Neo: The Smart Economy
Introduction
2017 was a fantastic year to be involved in cryptocurrencies. While much of the media attention focused on Bitcoin rising to $20,000, little has been covered on the role blockchain technology will have in our future. In this post, I will cover Neo and how the development team plans to solve inefficiencies in commerce through innovation in Distributed Ledger Technology.
A Digital Future
Each year, businesses begin to rely less on analog and prefer to use new technology to enhance their operations. The 21st century has brought with it a movement towards a hyper-digital age. Almost everywhere we look, we see digital transformations with computers and cellphones. Today, almost every piece of technology can connect to the internet.
Amazon and Alibaba have used the internet to establish themselves as e-commerce giants. Combined, both of these companies have a total market cap of $1.2 trillion. E-commerce differentiates itself from standard retail in that all transactions are electronically conducted through the internet. According to the U.S. Census Bureau, “total e-commerce sales for 2017 were estimated at $435.5 billion.” This is a 16% increase compared to e-commerce sales in 2016. With the increasing expansion of digital transactions, parties need to be able to exchange multiple types of assets online in a safe and secure network.
The Smart Economy
Browsing on the Neo website, viewers will immediately see multiple references to a “Smart Economy.” Da Hongfei, Neo’s founder, envisions an economy of the future where parties can register and trade various forms of assets on a decentralized network. Simply put, the smart economy is a trustless, digitized commerce that uses smart contracts to exchange digital assets. Three main pillars encompass the smart economy: Digital Identity, Digital Assets, and Smart Contracts.
Digital Identity
Digital identity has become increasingly important, as most entities engage with others over the internet daily. Companies and individuals in the neo ecosystem obtain an identity that exists in an electronic form. The International Telecommunication Union has set a standard on internet identity known as PKI (Public Key Interface) X.509. Third party Certificate Authorities (CA) sign X.509 certificates. Once signed by a CA, the identity on the certificate can be trusted. In our current system, using CA’s is the only option to verify online identities.
Neo plans to set digital identity standards that are X.509 compatible onto its blockchain. Blockchain technology enables users to trust online identities without a third-party service. Removing CA’s cuts out middle-men services, both lowering transaction fees and allowing assets to move more easily.
Digital Assets
Most of us are familiar with the common physical assets that exist today, such as gold and houses. On the Neo blockchain, physical assets are digitized and exist as electronic data. Users can both register and trade various forms of programmable assets. Exchanging digital assets with blockchain technology ensures that trades are trustful, transparent, and traceable. Coupled with digital identity, parties provide proof of ownership to tradeable assets.
Neo plans to incorporate two different forms of assets: contract and global assets. Global assets are recorded on the public blockchain. All users and smart contracts can identify transactions that occur publicly. In contrast, contract assets are recorded privately in a smart contract. This provides an opportunity to businesses who wish to trade privately, while also maintaining the major benefits of a public blockchain. Digitizing physical assets increases feasibility for parties exchanging value. For many, the idea of physical assets becoming digital sounds extremely perplexing. However, as I mentioned earlier, our world is inching towards digitization.
Smart Contracts
In 1996, Nick Szabo published “Smart Contracts: Building Blocks for Digital Markets.” Szabo detailed how computer programs have the ability to enforce contracts. Smart contracts are computer protocols that execute contract terms if a pre-programmed condition is fulfilled. A simple way to view smart contracts is through the If Then Approach: If I pay $1, then I will have access to download a song. The benefit to using smart contracts is their ability to be automated and self-executing. If conditions from either party are not met, then the smart contract will not deploy and refunds will be issued. The key difference between traditional and smart contracts is that smart contracts exist entirely in digital form.
NeoContract enables developers to write smart contracts in a variety of programming languages. NeoContract currently supports major languages including C#, Python, and several more. This vast support for languages will provide an easy entry for developers to program smart contracts. Prior to blockchain technology, third-party intermediaries were the only method to uphold trade agreements. Smart contracts allow value transfers without the use of intermediaries, both lowering transactional costs and increasing efficiency.
Conclusion
Distributed Ledger Technology is set to disrupt several industries in the future. The smart economy brings our current system to the digital age. The Neo development team leads the charge by introducing their vision for a future economy where physical assets are programmable. These digitized assets are traded on the Neo blockchain, ensuring transparency with Digital Identity. Smart contracts will power the network by pioneering trustless digitized commerce. Additionally, smart contracts are the cornerstone for autonomous trade agreements where programs are self-enforcing. With an expanding e-commerce market, more and more businesses realize the potential in trades that occur digitally. Neo is poised to enable businesses, institutions, and individuals the ability to exchange digital assets on a secure network, thus realizing their vision for the Smart Economy.
I’d like to thank Jesus Najera and Ariella Senzamici for their feedback on this post.
Disclaimer: I have a long term position in Neo.
Resources
https://www.census.gov/retail/mrts/www/data/pdf/ec_current.pdf
http://docs.neo.org/en-us/index.html
https://www.entrustdatacard.com/blog/2015/april/evolving-pki-standards
