What is NEO?
NEO is a blockchain platform that facilitates the development of digital assets and smart contracts. The platform uses two different tokens (similar to Ethereum): the first is also called NEO, the second is GAS. Both tokens have specific uses on the NEO platform, as we’ll see in this guide.
Icon Symbol Initial release date Algorithm type Max. supply
ANS icon
NEO
August, 2014
N/A
100 million NEO
ANS icon
GAS
August, 2014
N/A
100 million GAS
The primary aim of NEO is to become a digital, decentralised and distributed platform for 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. An example would be paying rent using a smart contract that triggers automatically once a month, instead of setting up a bank payment.
NEO vs GAS
The two native tokens of the NEO platform serve different purposes:
NEO tokens represent the ownership of the NEO blockchain. They are used to create blocks and manage the network, and when you hold NEO in your wallet you’ll be rewarded with GAS tokens.
GAS tokens give you the right to use the NEO blockchain. Much like Ether to the Ethereum network, GAS is the fuel that powers transactions in the NEO system.
What sets NEO apart?
The NEO platform, with its system of NEO and GAS tokens is different from bitcoin and many other cryptocurrencies. Three of the unique differences that set it apart are:
NEO indivisible units
The smallest unit of NEO 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, NEO cannot be divided into fractions. This might become a problem in the future if NEO’s value increases but exchanges already have their own methods 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 NEO being indivisible. The answer they have might not be the best one but it’s the best we have: You’ll be allowed to trade fractions of NEO as long as you keep them inside your exchange wallet. If you transfer them to your NEO wallet, those fractions will remain on the exchange and won’t be moved to your private wallet.
For example, you are not technically allowed to own 5.32 NEO. You either have 5 NEO or 6. But exchanges will let you exchange BTC for 5.32 NEO without issue. If you keep those 5.32 NEO in your exchange wallet, you should have no problem exchanging them for another cryptocurrency. However, if you transfer the 5.32 NEO you own to your actual NEO wallet, you will end up with 5 NEO, and the 0.32 NEO will stay on the exchange.
2. Generating GAS
The biggest differentiating feature is the two-tiered system of NEO and GAS. Although GAS can be bought and sold on a handful of exchanges, users typically buy NEO tokens, which represent their stake in the future of the platform. The benefit of the two-tier system comes into play the moment you transfer NEO to your NEO-compatible wallet.
While holding NEO, you start generating GAS automatically as more blocks are generated by the construction of the blockchain. With every new block generated, 8 GAS are distributed for all 100,000,000 NEO in existence.
This is similar to Ethereum, but very different from mining in bitcoin in that the value of GAS is decoupled from the value of NEO. This is in contrast to bitcoin, where the value of a bitcoin mined is the same as the value of a bitcoin purchased.
GAS is used to pay for transaction fees on 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. However, it’s worth noting that, at the time of writing, the fee for deploying a smart contract on the NEO network was 500 GAS.
How to generate GAS
In order to get a wallet and start generating GAS, you can simply buy NEO and hold it in a compatible wallet. This is essentially the same as holding a stake or shares and being paid dividends.
You can buy it directly with fiat currency on a handful of exchanges, and you can even exchange Australian dollars (AUD) directly for NEO. However, you can also buy NEO with bitcoin, Ether, Litecoin (LTC) and other cryptocurrencies
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