Two smart coins side by side.
NEO has often been called the Ethereum of China. And Ethereum has often been called… Ethereum.
NEO has been hailed by many as a direct competitor to Ethereum (ETH), but there’s much more to the story than that. We’ve brought them together for you to compare side-by-side and learn the difference between these two blockchain innovators.
A side-by-side overview
A simple way of understanding the differences is to think of Ethereum as the predecessor, and NEO as a system that was based on Ethereum, built with a focus on economic adoption and regulatory compliance. This table provides an overview of the notable differences between the two coins.
|Supply limit||100 million, inflation as 50 million developer tokens are released over time.||Unlimited, minor capped inflation each year.|
|Mining||Proof of stake.||Proof of work to transition into proof of stake.|
|Dividends||Dividends are transactions fees paid out in GAS, divided among NEO owners.||None. Casper update to introduce proof of stake dividends for node operators.|
|Distinguishing features||Easily programmable smart contracts, digitisation of physical assets, verifiable digital identities.||Pioneered smart contracts and dapps, unique programming language (Solidity), over 538 tokens hosted on its network*.|
|Applications||Digitisation of physical assets, anything that needs smart contracts, creation and hosting of dapps**, create digital identities, token economy.||Anything that needs smart contracts, dapps**, token economy.|
* At the time of writing 19/04/2018
** While NEO has some features Ethereum does not as part of its core product, through the use of dapps the Ethereum network can provide the same functions as if a relevant dapp was developed.
Live prices: NEO vs Ethereum
Ethereum and NEO smart contracts
Both systems offer similarly unlimited smart contract systems. The main difference is that NEO smart contracts are much easier to create and use.
NEO is designed to let smart contracts work with popular existing programming languages, while Ethereum smart contracts require a reportedly finicky programming language called Solidity.
This means almost any company can use its current developers to create NEO smart contracts fairly easily, while Ethereum requires developers that know how to use the Solidity language.
These are foolproof, theoretically 100% reliable automated contracts. Escrow smart contracts, for example, have become popular.
These can let two parties put their funds into one smart contract controlled account, then it will automatically distribute the assets appropriately when the smart contract signals it’s ready to go.
Before smart contracts, this required the services of a third party, which usually came at an extra cost and carried the risk of having to entrust that third party with all the money.
The reason smart contracts are theoretically 100% reliable is that blockchain technology is decentralised, and the escrow program’s code is open source. Decentralisation keeps it entirely tamper-proof, while open source code lets anyone check to make sure it’s going to work exactly as it should.
This is just one potential application of smart contracts. They can be used to securely automate almost anything in complex ways.
Where to buy Ether and NEO
One of NEO’s main advantages, and why it’s often referred to as an “Ethereum killer” is its smarter smart contracts. Programming Ethereum smart contracts requires some fairly specialised knowledge of the Solidity programming language. But NEO was designed to use common existing programming languages instead, meaning it’s a lot easier to use “out of the box.”
It also has a built-in proof of stake system, of the kind that Ethereum is more gradually migrating towards. Proof of work mechanisms such as those used by Ethereum are relatively inefficient. They consume a lot of energy and computing power compared to others.
Ethereum is planning on moving to a proof of stake system, but NEO was designed to come with proof of stake right from the start, potentially giving it cheaper and quicker transactions before Ethereum. Unlike Ethereum, the simple process of transferring coins between accounts is free on the NEO network.
NEO might also benefit from its focused use cases, and design that lends it to specific applications. One of the primary ones is its ability to digitise physical assets. Essentially, it can let people verify specific real world assets, like a car, fiat currency or anything else, on the NEO blockchain. This goes a long way towards tying the blockchain and the real world together.
In the long run, it might also benefit from possibly being quantum proof. NEO’s whitepaper includes a proposal for an “Anti-quantum cryptography mechanism” called NeoQS, which might eventually be implemented into the NEO architecture. While it’s not an essential feature today, it could become essential a few years from now when quantum computing becomes more common.
Ethereum’s main advantage over NEO comes from proper decentralisation. At the time of writing, the Ethereum mainnet was hosted across 16,141 nodes. NEO however, is concentrated to just a few nodes, most of which are run by the NEO council, prompting many to call the system centralised as it exists in its current state.
It’s hosted the creation of countless other cryptocurrencies and has found itself close to the heart of blockchain technology. At the time of writing, of the top 100 tokens according to CoinMarketCap, 91 of them are hosted on the Ethereum blockchain.
It’s also loaded with side-chains, cross-chains and various third-party solutions, such as 0x. The ongoing development of these means there’s no real reason Ethereum can’t work towards all of the same benefits offered by NEO.
NEO vs Ethereum dividends
One of the most distinctive economic differences is that the NEO network is divided into two different tokens, NEO and GAS.
Ethereum, meanwhile, just uses ETH as its gas.
Gas and GAS
This is the fuel for smart contracts. It’s essentially a transaction fee for using dapps and conducting other actions on the networks.
NEO pays dividends
One of the main factors behind NEO’s high prices is that it can pay out considerable dividends to large token holders. GAS paid as transaction fees is proportionally distributed among NEO token holders, and with growing use (and a relatively high GAS price) the earnings can add up.
To make it easier, several prominent exchanges will even distribute GAS to the rightful NEO owners when the coins are being held on their exchange.
It may also have the indirect effect of keeping NEO a bit more widely available and helping it circulate more.
ETH’s version of dividends
Ethereum will also pay dividends. Sort of.
It’s migrating to a proof of stake mining system with the Casper update, which means stakers can earn dividends in ETH by locking it up and staking it in a node.
Unlike NEO, you’ll initially need a considerable amount of ETH to stake if you’re to start earning dividends. Ethereum creator Vitalik Buterin has proposed around 1,000 ETH as the barrier to entry, to be lowered over time, although this figure is subject to change.
Unless you’re an ETH millionaire who’s looking forward to staking, the Casper update is a lot more significant for the scaling it will bring to the network, and how it will be dropping the transaction fees and times.
While NEO dividends are much easier to earn, you’ll still need to make a considerable down-payment on the coins themselves to start earning a worthwhile income. The same is true of ETH.
Before you buy: things to consider
NEO and Ethereum, and other smart-contract-oriented cryptocurrencies like Cardano, are loaded with similarities, but that doesn’t necessarily mean they’re mutually exclusive.
There may be a tendency to overestimate the effects of competition in the cryptocurrency space, and you can easily find plenty of pundits confidently stating that NEO will destroy ETH, or vice versa.
But despite any aggressive marketing moves, it’s impossible to predict the outcome either way.
If you’re considering buying either, keep in mind that cryptocurrency is volatile, unpredictable and speculative by nature, so remember to do your own research and make sure you’re across all of the risks before you dive in.