NEO is an open-source platform that utilises smart contracts and blockchain technology for the purpose of building a smart economy. Often called the “Chinese Ethereum”, the NEO blockchain allows users to own and trade digital assets, build and interact with dApps, and tokenise non-digital assets in order to trade them legally under Chinese law. In other words, Neo is China’s attempt to bridge the cryptocurrency ecosystem with the traditional economy. At the heart of this system lie Neo’s native cryptocurrencies: NEO and GAS.
You can think of NEO tokens like stocks, as they symbolise shares of the NEO blockchain. GAS tokens, on the other hand, are necessary in order to interact with the NEO blockchain and make transactions. Just like you need Ether (ETH) to make transactions on the Ethereum network, you need GAS tokens to make transactions on the NEO network.
Owners of the NEO cryptocurrency automatically earn GAS tokens every time a new NEO block is confirmed on the blockchain. That means you can get GAS tokens simply by holding NEO in your crypto wallet. In this guide, we will explain how the NEO cryptocurrency works and how much GAS you can earn by holding NEO.
What Is Neo?
Neo is an open-source blockchain platform developed by Da Hongfei and Erik Zhang, founders of OnChain, Cina’s most famous blockchain enterprise service. The project was initially called Antshares but was rebranded as Neo in 2017.
While Neo is often called the Chinese Ethereum due to its smart contract and dApp functionalities, it is different from Ethereum in some important ways. The NEO blockchain utilises a digital identity mechanism, which makes it profoundly different from Ethereum. All users and nodes on the NEO network have a unique digital identity that can be traced to a real work identity. While Bitcoin and other cryptocurrencies are usually pseudonymous, the NEO network requires full identity verification.
The digital identity feature allows NEO to execute smart contracts that are also binding and protected under Chinese law since all parties can be traced and regulated by the authorities. Despite the Chinese government’s crackdown on ICOs and cryptocurrencies, the NEO blockchain may in fact be an exception to the rule, as the digital identity measure allows Chinese authorities to regulate the cryptocurrency. In fact, a blockchain similar to NEO – Remin Chain – is already used in China as part of the country’s social credit system.
The NEO blockchain aims to become a hub of a smart economy where users can trade digital and tokenised non-digital assets on the network through smart contracts. The NEO blockchain’s compliance and integration with regulatory frameworks mean the platform can ensure all transactions are binding and protected under law.
The NEO Network
The NEO Network employs smart contracts to execute transactions. The network nodes can also generate their own tokens, similar to Ethereum tokens. NEO’s non-fungible tokens (NFTs) are known as NEP-5 tokens, and fungible tokens are called NEP-11 tokens. These tokens can be used to interact with dApps on the NEO Network.
Of course, in order to interact with a dApp or execute a transaction, you also need GAS tokens. GAS tokens are utility tokens of the NEO network. Just like you use ETH to pay gas fees on the Ethereum network, you need GAS tokens to pay gas fees on NEO.
GAS tokens are not mined; instead, they are generated every time a new NEO block is added to the NEO blockchain, approximately every 15 to 20 seconds. The NEO blockchain uses a Proof-of-Stake (PoS) consensus mechanism, whereby NEO coin owners stake their NEO coins to confirm NEO transactions and receive GAS tokens in exchange.
Understanding the Difference Between NEO and GAS
Now let’s take a more in-depth look at how NEO and GAS tokens work and are linked to one another.
NEO tokens are basically like stocks, as owning them gives you partial ownership over the NEO blockchain. NEO tokens are used to validate transactions on the NEO blockchain and confirm new blocks. When new blocks are added to the NEO blockchain, NEO stakers receive GAS tokens as a reward.
GAS tokens, on the other hand, make it possible to make transactions and interact with the NEO blockchain. They don’t generate value the same way NEO tokens do; instead, they are simply utility tokens. Of course, you can still buy and sell GAS tokens, and since they can be used as a gas fee on the NEO network, they are valuable.
NEO coin owners can vote on decisions about the NEO network and take part in management processes. In other words, NEO tokens are more valuable in the long run if you think the NEO blockchain has a strong future. Users who buy NEO tokens are investing in the blockchain, and in exchange for their trust, they receive GAS tokens that will be more valuable as the NEO network grows.
There are some important points about NEO and GAS tokens you should understand before you decide to make a purchase.
Neo Tokens Are Indivisible
Bitcoin and most other cryptocurrencies can be divided into infinitesimally small units. 1 BTC equals 100 million satoshis, and you can buy a fraction of BTC for a few dollars. This way, anyone can buy and trade small amounts of Bitcoin. This is very helpful for Bitcoin and other digital currencies because no matter how high the price of a single unit of cryptocurrency goes, people can still use them as payment methods.
However, NEO tokens are indivisible. 1 NEO is the smallest unit of NEO, and unlike Bitcoin, it can’t be divided into more pieces. Since NEO tokens function like stocks or shares, this actually makes sense. However, it also means that buying and selling NEO can be very hard if the price of the cryptocurrency reaches Bitcoin or even Ethereum levels.
That said, some cryptocurrency exchanges have developed a method to work around this hurdle: Cryptocurrency exchanges allow you to buy and sell fractions of NEO, as long as you keep NEO in your exchange wallet. That means if you try to transfer your NEO out of the exchange wallet to a NEO compatible wallet, your fractions will be left on the exchange.
This works because most exchanges store cryptocurrency in large mutual wallets. Let’s say you have 4.51 NEO tokens. You can exchange 4.51 NEO for USD or BTC on the exchange, However, when you try to send NEO to a crypto wallet of your own, you will only be able to send 4 NEO tokens, and 0.51 will remain on the exchange’s wallet.
Limited NEO and GAS Supply
There are a total of 100 million NEO coins in existence. These NEO coins are all pre-mined, and no new NEO coins can be issued. Half of the pre-mined NEO coins were distributed among users, and the remaining half is stored on the blockchain. Every year, some portion of the pre-mined coins is released to the market by a smart contract to be used for NEO projects.
NEO GAS tokens increase as the number of NEO blocks increases. However, there will ever be 100 million GAS tokens in existence, and new GAS won’t be issued once that number is reached. At the current rate of block production, the process will take around 20 years.
How Does NEO Generate GAS?
When a new block is added to the NEO blockchain, all NEO holders receive their share of GAS, based on how much NEO they own. Every block triggers the distribution of 8 GAS tokens. The GAS generation rate for a certain time period (a day, a week, or a year) depends on how many blocks are confirmed within that time period.
According to the NEO whitepaper, NEO blocks are generated every 15 seconds, and that means NEO holders will receive their share of GAS every 15 seconds periodically.
However, in reality, the block generation rate isn’t as stable as the NEO whitepaper suggests. The availability of consensus nodes and the current network traffic may slow down the block generation.
There are several ways to measure how much GAS you can generate with your NEO tokens. One of the best ways is to use the NEO to GAS calculator. There are several GAS calculators online, and you can use NEOtoGAS website to get an accurate prediction of how much GAS you can generate with NEO tokens you HODL. You simply have to enter the amount of NEO you have in your crypto wallet into the GAS calculator to get an estimate.
How to Generate Gas
First things first, you need to buy NEO tokens in order to start generating GAS. NEO tokens are available on several crypto exchanges, like Binance, KuCoin, Bittrex and Huobi. You can purchase NEO with fiat currencies like USD or AUD, or with other digital currencies like Bitcoin (BTC) and Ethereum (ETH).
But there is an important detail you should know before you buy NEO tokens on a crypto exchange. HODLing NEO tokens in an exchange wallet will not automatically generate GAS. Or, more accurately, your NEO will generate GAS, but the exchange will receive it instead of you. Unfortunately, this is true for most crypto exchanges.
Binance is the rare exception to this rule, but even on Binance, NEO doesn’t automatically reward GAS tokens to you. Binance has an Earn feature that allows you to stake your NEO in exchange for GAS. You may also receive a small amount of NEO through this feature.
That said, the best way to generate GAS from NEO is to store your NEO tokens in a compatible NEO wallet.
The Best NEO Wallet
If you are serious about generating GAS, picking a good crypto wallet is the first thing you should do. If you don’t already use a NEO-compatible wallet, take a look at some of our best wallet picks to store NEO and generate GAS.
O3 wallet is a NEO project approved multi-currency desktop wallet for Mac, Windows, and Android operating systems. Developed by the O3 Labs, the O3 wallet supports many different cryptocurrencies and can be used to interact with different blockchains.
Ledger Nano S
Ledger Nano S is a popular hardware wallet that supports hundreds of digital currencies, including NEO tokens. Ledger Nano S is a great option if you own a large number of digital currencies, as it offers secure offline storage for your coins.
Neon Wallet is a popular desktop wallet to store NEO tokens. It is an open source crypto wallet developed by City of Zion. Neon Wallet can be set up on Mac, Linux and Windows operating systems. However, Neon Wallet is a NEO-only wallet, so you won’t be able to use it to store other coins. You can also set up a Neon wallet and integrate it to your Ledger Nano S, and use the two in tandem for extra security.
Exodus NEO Wallet
Exodus supports more than a hundred digital currencies, including NEO. Thanks to the integrated exchange service inside the wallet, you can exchange NEO and GAS tokens directly on the wallet, without transferring your assets to a crypto exchange. You can also use the mobile Exodus app to be able to trade on the go.
A Few Words Before You Go…
In order to generate GAS tokens, you have to put your NEO tokens to a compatible crypto wallet outside of exchange wallets. GAS generation depends on the amount of NEO you HODL in your crypto wallet, as well as the rate of block production on the NEO blockchain. The best way to calculate how much GAS you can earn with your NEO is to use a GAS calculator such as NEOtoGAS.
There is a lot more to NEO than NEO and GAS tokens, as the network is transforming the way in which digital and traditional economies come together. If you want to learn more about the NEO network and its native tokens, visit the project’s official website at Neo.org.