This is why you should invest in NEO Crypto in 2022-dBFT blockchain explained

This is why you should invest in NEO Crypto in 2022-dBFT blockchain explained

NEO is an open-source decentralized block chain-based platform that supports its own cryptocurrency that enables the development of smart contracts and digital assets, which makes it similar to Ethereum network.

This decentralized block chain platform was founded by DA Hongfei & Eric Zang in the year 2014 in China. It was later re branded as NEO in the year June’2017 from its earlier name i.e., Antshares.

During its inception years it was often being thought of as a network having a potential to replace the Ethereum network. But it is yet to beat Ethereum as it still the second largest cryptocurrency only after Bitcoin in terms of market capitalization.

The aim of NEO is to automize the management process of the digital assets with the help of the smart contracts to create a distributed network based smart economy.

NEO blockchain has two native tokens in its ecosystem

GAS: The GAS token is used to show the right to use the NEO blockchain network.

NEO: Whereas, NEO token represents the right to manage the blockchain of the network.

The NEO token holders can participate in on-chain and off-chain governance structure, in on chain governance the NEO holders can vote on the network protocol upgrades and can get incentive in the form of GAS for participating in the process.

Whereas, in the off-chain governance structure the views can be presented to the NEO council who is responsible for making strategic and technical decisions and for their implementation.

How many NEO tokens are in supply and circulation?

According to the NEO’s white paper the total supply of the NEO was said to be around 100 million.

In August 2017 and initial coin offering was held which helped in raising of $28 Mn for the project for 50 Mn tokens to the participants. Whereas, 50 Mn tokens were held by the NEO council for the long-term support purposes.

The Neo Council that withheld the 50 Mn NEO tokens, decided that the council wouldn’t use more than 15 million tokens per year, and the tokens would be distributed as follows:

  • 10 Mn tokens will be used as an incentive for developers and the Council
  • 10 Mn NEO tokens will be used as an incentive for developers working within the Neo ecosystem
  • 15 Mn NEO tokens will be used for investing in other related blockchain projects
  • 15 Mn tokens will be retained as a contingency or emergency

How many NEO tokens are in supply and circulation?

What is total market capitalization of NEO tokens?

The total market cap of NEO is around $1.61 Bn at the time of writing this article as per Coinmarketcap data.

How does NEO cryptocurrency work?

As discussed earlier as well NEO is a distributed network that works on a blockchain technology and smart contracts to automize the management process of the digital assets.

The NEO blockchain uses Delegated Byzantine Fault Tolerant consensus algorithm that has the capability to generate the blocks within a fraction of 15-20 seconds, with the number of transactions per second being 1000. It is believed that NEO has the capability to reach 1,00,000 transactions per second as per the White paper of this project.

What is Delegated Byzantine Fault Tolerant consensus algorithm?

Besides the renowned Proof of work and Proof of stake consensus algorithms there are some other ways as well to make the blockchain more robust and powerful.

dBFT is an algorithm that is used to achieved consensus that confuses the multiple blockchain networks and cryptocurrency holders. dBFT has been derived from the classic Byzantine General’s Problem.

Byzantine General’s problem is an old school game theory problem, which tries to describe the difficulty that the decentralized parties face in arriving at consensus without having relied on the central party.

According to this game theory problem there are number of generals preparing a plan to invade a Greek city known as Byzantium. They surround the city from all the sides but they need to collectively decide when to attack, in order to launch a successful attack. If all the generals decide to attack collectively together, they will win but in case they attack the city at different times they will lose.

Therefore, reaching consensus is necessary to successfully launch an attack in the city. In case consensus is not built it may lead to significant battle failure.

In this case there are communication difficulties as the generals do not have a secure communication channel system as the messages may be intercepted by the defenders of the city. Therefore, the major concern for the generals is that they do not have a reliable source for communication and no particular measure to verify the message sent by the other members of the network.

 This problem is more evident in the decentralized system as in the centralized system there is an central authority that is believed to publish the true information and prevent the spread of false information throughout the network.

This type of problem can happen in the decentralized computing networks where there are many nodes of (NEO holders) communicating with each other and processing the transactions.

It is a very complicated concept that is very different from Proof of work and proof of stake algorithms. One of the largest crypto exchanges Binance has adopted this algorithm for its chain.

dBFT has more capabilities to counter the unreliable and the bogus participants on the blockchain than any other algorithm.

Delegated Byzantine Fault Tolerant consensus and NEO token

Delegated Byzantine Fault Tolerant consensus was introduced by NEO and it is also referred to as Ethereum of China. It aims to automize the management process of the digital assets with the help of the smart contracts to create a distributed network based smart economy.

In dBFT the new blocks are added to the blockchain on the basis of the consensus of the voters (NEO holders), this mechanism is similar to Delegated Proof of Stake where a voting process is undertaken by the NEO holders for to select the delegates, the delegates are selected irrespective of their NEO tokens held by them.

Anybody can become the delegate if he/she has a reliable internet connection, a valid identity and 1000 GAS (i.e., rewards received for activity over the network)

Further amongst the delegates a speaker is randomly selected from the network, the speaker is responsible for forming a block from the transaction intended to be validated.

The proposals are sent to the delegates, who then share and compare the proposals within the network with the other delegates for verifying the proposal or the data and the honesty and the loyalty of the speaker. Finally if more than two thirds of delegates reach consensus a new block is added to the network.

In this mechanism the  honesty of the speaker can be easily validated as the delegates match and compare the proposals in the network which enables them to identify whether the proposals are valid or not. Thus to validate a transaction in this dBFT mechanism two third consensus amongst the delegates is necessary.

What are advantages of Delegated Byzantine Fault Tolerant consensus Algorithm?

  • The block generation is very fast i.e. around 15-20 seconds.
  • There is no excessive energy consumption of wastage as in the case of Proof of Work mechanism.
  • Around 1000 transactions per second can be generated in this mechanism, which has a potential to reach up-to 100000 transactions per second.

What are other major consensus blockchain Crypto algorithms

Proof of work blockchain consensus algorithm

Proof of work is a consensus mechanism that was first used by Bitcoin. In proof of work consensus mechanism, the network requires high computational processing power where the power consumption is huge.

It involves solving of complex cryptographic mathematical equations using high computational power. In this mechanism the miners involved in solving the mathematical problem through high powered computers have the authority to verify the transactions over the network and add new blocks after having successfully solving the mathematical equations.

Upon solving the mathematical problems successfully and after adding a new block to the blockchain, the miner is rewarded with predetermined amount of cryptocurrency.

Proof of work requires super-fast computers that consumer significant power, this also hampers the transaction processing speed as the network becomes larger.

Proof of Stake blockchain consensus algorithm

Proof of stake consensus algorithm is also widely used to verify the blockchain transactions.

In this mechanism the miners who are responsible to verify the transactions have to stake their crypto holdings to validate the transactions. The miners in this mechanism are randomly chosen to verify the blocks and the ones that have a large stake tend to have an advantage. All the miners randomly chosen to validate the transaction need to arrive at a consensus to verify a transaction.

Before validating any transaction, the miners have to stake their crypto holdings for a period the transaction is in process.

Once the transaction is validated a new block is added to the blockchain network, also the miners after having successfully validated the transaction are paid fees in crypto form. In case of any malicious activity or wrongful validation of a transaction a penalty is levied on the miners and the cryptos staked by them is charged under the penalty.

In this manner a significant portion of their stake is lost for validating the wrong transactions, since a heavy penalty is charged from the miners from their stake this mechanism is very secure.

Proof of stake mechanism is more secure, reliable, scalable and requires very less energy.

Also Read: Dubai’s First Law on Cryptocurrency Regulation- VARA as it enters WEB 3.0

Greetings from Thewriteyouth.com, I am suraj Sharma the blogger of this website. I am an MBA professional who loves to travel to places and write about new technologies, finance articles, motivational articles, poetries and many more. You can reach out to me by writing me an email, I am also open for guest posting opportunities.

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