Broker to Trading

There brokers offer the trader CFD trading with the cryptocurrency NEO. In cryptocurrency CFD trading the trader does not own the cryptocurrency and thus does not need a wallet to store it.

What is NEO ?

NEO is a blockchain implementation which allows the use of smart contracts.

What are smart contracts ?

Smart contracts are computer programs which are compiled to run on the blockchain. These are called smart contracts as they digitise the idea of an outcome happening once initiated (like a non-digital contract). This results in a program which will run, as programmed. They make use of the fact that a blockchain runs on computers, thus the programs, which can be written in a variety of programming languages are compiled to run on a network of computers. NEO smart contracts are called NEOContracts.

What is the blockchain ?

The blockchain is a network of connected computing devices, used to process cryptocurrency payments. As payments are processed they are added to other connected blocks of data (creating a chain). This chain of blocks of data is thus a ledger of all verified transactions in the network. However some blockchains have extended their use, to allow programs to be compiled to run on the blockchain, like NEO.

Does the NEO blockchain differ from other blockchains ?

A key requirement of blockchains is to have a mechanism which produces consensus about the validity of the blockchain. This enables new blocks to be added to a secure ledger. In a centralised payment processing system, there is no need for consensus per se, but because the blockchain is a decentralised technology, there is. Consensus here is an essentially automated distributed computing based process, rather then consensus as it is understood from a sociological perspective (though humans are involved in both).

NEO differs from other blockchains in that it uses a consensus mechanism which does not allow forks (i.e. there can be no new cryptocurrencies created from the NEO blockchain), which is called the Delegated Byzantine Fault Tolerant. This mechanism allows it to have a relatively high rate of transaction processing (NEO anticipates this can be increased from 1000 transactions per second to 10,000 transactions per second). It uses what are called bookkeeper nodes to verify transactions. This idea of using specialised nodes to perform tasks is a developing feature of blockchains, as they seek to find greater efficiencies and speed up processing, though perhaps at the cost of making a truly decentralised system.

Does NEO have big aspirations ?

While it can be described as a platform for allowing programs to be run on a distributed computing network and to process payments for this, like other cryptocurrencies NEO has a bigger picture in mind as well. This is to be part of what it called a 'Smart Economy', where assets can be digitised and then utilised via smart contracts. Its transaction processing capabilities and its use of smart contracts, may allow it to have scalability, to enable it to at least try and fulfill its aspirations.

Is NEO a little bit like Ethereum ?

Ethereum is a platform which allows smart contracts to be run on its blockchain. Ethereum though does allow forks, as it uses a different way to establish consensus. NEO and Ethereum are entirely separate networks.

But what is the cryptocurrency ?

The cryptocurrency is a key part of any blockchain, as it establishes a digital asset to make payments in, which are then processed on the blockchain. The blockchain operates and builds as the cryptocurrency is used, and thus as smart contracts are run on it. NEO actually has two cryptocurrencies, NEO itself which is like shares in the network, and NeoGas (GAS) which is more like a typical cryptocurrency, as it is used to pay for resource requirements to run smart contracts and is generated as the blockchain is built (i.e. as new nodes are added, like other blockchains). The total number of NEO and GAS tokens is limited (like other blockchains).

Are these brokers offering NEO trading ?

They are not offering trading in the cryptocurrency asset NEO. This happens on exchanges. What they offer is CFD trading based on the price of the cryptocurrency NEO on exchanges. CFDs are contracts which allow the trader to speculate on price movement of assets, without owning the actual asset. What this means is that the trader does not need a wallet or other means to store the cryptocurrency, as they do not own it, and can go long or short.