The full form of NEO is "Non-Ethereum-Object" which describes itself as an entirely new blockchain developed in China. It was originally launched by OnChain in 2014, but later became independent from them in June 2017 when it forked off Ethereum's blockchain due to the Chinese government's ban on ICOs.
NEO is often described as China's version of Ethereum because it has many similar features to Ethereum, but there are some fundamental differences between them. NEO uses a completely different consensus algorithm not based on proof of work or even proof of stake . The network aims to produce 100 million tokens and all the tokens were pre-mined in the genesis block with full distribution taking place after one year since launch. They plan to implement "proof of stake" by 2020 which will decrease power and increase transaction speeds without changing the total number of tokens.
The founders of NEO are Da Hongfei and Erik Zhang, both of them have a long list of academic credentials – including his Ph.D in applied cryptography from National University of Singapore – which gives an air of legitimacy to the project. His bio says he is a "pioneer within blockchain" and was one of the first blockchain developers in China before joining Onchain as CEO.
Da Hongfei is also founder or co-founder for several other crypto projects such as AntShares and Open Assets . Both teams come from a financial technology background, having worked on securities trading systems at institutions like Accenture Fintech Lab and Microsoft , before founding Onchain technology.NEO is similar to Ethereum in that it uses smart contracts to automate the running of decentralized applications (dApps) across its network which allows people to build their own cryptocurrencies, digital assets , and digital identities. Another similarity is the virtual machine that supports multiple languages for writing smart contracts . This makes it easy for developers to port code from other existing programming languages like JavaScript or Python . NEO differs in one big way though: instead of using a proof-of-work consensus algorithm, they use Delegated Byzantine Fault Tolerance (dBFT). dBFT was actually developed by Chinese university researchers in 2004 before being picked up by Onchain/NEO team. The main difference with dBFT is that it requires token holders to vote for a certain number of trusted nodes, reducing the risk of a minority chain emerging in case consensus is not reached. This also provides a more consistent transaction time compared to Ethereum's 15 seconds . The dBFT algorithm will be further explained in the "How does NEO work?" section below.
As per their whitepaper (p5), all 100 million NEO tokens were created when the blockchain launched and distributed through a wallet-based bonus program. Unlike other projects which pre-mined coins without distributing them, they have been fairly transparent about their distribution with many people receiving free coins from the beginning. In fact, most exchanges that list NEO offer free tokens for signing up with them or by holding BTC or ETH in your account during the genesis snapshot. The NEO tokens themselves are used to generate gas or " GAS " which is an internal currency that can be consumed in order to use certain functions on the blockchain like calling smart contracts (similar to Ethereum's GAS).
The majority of NEO tokens are held by Onchain , who currently controls about 30 million Coins (or 30% of total supply), while Da Hongfei holds another 2.5 million coins (around 2%). The remaining 57.5 million coins or 57% were given away as incentives (50%) for people who hold their ICO in 2016 and 2017, with 10% going towards investors during the first ICO round in 2015. This means only 12% of all NEOs ever went through public trading, just like Ethereum. The other 88% of coins are held and used by the NEO Council and Onchain for future development, with 1% going to support their community projects.
Of the 50 million GAS distributed as an incentive for holding NEO in a wallet, 33 million were given out during the first year (2015) and another 17 million will be rewarded every year until 2020 . The original plan was to distribute 100 million GAS but they decided not to do so because it would have led to inflation after one year. This is similar to how pre-mined tokens on other platforms turn into inflationary currency once mining ends.
