What is NEO? The ultimate guide

Formerly known as Antshares, Neo is China’s first ever open-source blockchain. But is it still too young?

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Closeup of NEO physical coin

Neo, previously known as Antshares, is a relatively new cryptocurrency, but don’t let that dissuade you from considering its potential value. It’s not only China’s response to Ethereum, its goal is to be something more than just another coin. The Neo vision is to create a smarter economy and facilitate the transfer of digital and traditional assets.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade.

What is Neo?

Neo is a blockchain and coin system to create a smarter way of transferring currency between users. It’s divided into two different tokens (similar to Ethereum): the first is Neo (or Antshares, code: ANS), and the second is Gas (or Antcoins, code: ANC), and they both have extremely specific uses on the Neo platform as we’ll see in this guide.

Icon Symbol Initial release date Algorithm type Max. supply
ANS icon
ANS August, 2014 N/A 100 million ANS
ANC August, 2014 N/A 100 million ANC

The primary aim of Neo is to become a digital, decentralized and distributed representative of non-digital assets, through the use of smart contracts (see below for a more detailed look at smart contracts). This means that its goal is to become a digital alternative for asset transfers that are currently non-digital (e.g., paying rent using a smart contract that triggers automatically once a month, in preference to writing and mailing a monthly cheque).

How is Neo different from bitcoin?

Neo, with its system of ANS (Neo, previously Antshares) and ANC (Gas, previously Antcoins), is drastically different from bitcoin. Here are three of the most important differences:

  1. ANS are indivisible.

The smallest unit of ANS will always be 1 share, and this cannot be divided in the same way as other coins like bitcoin. The primary reason for this is that, just like shares in a company or service, ANS cannot be divided into fractions. This might become a problem in the future if Neo’s value continues increasing but exchanges are already handling their own method of dividing the coin.

Coin fractions at exchanges. How do they do it?

Exchanges are currently trying to figure a way around the problem of ANS being indivisible. The answer they have might not be the best one but it’s the best we have right now: They will sell you fractions of ANS as long as you keep them inside your exchange wallet. If you transfer them to your Neo wallet, those fractions are lost.

For example, you are not technically allowed to own 5.32 ANS. You either have 5 ANS or 6. But exchanges will let you exchange BTC for 5.32 ANS without issue. If you keep those 5.32 ANS in your exchange wallet you will have no problem exchanging them back to BTC once the value increases, for example. But, if you transfer the 5.32 ANS you own to your actual Neo wallet, you will end up with 5 ANS, and the 0.32 ANS will be lost.

2. Generating ANC

The biggest differentiating feature is the two-tiered system of ANS and ANC. At the time of writing (September 2017), it’s impossible to trade and buy ANC, except from Chinese-specific markets. Instead users must buy ANS which, in essence, is their stake in the future of the platform (hence the name before the rebranding to Neo: “Antshares”). The beauty of the two-tier system comes into play the moment you transfer ANS to your Neo wallet.

While holding ANS, you start generating ANC (or Gas) automatically as more blocks are discovered and registered. This is similar to Ethereum, but very different from mining in bitcoin in that the value of ANC is decoupled from the value of ANS. This is in contrast to bitcoin, where the value of a bitcoin mined is the same as the value of a bitcoin purchased.

ANC will be used as transaction fees when people start making payments using the Neo network.

3. Smart Contracts

Another important factor that sets Neo apart from bitcoin is the use of smart contracts, best explained using a real-world scenario:

How Do Smart Contracts Work?

Smart Contracts are the digital equivalent of holding money in escrow with a third party, with the intention of releasing the funds some time in the future. Suppose I have to pay you 0.002 BTC in three months’ time. A contract is created and entered into the blockchain that triggers in three months’ time, as long as I’ve deposited the 0.002 BTC required. Once the contract executes, the money is transferred from my wallet to yours and is automatically witnessed and verified by regulators on the blockchain.

Where can I use Neo?

As of the time of writing, neither Neo nor its currency token, Gas, are usable in real world situations. The future and direction of Neo is still, to an extent, uncertain.

How to make money investing in Neo

Investing in Neo currently involves holding Neo to generate Gas. This is essentially the same as holding a stake or shares in a startup you believe will make money in the future, and being paid dividends. Gas will be used to pay transaction fees in the future and, possibly, will also be tradeable on the exchanges.

In order to get a wallet and start generating Gas, follow these simple steps:

    1. Buy some bitcoin. Because Neo can only be purchased using bitcoin, you will first need to purchase some bitcoin from a separate exchange.
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  1. Sign up to Bittrex. This is the official Neo exchange, the place where you can buy Neo for bitcoin.
  2. Transfer bitcoin to a Bittrex wallet. The exchange from which you bought bitcoin will have stored your purchased bitcoin in an online wallet. Now is the time to transfer those bitcoin into the wallet provided by Bittrex.
  3. Buy Neo from Bittrex. Just as you purchased bitcoin for your fiat currency of choice, now you can buy Neo for bitcoin.

Now you have some Neo shares sitting in an online wallet created for you by Bittrex. This is not ideal as you can only generate Gas when Neo is in a wallet that you own. So, as soon as possible, you should install a Neo-compatible wallet on your computer and transfer the ANS from your online Bittrex wallet to your actual one. This will start generating Gas for you.

What’s the difference between an exchange wallet and a local one?

Most, if not all, cryptocurrency exchanges allow you to keep your coins in an online wallet. This wallet looks and works the same as a wallet installed on your computer but the main difference is in the underlying structure of how it works.

But more importantly, your exchange wallet does not technically have an address. The exchange has its own wallet, a part of which it’s reserving for you. But the wallet is never really yours; it always belongs to the exchange. So, in situations like Neo where keeping some currency in a wallet gives you some sort of bonus, it’s the exchange that will get that Gas, not you.

Therefore, it is always beneficial to move your currency from the exchange-provided wallet, to your personal one.

Using Neo to transfer money

The transfer of money over the Neo network will depend entirely on how cryptocurrency developers decide to integrate with the network in the future and, as of right now, you can only buy ANS to generate ANC. There is no currency that runs on Neo as of September 2017.

What to watch out for

Neo is still relatively young, even compared to other new cryptocurrencies. As a concept it’s both new and complex for most users and this makes the platform harder to adopt. Still, there are bigger issues at play than difficulty of use.

  • No share fractions

The single biggest complaint about the current system is that ANS are indivisible, making gaining value a problem. Coins like bitcoin avoid this problem by having their coins divisible by up to 8 decimal places (the so-called “satoshi”). This means that even as bitcoin gains in value, users can still purchase coins that are within their budget (i.e., even though 1 BTC might cost $4,000, one might still buy 10 μBTC for $0.04). This is not something you can do with ANS. If 1 ANS costs $1,000, you will have to shell out a minimum of $1,000 to get in.

  • Slow to synchronize compared with other currencies

The second biggest complaint users have about the platform is that the blockchain is extremely slow to synchronize updates, for example when transferring ANS from an exchange to your wallet. This might be fixed in the future but, as it is now, it would be nearly impossible to pay for any large value transactions requiring you to wait for confirmation.

What’s next for Neo?

As interesting a concept as Neo is, there is only one certainty in the future of Neo: no-one knows exactly where it’s going. Many speculate it will reach values of $100 per ANS in 2018, but others are not so certain. After all, while the sudden growth in ANS to above $40 in August 2017 was impressive, it’s still very much a mirror of the explosive growth of bitcoin, and ANS tumbled back down to around $23 by September 2017.

The biggest thing going for Neo is that the Chinese government has embraced the platform, while simultaneously distancing itself from other cryptocurrencies like Ethereum and bitcoin. This both legitimizes the Neo platform and alienates it from the western world.

The future of Neo is still very much in flux, and a lot remains to be seen.

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Image sources: Shutterstock, CoinMarketCap
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