NeoGas - What You need to Know to Earn Returns on NEO
Most cryptocurrencies and digital assets today operate one native token or coin, each. For instance, on the bitcoin network, the only asset of value is bitcoin (BTC) itself. This is also generally true on most smart contract platforms like Ethereum Classic and Lisk.
Some projects, however, have more than one digital asset that makes up their network. Such projects include Neo, with its sub-asset called GAS. Much like its name suggests, GAS works in many ways similar to how "gas" as a concept works on the Ethereum platform.
That being, it's used to pay for a number of operations on the network. In this article, we're going to talk about GAS. Including, what it is, what it's for, and how to earn it.
A brief review of Neo
NEO is a smart contract platform that refers to itself as a "smart economy". According to its official website, the company behind it was founded in 2014 and it first appeared on Github in June 2015.
Neo has faced a number of criticisms, such as that it is just a copycat of Ethereum, and that it is trying to cash in on the success of other blockchain projects. Others have supported the company by saying that its offerings are in fact quite unique and compelling, and offer several technical advantages and distinctions from Ethereum.
What's important to remember about blockchain projects (which many people who don't understand China very well may miss) is that one of the most important aspects of blockchain projects is their inability to be censored, and their protection from shutdown by any single government or government agency.
As Neo is based in mainland China, it is required to be compliant with domestic Chinese laws. This means that it will inevitably have some sort of backdoor or kill switch that the local government could employ at any time.
Political winds are constantly shifting in China, and so it's impossible to say if at some point in the near or distant future that the reigning government could simply decide to shut things down, or even appropriate and nationalize it.
Likewise, Chinese law requires that all businesses in China be fully willing and able to turn over all records to the government at any time and for any reason.
Recently China has taken a relatively strong anti-cryptocurrency stance as they have been first pushing ICO's and exchanges out of the country, and recently they appear to be targeting mining operations as well.
It is entirely conceivable that they could go after locally based cryptocurrency projects. It's also possible that could offer tremendous support and encouragement for the sector. At this point, however, there is no solid information on this.
If you'd like a more complete overview of Neo, we suggest you take a look at our piece on why NEO is more than Chinese Ethereum.
With all that out of the way, let's take a look at the secondary digital asset of the Neo platform, NeoGas or GAS for short.
Everything about GAS
GAS is a secondary cryptocurrency that can be bought and sold independently on many exchanges. The big attraction to GAS as a cryptocurrency is the ability for someone to earn it by staking NEO units on the Neo network.
GAS is used on the network to perform a number of functions. It can be thought of as a way to pay for transaction fees. One thing that is different about Neo than many other cryptocurrencies is that NEO units are not divisible.
For instance, it is not possible to send or hold 1.01 units of NEO, instead, one must only send or hold one or two units of NEO. Transaction fees on the Neo network can be paid for with GAS, and new smart contracts must be paid for in GAS as well.
Today, GAS is trading for just about $35 each and has a market cap of just under $350 million independent of Neo. In the past, prices have ranged from between $2.50 to over $80.
How much GAS can you earn by staking NEO?
In order to figure out how much GAS one can earn by staking NEO, we took a look at the website neogas.io. The site provides a calculator that can help to estimate how much GAS one can earn per day.
At today's rates, it would take about 83 units of NEO to earn one dollar per day. 83 NEO at press time will cost just under $10,000. This means that holding NEO in a staking eligible wallet (not an exchange) earns a return of about 0.3% per month.
While this is higher than most bank accounts in the US, 0.3% per month is still below what one would expect to earn by holding index funds on a traditional stock market that is performing normally.
Comparing this to another popular cryptocurrency that involves staking, PIVX, the rate also appears quite low. The same amount of money necessary to purchase 83 units of NEO would net you 1618 units of PIVX.
According to this PIVX rewards calculator, with that amount, you should expect to receive about $40 a month. This is about 25% more value than one would receive with NEO staking.
The difference being that staking PIVX does not pay out every single day. Instead, there is an element of chance involved. Therefore your earnings could be less or more.
For those who are already interested in holding NEO, staking it in exchange for GAS seems like a highly logical thing to do. In this way, you can earn an additional return each day without needing to do anything else.
If, however, you do not already own NEO, or don't already have an interest in the cryptocurrency, you may be better off putting your money in traditional index funds on the stock market. Or, in a higher-yielding cryptocurrency that offers staking rewards such as PIVX, among many other choices available on the market today.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.