Initial Coin Offerings (ICOs), exploded in 2017 largely due to the smart contracts technology developed by Ethereum which allowed companies to easily develop ERC20 Tokens which could then be issued to the public as a means to get funding for their idea. This sudden rise in popularity of ERC20 tokens highlighted a lot of problems in the Ethereum blockchain. This is where NEO comes in which has often been called the “Chinese Ethereum” and just like Ethereum has “Smart Contracts” in the form of ERC20 tokens so does NEO, called NEP-5 Tokens.
NEP is a recursive acronym and stands for “NEO Enhancement Proposals“
What are NEP-5 Tokens?
NEP-5 tokens run on the NEO blockchain and are defined by a set of rules which need to be met in order for a token to be accepted and called as an “NEP-5 Token“.
NEP-5 tokens differ from standalone cryptocurrencies like Skycoin, Litecoin, Bitcoin etc. , which have their own blockchain, in the fact that these tokens piggyback on the NEO network and thus the transactions are in turn processed on the NEO blockchain. This allows companies to create NEP-5 Tokens without having to deal with the hassle of managing their own blockchain which makes the development process a lot simpler for them.
Here is a sample NEP-5 token transaction.
At first glance, this transaction may not look very different – but look at the text in the red box:
This is a record of an NEO transaction which involves the transfer of DBC tokens (63,103.792685) which is an NEP-5 token deployed on the NEO blockchain.
Just like ERC20 tokens, NEP-5 tokens are basically digital assets on the NEO blockchain which follow a set of rules as defined by their contract called a “smart contract“.
If a smart contract does not follow the rules defined by NEP-5 then it cannot be launched on the NEO Blockchain.
How are NEP-5 Tokens better than ERC20 Tokens?
Ethereum’s biggest disadvantage is its scalability issues as at present it can handle only 15 transactions per second while on the other hand, NEO can handle 10,000 transactions per second. If smart contracts are going to be adopted on a global level in the near future then they need to be much more scalable than what Ethereum provides and this is a major issue that NEO has solved.
List of available NEP-5 Tokens
Note: The Tokens are listed above only to make it easy for you to know if the Token you are looking for is NEP-5 Token or not. Some of these Tokens can be scams as well. Before investing in a Token, do your own research.