weekly developer reports as well as coding.
Has been involved in porting ERC20 Ethereum tokens to the Neo platform.
A Computer Science PhD at Stanford. He has made commits to the documentation and wallet.
Has been working on creating a stack exchange and easier dissemination of information for non-technical users. He seems to be involved with Monzo, a mobile payments gateway, and Vidsy, a platform for creating mobile video advertisements as a day job.
Ash is currently working on the unit tests.
Code Quality Assessment
When I first looked at the Neo Github repository I was a bit worried. There were only around 200 commits with infrequent activity. After some more research I came across the City of Zion Github repository and the DNA repository which will all supplement each other. However the number of commits compared to other projects still worried me. I contacted wv vw, the community developer, to ask him about this and he replied:
“Commits are not a good metric for project activity. In general, it’s good practice to “squash” commits when merging a pull request.”
While this is still a concern, the fact that their are many companies and the Guiyang local government already started using the DNA framework and DApps are being built for the Neo platform suggests that the code is of good quality. Please contact me if you find any evidence to the contrary.
I’m currently looking for blockchain developers to test the validity of this and audit the code of the following Github repositories to determine how well it’s structured and whether their claims stand up to scrutiny.
Currently working with /u/DaBaiSha to deliver you an accurate view of how the Chinese online and offline developer and investor communities view Neo and its competitors. Coming Soon
Currently hiring a Chinese Translator. Please send me a message on Reddit @u/ImBrittle
Disclaimer: I need to offer the usual disclaimer that I am not offering financial advice and this guide serves educational purposes only. Before you get excited please read the Risks section.
Remember that the average Neo holder will earn gas from the “extra service charges” such as asset registration. The big question then is how much does this cost and how many assets can we expect to be registered in a given amount of time? In order to try and make some educated estimates on these unknowns let’s take a look at the real estate market.
The typical costs for changing the title deed and legitimizing the sale of a property in China are 0.5% of the total sale value in transfer fees and 0.3% in notarization fees. An obvious incentive for registering a house on the Neo blockchain is to avoid this cost. It is yet to be seen whether the price of asset registration will be based on the cost to the system or on real world cost. In order to have some idea let’s initially assume it’s set at 10% of the real world cost which, coupled with the ease of transaction, should be a significant incentive to register a property.
The expected real estate sales volume in China for 2017 is 10.7 trillion CNY so the total cost of notarization and transfer fees is 85.8 billion CNY. Taking Neo’s extra service charges to be 10% of this cost gives us 8.58 billion CNY or $1.3 billion per year in GAS dividends assuming 100% market penetration.
If Neo achieves this level of penetration it will be seen as a secure investment and we could expect people to valuate these dividends at a 2-7% return on investment. Given these figures NEO would be valued at between $18.5 – 65 billion.
Total B2B e-commerce volume was $1.6 trillion in 2014 according to China E-commerce Research Center (CECRC). We can only assume this has increased since then, however I will avoid speculation as much as possible so we will use this number. Given that the OnChain-Neo combination is aiming at this market we can make some estimates of what the future value of the network is from this perspective. Under the same premise of charging 10% of the real world cost let’s assume a transaction cost 0.5% (this is a conservative estimate based off Visa’s lowest merchant fees and doesn’t include any legal costs). Neo would then charge 0.05% of total value which would equal $800 million of GAS per year. Using the same method of assuming a 2-7% expected return on investment this puts Neo at a valuation of $11.4 – 40.0 billion.
Let’s look at the automobile industry. In 2016 car sales in China reached 28.03 million. There are several costs to registering a car. One of these is by way of auction to keep car ownership in check to reduce congestion. The high cost of this is intentional and institutionalized so Neo wouldn’t look to make a difference here. However, the additional fee of registration comes to around 300CNY or $45. Applying the same logic and charging 10% for asset registration on the blockchain leads to annual GAS revenue of $126 million. Following the same procedure as above this places the value of Neo at $1.8 – 6.3 billion.
These three industries alone would place Neo at a valuation of $31.7 – 111.3 billion
The range of industries Blockchain is set to disrupt is much broader than just these three. the first two DApps on Neo look at disrupting the market research and advertising industries, not to mention that the existence of digital assets makes B2B e-commerce viable for many products and services which were previously restricted to traditional payment. Furthermore digital identities will also incur an extra service charge. Current cost is 20CNY ($3) which under the 10% cost assumption and 180 million births per year equates to $54 million in Gas or $0.77 – 2.70 billion Neo valuation.
Let’s just reiterate the assumptions:
- 100% market penetration
- 10% cost of traditional methods
- Current transaction volume remains constant
- Price of Neo determined by a 2-7% expected Gas dividend payout
- Doesn’t expand outside of China
Let’s assess these assumptions. Firstly 100% market penetration. For certain markets, like real estate or automobile, once the network reaches a critical point it is hard not to see it becoming an industry standard. For others such as B2B e-commerce it is not fair to assume 100% market penetration as not every product and service will benefit from being digitized.
The assumed 10% cost was based on a number that is likely to encourage adoption. It is possible for these costs to be lower by popular vote to encourage network usage, or possible more expensive once a monopoly is established. I won’t hazard a guess at how the market will react, but we can certainly place an upper limit at the original cost of transaction before digitization .
Current transaction volume will almost definitely increase. Volume will of course fluctuate with the boom and bust cycle but the general economic trend is for volume to increase with time. Furthermore, asset digitization provides greater liquidity which leads me to believe that for certain traditionally illiquid industries such as property transaction volume will increase significantly. We stated previously that only nodes claim transaction fees, but increased volume almost always leads to industry growth and with growth comes more extra service charges.
Neo is already producing around a 7% return on investment for Neo holders as Gas is being produced. If we assume Neo becomes ubiquitous and achieves 100% market penetration then it is likely it will be seen as a very safe investment option and the expected return on investment will shrink well below 7%. This only increases the Valuation of Neo long term.
Finally, if Neo achieves mainstream adoption in China the only thing preventing it from expanding into other countries is the appearance of copy cats that they would have to compete against.
Taking into account all of these factors I give Neo a realistic mid term valuation of $50 billion and a long term valuation of over $1.3 trillion assuming a 2% expected Gas dividend from extra service charges and a cost of transaction equal to traditional methods while limiting itself to the Chinese economy and the industries mentioned. At current market price that would produce a 3,100% – 81,250% return on investment without taking into account Gas dividends. One NEO would be priced at $500-$13,000. At this price 1000 NEO would pay a yearly passive Gas income of $260,000.
Before you go and take out a loan to buy Neo please be aware that it is anything but a sure thing. There are many things that could go wrong before it reaches the success it hopes for.
Below I’ve outlined some of these risks and attempted to assess the likelihood of them occuring:
Government Regulations: This is a very prominent issue for cryptos at the moment. Governments and central banks are keeping a very close eye on the crypto industry, the displacement of FIAT as the currency of choice poses some very dangerous questions. Unlike Bitcoin and other traditional cryptocurrencies Neo is not intended to serve as a currency and so may avoid some of the scrutiny reserved for these FIAT competitors given that it’s designed with compliancy in mind.
In fact, many of the listed benefits of the Neo Smart Economy directly benefit the country (reduced corruption, fraud, company transparency, identity and transaction records…).
That said, it is certainly not immune from regulation. Where government regulation might pose a risk is in the establishment of Neo as the de facto Smart Economy. As dividends from extra service charges are paid to Neo holders proportionally and the majority of Neo holdings are overseas there may be a fear that this will cause money to leave the domestic economy.
Let’s use Game Theory to establish the likelihood of this being a legitimate fear. In the first scenario Neo is restricted solely to the Chinese economy and the vast majority of Neo holdings are overseas. In this case most of the extra service charges are leaving the economy. The Government may intervene in one of two ways as I see it. The first is to ban the use of Neo outright and establish their own version. The second is to buy large amounts of Neo as a way of ‘taxing’ the system and retaining wealth.
In the first scenario the price of Neo will completely crash leaving investors out of pocket, while we said the majority of holdings are overseas it is still very likely there will be a significant amount of Chinese investors losing money. Furthermore, the implementation of a government controlled smart economy defeats many of the purposes of blockchains. Corruption is still possible at the higher levels and investor confidence will suffer. On the other hand China retains hold of all of the service charges and has more control over the technology’s direction.
In the second scenario the government sees the writing on the wall and invests in buying significant amounts of Neo. With this they retain some control of the nodes by having large amounts of voting power and can effectively tax the system. This benefits investors as the circulating supply of Neo is reduced pushing up prices. Investor confidence would suffer less in this istance by retaining the transparency. One could also speculate on the price of a cryptocurrency endorsed by the government.
Now let’s take a look at a second set of scenarios. Cryptos were conceived around connecting people and economies. If Neo were to see significant success it is unlikely they would remain solely in China. In the case that Neo becomes a global network then Gas dividends are paid by everyone and received by everyone, the flow of wealth follows similar principals to the current economic system and there is no incentive to banning Neo. In fact, a Chinese based organisation of that magnitude would likely greatly benefit China.
In these scenarios I see the government banning Neo outright as highly unlikely given the cost/reward ratio.
It is still possible that negative press about the crypto industry as a whole could place Neo in a bad light and force regulations across the board. I would hope that regulators have enough insight that each crypto must be examined individually. The recent controversy over ICO regulations is actually encouraging in that they are looking specifically at regulating suspicious fundraising practices rather than the industry as a whole.
Initially I was concerned about the Gas price of implementing smart contracts using the Neo network and the low initial circulating supply. I thought that speculators might acquire a monopoly on Gas driving prices through the roof. On further reflection I don’t think this is such an issue. The developers have already stated that the Gas price will change based on its FIAT price, so as long as we assume even a small amount of liquidity on Gas exchanges we can expect price to adjust to real market demand.
As with any crypto there is a risk of the network being attacked. Traditionally this was discouraged from a purely economic perspective. Neo offers not only economic barriers to attacking the network but judicial consequences. I think it is highly likely that a digital identity will be required to run a node. There are two possible worst case scenarios. The first is early in Neo’s lifecycle, where economic barriers aren’t yet large enough to prevent an attack. The Neo team currently holds 50% of the entire Neo supply so until this reaches circulation this is impossible unless done by the team itself.
The second situation is when Neo is mature and holds vast amounts of digital asset wealth. Here there may be an economic incentive to short asset classes and cause a network collapse. There are two problems with this though, due to the network maturity it would require a very large amount of Neo to establish a 66% consensus and the identities of those that crashed the system would be known by everyone. The ones responsible would likely face life imprisonment.
This is a very real risk as can be seen form the DAO hack on the Ethereum network or the Bitcoin vulnerability in 2010 leading to the creation of 184 billion new coins and require a hard fork to revert.
Da Hongfei has answered this question in one of his Q&A sessions with two points. The first is that Neo uses well established languages such as .NET and Java which are already being used in many financial services globally. Compared to the much newer language Solidity, used by Ethereum, the chance of a developer error becomes much lower. This doesn’t completely exclude the possibility of a hack, under which situation the consensus nodes (whose identities are known and are relatively few) will be contacted and can reach a consensus on whether or not to freeze the address that caused the hack until the judicial system can process the theft. Note that this feature has not been implemented yet. While many crypto enthusiasts may have wonder about the potential to abuse this power Da Hongfei also stated that at this present stage security is of a much higher importance than anti-censorship as we’ve seen many hacks or attempted hacks but very few censorship cases.
As noted in ‘Network Attack’, the Neo team holds 50% of the total supply. This prevents an attack on the network in the early days but also leaves itself open to embezzlement by whoever controls those private keys. Financial transparency would go a long way to alleciating this and could be achieved through weekly/monthly spending reports, much like the QTUM team already does.
This centralization is only temporary and Da Hongfei can be heard discussing how they plan on decentralizing over time in his Tokyo Q&A.
Neo doesn’t allow direct connection with outside sources to prevent non-deterministic behavior (disagreement between nodes) and therefore requires an ‘oracle’ which is a trusted third party to feed reliable real world data into the network. Currently Neo is not partnered with any companies which provide this service and until they do certain smart contract functionality will be limited. It is possible that this will be the nature of the technical partnership between Neo and Alis.
This industry is still very much in its infancy and we can’t rule out the possibility of another crypto overtaking and outmaneuvering Neo. As discussed in the ‘Competitors’ section the only crypto on the radar that could really be considered a threat is Metaverse ETP.
Don’t confuse the many other blockchains attempting to target business applications, these pose competition to OnChain rather than Neo, the success of blockchains in industry only strengthens Neo’s use case.
It is also possible that DApps are built on the Neo platform or other blockchains that interact with Neo which cater to individual industries (real estate, automobile…) and siphon off the lion’s share of the extra service charges reducing the amount of Gas paid to Neo holders. This isn’t wholly a bad thing as it requires Neo to become mainstream. Furthermore, DApps focusing on their own niches may speed up adoption.
In order for industries to adopt Neo there needs to be a large enough incentive to replace legacy systems. As discussed in ‘Growth Potential’ that could be financial (90% cost reduction),technical improvements in transparency, speed and liquidity or regulatory requirements. However, there is something to be said about the inertia of legacy systems. Many old institutions still keep paper files despite the obvious advantages of moving to the digital world. Until a larger community of developers grows around Neo I think its adoption will initially be limited to large coporations and institutions that stand to gain a lot and have the resources to transition.
It seems that the dev team realizes this which is why they’re spending the next few months focusing on producing documentation and running workshops and meetups.
It is always a risk for any startup if one of their key members should die or have to resign. Neo is becoming a community project but it doesn’t yet have enough momentum for the community to spearhead its direction without Hongfei or Erik.
While we established that OnChain are designed to work with each other from the ground up one could argue that without transparent financial statements it is possible for funds to be siphoned from the development team’s Neo fund towards OnChain’s development. This is unlikely as OnChain has large VC backing as it is.
If you’re reading this you must have heard of Ethereum. Ethereum was the first blockchain to implement smart contracts and Neo is often referred to as “The Ethereum of China”. Ethereum is currently working with Wanxiang Blockchain Labs to establish a foothold in China. Wanxiang Blockchain Labs owns 500,000 Ether and has pledged $30 billion towards the development of a smart city which will have some aspects of blockchain technology integrated in to it (This is NOT $30 billion pledged towards Ethereum development). So is it fair to call the Chinese Ethereum? Comparing technicals Neo claims to have much better scalability with both higher transactions per second and concurrency but technicals alone don’t determine success. By now you will know that Neo’s emphasis is on its Smart Economy. Ethereum is currently incapable of creating legally binding digital assets and therefore Neo retains a competitive advantage over Ethereum in its niche.
Will Ethereum outperform Neo in the global DApp marketplace? Quite possibly, but does this affect Neo’s smart economy? No. It’s like comparing Google to Amazon, Google is mostly confined to the digital realm whereas Amazon provides digital services such as entertainment and servers, but its focus is on bridging the gap between digital and physical worlds.
Futhermore, the design philosophy of the two blockchains are different. In a Q&A sessions Da Hongfei quoted the first line on the Ethereum.org website “Build unstoppable applications”. He said that Neo’s focus is not on anti-censorship, in fact it is built around compliance and working within the current framework.
QTUM is often compared to Neo and their price action is very highly correlated. Both founders have stated that they are not in direct competition with each other and serve different niches.
Looking at their QTUM blockchain economy whitepaper I would have to agree. Under Section 6: Business Use Cases there is discussion about its use in product management, securities and logistics. While this is asset digitization we must look at what role this fills. Neo looks to be the public marketplace of digital assets. QTUM looks to be the private management of digital assets. One could argue that QTUM is a competitor to OnChain as opposed to Neo but NeoX is designed to work with all smart contract blockchains so the adoption of QTUM is actually beneficial to NEO long term. The crypto industry is not a zero sum game, I would urge developers and investors to follow Agrello’s mantra of being blockchain-agnostic and supporting the development of the industry as a whole.
This is the only crypto I’ve found that looks to pose direct competition to Neo. In some ways it is actually ahead of Neo. ZenGold is a digital asset on its platform backed by physical gold. Zen Dao is a marketplace of collectibles (think artwork) with digital certificates. Zengold is currently only available on Openledger DEX with very low liquidity and Zendao has only recently gone through fundraising and has no ready product. The creator of Metaverse ETP Eric Gu is the organizer of the largest blockchain conference in China Finwise, with 35,000 guests in 2017. While this inevitably means he has a good network of contacts and respect in the industry the Chinese government recently placed him and his conference under investigation due to the attention it was receiving and the similarities between blockchain and the financial services sector, the former not yet being regulated.
The PoW consensus method actually restricts the network in this case. Having digital assets worth more than five times the cost of mining makes it profitable to attack the network and short the assets. This means the network isn’t scalable as cost of transactions must be greater than 20% of the total value of the network!
Upon deeper research I found out that Eric Gu is actually one of the orginial founders and angel investors of Neo and even coined the original name AntShares.
The ICO for Metaverse was back in August 2016 but since then it seems like Neo has outpaced them in terms of development and industry recognition.
Neo is the fastest growing crypto in 2017. Since January it grew by 400x to its peak of $56 on some exchanges. We can see two spikes in price, the first around the middle of June which is when the entire market was booming and large announcements from the dev team were expected, followed by a dip due to misunderstanding around their relationships with Microsoft and Alibaba and the general crypto market correction. The second spike occurred during its re-brand from AntShares to Neo and the launch of its new software (NeoContract 2.0). The most recent dip was due to the ICO regulations announcement and the restriction the Red Pulse ICO placed on Chinese citizens. These have been discussed already.
To download the wallet follow this link and the pictures below:
Click on the Download button circled which will take you to City of Zion’s Github page
Select the download which corresponds to your operating system.
Once the file downloads, open it and create a new wallet.
Save your private key somewhere, make multiple backups. See the general guide for more details.
To claim your Gas you must log in to your wallet and click the button “Claim Gas” underneath your balance. Wait a few seconds and you will receive the Gas the has accumulated.
If you speak Chinese you may want to try out the OTCGO web wallet which has the decentralized exchange built in. I haven’t used it myself
Official Neo website https://neo.org
Official OnChain website http://www.onchain.com/en-us/
Whitepaper and documentation http://docs.neo.org
Github (Neo-project) https://github.com/neo-project/neo
Github (City-of-zion) https://github.com/CityOfZion
Github (DNA-network) https://github.com/DNAProject/DNA
Trello community development roadmap https://trello.com/b/6TngvuLf/neoblockchaindevelopment
Reddit community https://www.reddit.com/r/NEO/