What is Neo? How Does Neo Blockchain Work?
With lightning-fast technological innovations, efficient use of resources, sustainability, and high social welfare, we are moving towards a smart economy. It also adopts new entrepreneurial initiatives, increases productivity to improve people's quality of life globally. Da Hongfei and Erik Zhan share the same vision of a smart economy and to bring this vision to fruition they founded AntShares in 2014 and rebranded it to NEO in June 2017. But, what is Neo? How does the Neo blockchain work? Let’s find out.
What is Neo?
Neo is a blockchain-based platform on which anyone can transact and build decentralized products and services. It allows the development of digital assets and smart contracts and hence it is also known as the "Ethereum of China.” Other than that, the Neo network also offers a legion of features such as an identity system, a decentralized file storage system, an oracle system to feed external information to the network—to name a few.
Connecting your Neo Address to ZenLedger For Your Crypto Tax Forms
- To import your Neo transactions into ZenLedger for your crypto tax forms, all we need is your public address.
- Select the proper blockchain or wallet from the dropdown list.
- Paste your address into the address field in ZenLedger.
- Select if the wallet is based in the USA or not.
- Then hit the ADD COIN button.
With the explanation of Neo out of the way, let’s move on to the mechanics of Neo blockchain.
How Does Neo Blockchain Work?
Neo aims to automate digital assets management using smart contracts with a bigger picture of eventually building a network-based smart economy system. In the eyes of Neo smart economy consists of three things: digital assets, digital identity, and smart contracts.
On the Neo network, assets can be conveniently digitized in a decentralized, transparent, and traceable fashion without paying any intermediaries. Those assets digitized on Neo’s network have a valid digital identity and are protected by law.
What is Neo’s Secret?
The secret behind Neo’s network is its development community that updated the Delegated Byzantine Fault Tolerance (dBFT) consensus mechanism. The update was finished in 2019 and it integrates with several other elements of Neo blockchain that in turn expand its capabilities. This update was a stepping stone in the update cycle of the Neo 3.0 blockchain. The dBFT update comprises improvements such as Neo Virtual Machine (NeoVM), NeoID, Neo File Storage (NEOFS), Neo’s in-house oracle system, and a much better streamlined technical architecture.
The dBFT algorithm is similar to that of a proof-of-stake (PoS) model and selects the network’s consensus nodes via a proxy voting process. These nodes come together, reach a mutual consensus, and validate blocks before adding them to the blockchain. The dBFT enables single block finality which means the on-chain transactions cannot be reversed.
Moreover, the NeoVM is a part of dBFT 2.0 and it is designed to assist the protocol in creating, executing, modifying, and upgrading smart contracts. NeoVM is a lightweight virtual machine and its computationally universal framework ensures continual communication within the system via nodes and smart contracts. On top of that, NeoVM supports software engineers who build dApps on Neo blockchain.
What is Neo’s Speciality?
Today, blockchains face an unprecedented challenge of insufficient interoperability among themselves. Ideally, a blockchain should be able to share data, digital assets, and other information with each other. This is where Neo shines. The overall Neo 3.0 update supports blockchain interoperability through the continuous development of native on-chain and external cross-chain ecosystems. These developments are possible due to the Neo-built decentralized finance project and Poly Network, an interoperability protocol.
How is Neo Taxed?
As we have established, Neo operates on a PoS model, and as staking is still very much in the infancy stage as the IRS is still figuring out the nuances and quirks of this income source. As the IRS is coming to terms with this emerging technology, it has shown its commitment to improving its understanding.
The staking process is similar to an average bank savings account. Usually, a bog deposit results in additional interest. As of now, under the current IRS guidance, when cryptocurrencies are staked, a temporary token is issued to the user. If these tokens are converted then a short-term gains tax is levied at the rate of 22-37 percent especially when cashing out the tokens. If you want to save on Neo tax then you must get a return in excess of 7-10 percent above the gains.
How to Buy Neo?
Unfortunately, major crypto exchanges and trading platforms like eToro and Coinbase don’t support Neo. One of the well-known exchanges that support Neo is Binance. Here’s how you can buy Neo from Binance:
Open an online account
You have to provide your information to the exchange such as name, DoB, address, email ID, Social Security Number, and more. This information is for taxation purposes.
Buy a Wallet
If you wish to store your tokens for the long term, you need to buy a crypto wallet. If you leave your tokens on an exchange, you put them at the risk of being stolen. You can either get a hardware wallet or a software wallet. Hardware wallets are physical devices that store your tokens offline whereas software wallets are applications on either your computer or mobile device and are ideal for day-to-day trading.
After you have chosen your wallet and opened an online account, it is time to add funds to your account and buy Neo. Once you’ve bought the token, store them safely in your crypto wallet.
The Financial Takeaway
Neo strives to create a smart economy by connecting smart contracts, digital identities, and digital assets. In achieving this dream, Neo 3.0 is a key step forward as it leverages the next-generation Delegated Byzantine Fault Tolerance (dBFT) consensus model. The platform incorporates enhancements that improve Neo’s usability, performance, and developmental capabilities.