David McNeal

“The Neo Project” Report Key Points Blockchain: The Neo Blockchain Classification: Cryptocurrency platform Function: Incorporates digital identities, global assets, and self-executing smart contracts to make a smart economy. Project Status: Active Supply in circulation: 65,000,000 Total Supply: 1,00 000,000 Market cap: $2,324,478,887 Exchanges: 83 of the leading Cryptocurrency trading exchanges has NEO listed. Consensus Algorithm: Delegated Byzantine Fault Tolerant (dBFT). Initial Coin Offering (ICO): 8th Aug 2017 - 7th Sep 2017 Website: https://www.Neo.org/ Whitepaper: http://docs.Neo.org/en-us/index/ Coinmarketcap: https://www.coinmarketcap.com/currencies/Neo/ INTRODUCTION Background Neo is the first ever open source blockchain started in the People's Republic of China. The Neo Blockchain implements P2P networking, digital certificates, cross-chain interoperability, superconducting transactions, and dBFT consensus technologies execute and manage smart assets within a safe and binding framework. Since its founding, Neo aims to contribute in revolutionizing e-commerce through implementing a blockchain-based smart economy; its distributed blockchain incorporates a combination of digital identities, global assets, and self-executing smart contracts to make a smart economy on The Neo Blockchain. This guide summarizes The Neo Blockchain and its technical features, while it explores non-technical details and design of NeoContract, NeoVM, DBFT, NeoX, and other technological innovations structuring the “smart economy of the future." Neo is a public blockchain funded by Onchain; while China's largest private conglomerate called Fosun backs Onchain. Additionally, Onchain has collaborated with Microsoft (China) Co. and other big companies to develop new blockchain business cases. History The cryptographer Nick Szabo conceived a smart contract in 1994, which makes it as old as the Web itself. In 2008, a man or anonymous group under the name of Satoshi Nakamoto released the Bitcoin white paper and outlined the first blueprint of a “blockchain”; the purpose of its design was to solve security issues faced by cryptocurrency developers, such as “double spending." In 2014, a teen named Vitalik Buterin introduced Ethereum, which offers a blockchain-based Turing-complete smart contract platform used to host an assortment of decentralized applications. In 2014, Onchain, a blockchain R&D company launched The Neo Blockchain project under a different name, AntShares; then later became open source on GitHub in June 2015; The original release of The Neo White Paper was on September 2015. It was not until two years later, in 2017, Onchain re-branded the company; the name AntShares changed to NEO.  Neo has made digital identities the central focus of their project as they are essential for creating a smart economy. In fact, at its basic functionality, NEO allows users to engage in digital businesses in less time, and without the limitations that come with having to issue native tokens on the blockchain, as faced by some Ethereum-based startups for example. TECHNOLOGIES Overview The Basics Background NEO is labeled “The Ethereum of China” — a coined nickname regularly used in their marketing strategy. NEO has been quickly gaining rank in each of the 83 crypto exchanges currently listing NEO on their platform, and have become close rivals with Ethereum, Aka. “Bitcoin 2.0” ICO Token Sales The Neo Blockchain is ideal platforms for businesses to raise capital by developing an optional number of native cryptocurrency tokens and offering them up for sale in a crowdfunded event known as an Initial Coin Offering (ICO). NEO vs ETH Common features: Easy access to online community support Simplified programming The Ethereum Virtual Machine (EVM); The Neo Virtual Machine (NeoVM) Smart contract execution environments Digital asset data storage with real-world implements Immutable records and tamper-proof security Smart Contracts A Smart contract is a pre-programmed agreement, stored on the blockchain. Upon fulfilling its predetermined rules, a node triggers the contract to execute itself on a distributed blockchain network. There are two ways to trigger a smart contract: Contract User Authentication: Here the smart contract is a contract account; when the user requests to use the contract account in an asset, it triggers the smart contract. Call a smart contract: Here the user sends a transaction (Invocation Transaction) to trigger the smart contract. The Neo Project Now let us review what makes Neo unique, and break down its technical components. NeoContract NEO designed The NeoContract to fix the issues faced by current smart contract systems. Like any blockchain, Neo enforces a set of specific protocols to ensure the security and consistency of user and system information.  NEP-5 NeoContracts are built on NEP-5 token standard and the dBFT consensus protocol. dBFT offers immutable finality, meaning that block confirmations are final and cannot fork, therefore confirmed transactions are tamper-proof. bDFT The Neo consensus mechanism guarantees consistency and finality of the storage position of every node on the network. It also ensures the system keeps its finality and availability if Byzantine fault occurs on less than one-third of all nodes. NeoContract Technology The smart contract system built on The Neo Blockchain, named NeoContract, combines several unique contract functions developed by Neo and partner developers. Private storage Better Scalability: Distributed Storage Protocol - NeoFS API calls NEO Devkit Interoperability services smart contract code and decentralized application development Private storage A NeoContract can give authorization for others to read or write into a contract storage space. Also, allows rental of contract storage space. NeoX Neo further simplifies development of NeoContracts by focusing on open standards, enhance interoperability, and allow data exchange of alternative products or services. NeoX gives the functionality of fusing Atomic Swaps with Smart Contracts. NeoX Atomic Swaps NeoX allows cross-chain smart contracts, where a smart contract does various actions on multiple chains. It enables atomic asset swaps and guarantees the consistency of smart contracts executed across different chains. The design divides NeoX into two parts:  Cross-chain assets exchange protocol A protocol that implements cross-chain interoperability, it allows cross blockchain contract collaboration in a single smart contract. Cross-chain distributed transaction protocol Multiple steps of a transaction scatter across a different blockchain and ensures consistency of the entire operation. Interoperable data NeoContracts do not offer an immediate method to interact with external data freely. Therefore, to use 3rd party information, you need to use a special transaction to move outside data into the blockchain. Then, the block must be confirmed and recorded before the smart contract can access the retrieved data. Time-stamped information Block height number Price and amount Public addresses NeoContract data information Note: data must come from a limited list of allowable sources, or the contract will not gain access, but, this was not possible until now. Neo makes this possible by implementing interoperable services into The NeoVM. Furthermore, Developers must decide on the behavior of a NeoContract and define any data sources before deploying on The NeoVM MainNet. Neo Virtual Machine (NeoVM): NeoContracts run on a lightweight virtual environment called The Neo Virtual Machine (NeoVM). NeoVM is a decentralized, stack-based Virtual Machine where developers can develop smart contracts and decentralized applications Sharding Sharding for NeoVM helps parallel processing scale better than EVM which has static sharding. Variables in NeoVM are decided before execution and then the sharding is performed before computation as opposed. Unlimited Scalability In Theory, Neo Turing-complete smart contract support with high certainty and finality, support parallel operation, and sharding in NeoVM, makes unlimited scalability a realistic possibility. Top-level Smart Contract Programming NeoVm supports multiple top-level programming languages to be written and run on NeoVM. Now, 90% of developers should already have the skills needed to write code for their favorite Neo projects. As a result, both beginner and veteran programmers have more opportunities to improve their resume and grow a robust portfolio, by adding to it a high paying skill which increases in demand every day — "smart contract development experience." Moreover, startup times are reduced from smart contracts needing less lines of code in comparison to other types of app development. Supported languages C# Java Python Kotlin VB.NET F# 2018 Top IDE Software NeoVM also makes it so developers can now build and test reusable contract templates, smoothly, in their favorite Integrated Development Environment (IDE). Visual Studio (VS), NetBeans PyCharm Aptana Studio 3 Eclipse Komodo Note: Microsoft develops IDE plugins and compilers to help people build on the Neo platform. Every time a node calls a NeoContract, it starts a new virtual machine. Hence, the execution speed of the virtual machine has a more significant impact on executing The NeoContract, instead of relying on the processing power of the individual node. Also, by caching smart contract data and using the computational efficiency of Just in Time (JIT) compiler technology, Neo further improve the efficiency of each virtual machine.  Smart Economy NEO and GAS One of the most notable economic differences between NEO and Ethereum, is that Neo divides two unique tokens into its network, NEO, and GAS. NEO SUPPLY – GAS SUPPLY Source: https://neotogas.com/ NEO Formerly known as AntShares, NEO is the investment token of the smart economy. Neo token holders get governing rights to manage the network for voting; It allows for more trust; if someone breaks a trading rule, then the institution or government have evidence to support the victim and punish the person or company that broke the rule. NEO token holders are the network owners and managers, managing the network through voting, they also receive dividends payed in the form of GAS tokens. GAS Formerly known as Antcoins, GAS is the utility token of The Neo Smart Economy. GAS has a separate value and purpose from the native NEO currency, and is used to pay for various network functions. One could easily mistake Neo GAS for being the same as Ethereum Gas, but they are much different. When transacting ETH, you pay a fee called "gas," but gas derives from Ether. It is not a different cryptocurrency of its own and does not hold a market value separate from Ether. GAS generation The blockchain generates GAS with each new block; the first-generation cost 8 GAS per block. The interval between each block is 15-20 seconds, so, it generates 2 million blocks in one year. There is an annual reduction of 1 GAS per block every year. The decline continues to just 1 GAS per block and holds at that rate for 22 years. After the 44 millionth block the total GAS generated reaches 100 million, and from this point, there will be no further generation of GAS from new blocks. By calculating normal distribution every 2 million blocks, in 22 years it will reach the total limit of 100 million GAS. With this release curve, NEO will create 16% of the GAS in the first year, 52% of the GAS in the first four years. 80% of the GAS in the first 12 years. Dividends Much like corporate world dividends, if you hold a share of NEO in your digital wallet, then you can claim a payment in GAS every so often, In comparison, “new” bitcoins generated from the mining algorithm is like “new” GAS generated from NEO holders claiming their dividends, in that the coins did not exist prior to making the claim. Dividends deposits go to the corresponding address where the NEO is held. Additionally, if you transfer NEO to a new wallet, you also collect newly generated GAS from that transaction. The amount of GAS generated from dividends follows the NEO holding ratio, so, you need to buy and hold NEO to claim any GAS dividends. example ROI calculation (65 Million NEO in circulation) Source: https://neotogas.com/ A problem with the value of NEO is that at this time, dividends paid in gas, lack short-term profitability. People who need to have their money in usable form will keep it in GAS, the tradeable utility token. It is deflationary, and it will correlate with the price of NEO, and currently GAS has a higher market value than NEO, but that may eventually change. Fees Test network (TestNet) Fees The TestNet is a virtual environment where the user can develop, run, and test smart contract programs. Testing programs on the TestNet incur the network fee of TestNet GAS (not real GAS). TestNet NEO and GAS can be applied free of charge. The blockchain of the TestNet is independent of the MainNet. If you want to develop a simple smart contract or test-register basic assets, the TestNet should suffice. Then, after testing, development can be moved to The Neo MainNet virtual machine. TestNet characteristics Testing asset registration, asset distribution, and contract execution does not consume real money. Globalized deployment in the virtual environment. TestNet blocks, transactions, and other information can be easily viewed in the blockchain browser. Smart contract deployment in the test environment where anyone in the world can employ it. TestNet cannot be used for commercial application development. Main network (MainNet) System Fees The system fees are depicted in the chart below (in units of GAS): For the description of API in the table above, refer to NEO Namespace Creating assets requires a certain amount of NEO as an additional service fee, currently 10,000 NEO on MainNet according to the Neo GitHub Wiki Page. Digital Identity A predominant feature of The Neo Blockchain is how it enables global asset certifications, “X.509 digital identity", to be recorded permanently and verifiably in The Neo Blockchain. These digital identities have become a wide-spread accepted standard. Neo.org describes digital identity as: Digital identity refers to the identity information of individuals, organizations, and other entities that exist in electronic form. Typical implementations include fingerprint & voice recognition SMS facial recognition multi-factor verification traditional web-based verification Legal assets The Neo Blockchain and the various dApps built onto its framework enable users to confirm identification, secure patents, claim ownership of physical and digital assets, and create decentralized organizations — all stored on the blockchain. This can give full legal protection for assets digitized through the NEO platform. As a result, Neo hosts a self-sustaining smart economy in which businesses and governments use a P2P exchange of digital and physical assets on a blockchain. This is the Neo Smart Economy — where you can digitize any real-world asset, and trade with trust. Ecommerce Neo is reinventing e-commerce with blockchain technology. Buyers and sellers handle digital assets and currencies via peer-to-peer with no third-party exchanges. The platform supports digital certificates for real-world objects, thus makes use of smart contracts to create self-managed physical assets. Using pre-defined Digital Identity programmed into NeoContracts, you always know with whom you are trading. It allows Neo to map all real-world assets into smart contracts for any industry and manage them for use on The Neo Blockchain. The Neo digital economy could one day be used in e-commerce services for buying and selling items like clothing, electronics, and groceries, with NEO, or GAS. Other Use Cases Digital tokens generated by smart contract functions and could be used for recording rights and assets like equities, creditor’s, claims, securities, financial contracts, and registering currencies. Furthermore, could be as general underlying data in areas like crowdfunding, equity trading, employee stock ownership plans, P2P financing, and supply-chain finance. Creating and Renewing Assets Users can create a new user-issued asset in The Neo Blockchain and define the type, name, total quantity, and specify the administrator account of the asset. When an asset expires, you must pay a service fee for renewal or the registration will be frozen. If the asset is frozen, then the renewal date will be from the time that the renewal takes place and the asset is un-frozen. If the asset is not frozen, then the renewal fee will be extended one year from the original expiration date of the asset. Therefore, no past-due renewal fees will incur. Ontology Ontology Network gives support for complex technological systems, whether that be existing block chains or traditional information systems. It focuses on connecting and mapping a variety of digital identity services, with a conceptual design resembling an overarching stacked framework that houses multiple levels of functions, block chains, and protocols. Source: Coincentral.com OPERATIONS Governance The Neo Council The Neo Council includes the founding members of The Neo Project and consists of a management committee, a technical committee, and a secretarial committee. The Neo Council oversees the distribution of Neo, and promotional development of a NEO ecosystem is its primary goal. It registers and manages compliant financial assets in The Neo Network. Thus, The Neo Council can freeze, revoke, inherit, retrieve, and transfer ownership of NEO at their own discretion or in cooperating to a judicial decision. The Neo Network plans to support such operations when necessary. City of Zion City of Zion (CoZ) is a global open source ecosystem, with the shared goal of helping NEO achieve its full potential. CoZ communicates through Slack and CoZ GitHub, central places where the team shares knowledge and contributes to projects. Contribution There is no formal process to joining CoZ. Interested individuals must do the work first, and the sent code has needed a license under the MIT License. Consistent contributors become eligible to take part in the CoZ organization and collaborate on projects. Read more about the structure of this organization here: https://cityofzion.io/ Consensus Nodes On July 4, 2018, at 21:00 (GMT+8), NEO Foundation started the election of new consensus nodes, beginning the era of decentralization of NEO. The candidate node run by the City of Zion, after running smoothly on TestNet for over six months, they were finally voted in as a new consensus node. City of Zion (CoZ) is an international group of open source developers working on improving The Neo Blockchain. A webpage has been set up on the NEO website; its purpose is for monitoring The NEO Blockchain status as well as information updates of consensus node candidates and their votes. (Weblink: https://Neo.org/consensus) Apr. 2018, The node hosted by KPN initiated on TestNet. KPN is one of the biggest telecom companies in the Netherlands. Apr. 2018, The node hosted by Fenbushi Capital initiated on TestNet. Fenbushi Capital is the first China-based venture capital firm that exclusively invests in Blockchain-enabled companies. Jan. 2018, NEO-GUI updated to be compatible with an optimized voting algorithm; also the CoZ node initialized on The Neo TestNet. Jul. 2018, Following the recent enhancements to the P2P network. NEO Foundation launched a monitoring webpage to give a transparent source to view consensus node candidates was started; The Neo Council voted the CoZ consensus node onto The Neo MainNet. By the end of 2018, NEO Foundation plans to vote KPN, Fenbushi Capital, and other consensus nodes onto The Neo MainNet. Neo plans to open public campaign for election of all consensus nodes sometime in 2019. ICO Unlike most cryptocurrencies, NEO coins are non-divisible, so they do not break down into decimal fractions, the smallest unit is 1(one) NEO. The Neo Council pre-mined 100% of the 100 million tokens from the genesis block, then divided them into two batches: 50 million sold via crowdfunding 50 million managed by The Neo Council The Neo Council distributed coins in an ICO crowdfunding event which allowed people to invest, but Neo still made money from the sale. Since there was no mining and only issuance of tokens, this centralizes the distribution. Images clipped from ICOWATCHLIST.COM Two crowd sales funded The Neo Project: 1. The first crowd sale took place in October 2015 and lasted for ten days during which 17.5 million NEO tokens sold for $550,000. 2.The second crowd sale, the remaining 22.5 million NEO tokens sold for $4.5 million. The Neo Council assigned themselves 50 million NEO to manage and distribute overtime, to date, 15 million NEO have been distributed from that supply. The other 35 million NEO are secured at this public address: AQVh2pG732YvtNaxEGkQUei3YA4cvo7d2i and considered a non-circulating supply. By rule, the distribution should not exceed 15 million NEO per year. The Neo Whitepaper explains that these tokens are to be used for long-term development, operation, maintenance, and ecosystem purposes such as: •10 million tokens (10% total) assigned as an incentive for NEO developers and members of The Neo Council. • 10 million tokens (10% total) assigned as an incentive for NEO developers in The Neo ecosystem. •15 million tokens (15% total) assigned for cross-investing in other block-chain projects; these tokens belong to The Neo Council. •15 million (15% total) assigned as reserve for contingency. Conclusion Regarding centralization, there has been a lot of skepticism surrounding the project since it is inception, but that is not uncommon in the crypto-verse. However, Neo has announced plans to open voting to the public in 2019. The NEO Council's voting impact is expected to drop to around 15% by 2019/2020. The open source developer community (CoZ) voted in as a consensus node on the NEO MainNet after months of waiting on the test-net. There are also other test-net consensus nodes run by KPN, a Dutch telecom operator, and Fenbushi, a blockchain VC firm that is expected to be up for a vote soon. In conclusion, Neo brings a lot of exciting innovation to improve blockchain technology. They continue to earn the loyalty and support from a massive online community and are one of the fastest growing startups this year. As NEO proceeds to capture the interest of crypto-enthusiasts throughout the globe, the future seems bright. Benefits: •Programming in multiple top-level languages speeds up startup time and exhausts minimal resources. •Support for dApps and ICOs. •Allows multiple participants to exchange assets across different chains •Buyers and sellers handle digital assets and currencies via peer-to-peer with no third-party exchanges. •Registers and manages compliant financial assets in The Neo Network. •Use of smart contracts to create self-managed physical assets. Risks: •Over 35 Million NEO remain in the centralized control of The Neo Council; this leaves open a chance of dumping on the market or other actions that might affect the price or morale of the economy. •NEO holders simply vote for new consensus nodes, there is no way for any random person to do consensus •The Neo Council holds central power by design •High fees for registering new assets •High fees for deploying new contracts •Holding NEO for dividends lacks short-term profitability •Lack of transparency in the consensus system •Technically, the Neo Council can freeze, revoke, inherit, retrieve, and transfer ownership of NEO at their own discretion