What threats can lead to the update of the NEO software?

What is NEO?

The NEO project, formerly known as Antshares, was founded in 2014 to create a corporate block with an emphasis on identity and smart contracts. By collecting more than $ 3.7 million during ICO and launching the main network in 2016, the project has already taken its place in the “new Ethereum” series.

What’s new?

The latest version of the software, NEO 3.0, was launched in the second quarter of 2018, and was intended to be a completely new version of the NEO platform, built for large-scale corporate use. This goal, in particular, is to implement cross-platform intellectual contracts, local smart contracts, enhance stability and change the economic model of NEO. And the last point has already caused a stir in society.

To achieve consensus, the NEO uses an algorithm called “Delegated Byzantine Generals” (dBFT).

And how is it working?

Using a simple BFT protocol that is used, for example, in Ripple and Stellar, the network should use such interaction scenario, so that even in the presence of harmful nodes, “loyal” Noda has always reached consensus and did not give power to the Node-opponents. “Delegated” BFT believes, that transactions in the network are confirmed (and blocks are created) not by all parties, but only by “delegated nodes”. And these nodes are selected by all users, that is, the owners of the NEO, by voting.

In essence, dBFT is a modified standard for a more popular proof-of-stake consensus algorithm, since the token NEO provides its owner with a share in the network and the right to decide on some issues.

How about tokens?

The NEO platform has two local tokens – NEO and GAS. NEO is something like a network share, and GAS is designed as a utility token and used to pay for services provided by the platform – for example, the execution of reasonable contracts.

In this case, the NEO token is indivisible, that is, unlike the bitcoin or ether, which allows you to spend 0.001 part of the coin, NEO can be consumed completely. Such an NEO device is associated with technical reasons, including the double nature of the network tokens and the GAS distribution mechanism, that is, each time the platform uses GAS, and it is redistributed among the holders of the NEO tokens in proportion to the number of NEOs owned by the user.

And the results

Under such a system, the user does not have the economic incentives to be active, that is to participate in network management, including the selection of nod delegates, as they receive GAZ in the process of redistribution, regardless of whether they voted or not. Secondly, it is considered possible that the GAZ will be gradually redistributed to the so-called “black hole address”, and it is theoretically possible that all or almost all GAZ will move to these addresses.

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