ELI5 : How to mine NEO

ELI5 : How to mine NEO

Many cryptocurrency newbies ask us how to mine NEO.

This is a recurring question, so we decided to write a short post to clarify how to properly obtain NEO cryptocurrency.

Mining vs Staking

Mining is one of the most frequently confused concepts in cryptocurrency.

Some newbies call any form of crypto generation mining, which is a mistake.

So we’d first like to clarify that NEO cannot be mined in the sense that Bitcoin, Litecoin and others can.

NEO uses a consensus mechanism called Proof of Stake (PoS). In PoS you don’t spend tons of energy to produce cryptos using mining rigs.

Instead, you stake your coins in order to contribute to NEO transaction processing.

NEO Staking

Staking involves “blocking” a certain amount of your NEO within the NEO wallet. When you block NEO, you tell the network that this amount can be used to verify transactions.

If a NEO stakeholder were to try to defraud the system, their stake would be used to compensate for the fraud.

This system substitutes mining rigs in order to maintain the NEO P2P network running.

GAS

As you probably know, NEO is sometimes called the “Chinese Ethereum”.

It’s a charismatic name given to it since it shares some common traits with ETH, namely being a second generation cryptocurrency.

As in Ethereum, NEO uses a separate asset to pay for transactions.

This separate unit uses the same name as ETH: GAS.

GAS is the unit you must spend in order to move NEO. ( In other words, the NEO network fees are paid in GAS.)

Staking NEO

Since NEO is staked and not mined, transactions are verified by users when they stake an amount of NEO.

Every time someone sends NEO, some GAS must be paid. This GAS goes to the stakeholder who verified the NEO transaction.

Therefore the reward for staking NEO is paid in GAS!

This makes sense, since there’s a limited amount of NEO available and this amount cannot be increased. There’s no more NEO to be produced, only GAS is paid during the minting process.

Whenever you leave your NEO wallet running, with a certain amount of it invested in stake pools, you get paid GAS in exchange for your contribution to the network.

GAS can then be traded for more NEO.

This is the only procedure that exists for “mining NEO”: first you get paid GAS, then you may exchange this reward for NEO.

Conclusion

We hope this article has cleared up the frequent misconception about mining NEO. There isn’t really a way to directly mine this popular cryptocurrency, instead it’s an indirect process where you get paid GAS and then exchange that GAS for NEO (or any other crypto for that matter).



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