NEO is a platform created with a purpose. If she can compete with Ethereum, and most importantly, should you?

In the third part of the paper we turn to the analysis of the main differences between the two platforms.

The key differences between Ethereum and NEO

Protocol

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The amount of energy which is consumed by Ethereum, would be enough to supply 1 025 438 American homes during the year (source).

Ethereum uses the same Protocol, Proof of Work (PoW) Bitcoin. In the framework of the computers United in a network, compete in solving mathematical formulas and confirming transactions in the blockchain, thus securing the network. Two major drawbacks of the Protocol PoW is the vulnerability to attack by 51% and the amount of energy required to ensure network security. I believe that for these reasons PoW soon become obsolete and to replace him comes a new type of protocols are Proof of Stake (PoS).

Proof of Stake works on the same principle, but instead of computers responsible for network test and receiving a reward depending on their processing power, here the process involved holders of tokens. They can temporarily “put” their tokens, i.e., place them in closed smart contracts prior to the expiration of the “bets” in exchange for the opportunity to verify the transaction and receive a reward proportional to the number of available tokens. In the framework of the PoW Protocol using 5% of the total computing power of the network will bring you 5% of the amount of remuneration for the block. In the case of Protocol PoS you own 5% of the tokens will also earn 5% rewards.

PoS offers a solution to many problems of the algorithm PoW. The main difference is that its operation does not require energy, and without compromising security. I would even say that perhaps this scheme allows raise security level. In the case of Ethereum and other projects based on the Protocol PoW algorithm for solving mathematical formulas must always be complicated to match the growing capacity of the hardware and the miners, while the PoS Protocol such efforts are not required. In the case of Ethereum you have at least a theoretical opportunity to purchase enough equipment to carry out the attack 51%, to bring down the network and use these devices to attack other platforms, using the PoW algorithm. When using the PoS Protocol, any malicious behavior will result in the loss of “delivered” your coins: if you buy 51% of the network token, it immediately loses the investment. In addition, the cost of buying 51% of the tokens are the same for all, what can be said about the costs of the acquisition of 51% of computer capacity, which varies greatly in different countries depending on the cost of wholesale purchases of computer equipment and electricity prices.

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Resistant to the “Byzantine error” the Protocol claims to be the solution of the problem of the Byzantine generals

NEO uses a Protocol dBFT (Delegated Byzantine Fault Tolerance), or “resistant to delegated Byzantine error”, whose name recalls paragraph from of examination in history. In General, resistance to the “Byzantine” error can be explained as the ability to provide an honest collaboration of all members of the network, because even with a single unreliable link can break the whole chain. Used NEO Protocol dBFT is a modification of the classical PoS, having before him a number of significant advantages and one main drawback.

In my view, the scheme of work dBFT is similar to the us Senate (if this analogy seems disappointing, I perfectly understand you… but still read on to the end). If each of the 323,1 million Americans were permitted to participate directly in decision-making, it would be a disaster. Millions of people would fight for the microphone, shouted their opinions and arguing with each other, significantly slowing down the process. Decision making would also be deadly slow, so as an alternative to each of the inhabitants of the country given a voice with which they can choose their representatives, and those already will Express their opinions in the Senate. This scheme reflects the essence of NEO. Instead, to ensure that everyone involved in the process of confirming transactions that may adversely affect their speed, holders of tokens NEO is given the opportunity to vote for their representatives. These representatives, called buccieri (from the English. “bookkeepers»), support the work of the network. Thanks to this scheme, the NEO can work faster and more efficiently, and the rest of the network participants can sit at home, drink beer and watch football, putting the computer to sleep.

Buccieri will have to undergo a digital identification that ensures significantly greater compliance NEO government requirements.

Disadvantage of this system is the low level of decentralization: instead of thousands of people confirming transactions around the world, management is concentrated in the hands of a few dozen individuals. Most of these network nodes today by a team of NEO. Despite the fact that by the end of the first quarter of this year, they are going to keep at least 2/3 of the nodes, and over time this number will decline further, according to the degree of decentralization NEO never be compared with other platforms based on Protocol PoS in pure form.

However, I would say that Ethereum is not as decentralized as it may seem at first glance. Yes, the PoW Protocol is decentralized, but the leading developers of Ethereum can be counted on the fingers of one hand. I trust Buterin acne, but it doesn’t change the fact that concentrated in his hands enormous power and the ability to directly influence the direction of development of the project.

In the future Ethereum go to the PoS Protocol. This process has already started, and the difficulty of confirming new blocks will continue to grow exponentially as long as the mining will not be altogether impossible – and then everything will have to go on the PoS. It will happen, but unlikely earlier than in a year.

SUMMARY: Ethereum Protocol uses Proof of Work and eventually will switch to Proof of Stake. NEO uses the report dBFT, which is a modification of the standard PoS-protocol’s.

The transaction rate

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Due to the fact that NEO does not work for PoW, but at a more advanced PoS Protocol transaction it processes much faster than Ethereum. When the comparison is made should be taken into account theoretical, and actual speed. So, theoretical speed is the absolute maximum speed, is mathematically possible for this network. For NEO, this figure is 10 000 transactions per second and for Ethereum – only Thirty. In practice, due to various kinds of inconsistencies and complexities, NEO can show a more modest result – 1000 transactions in the second, and Ethereum – 15 transaction. It is possible that, as improvements of the protocols, both platforms will approach their theoretical speeds.

This is a huge difference and a significant advantage NEO, whose speed of transactions may correspond to the level of “smart” economy, which are oriented by its developers. About Ethereum that we don’t yet know. However, this speed NEO is paying less compared to Ethereum, the degree of decentralization. Moreover, it is recognized that acne is acutely aware of these limitations and, as a solution to scalability issues, strategy Ethereum provides for the use of Raiden and sharding, two wonderful technologies that are in this article to describe, unfortunately, will not work. They can significantly increase the speed of transactions.

SUMMARY: Ethereum can spend 15 transactions per second with a maximum level of 30 transactions. NEO, in turn, handles 1,000 transactions with a maximum value equal to 10 000. At Ethereum have plans and solutions to address this gap.

(To be continued.)

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