Neo X Sidechain: A Game Changer for DeFi Traders?

Apr 28, 2024 1:13:57 AM


Neo’s recent announcement has made the news and caused a 20% price surge, but why?

At the Neo APAC Hackathon Finale, Neo’s founder, Da Hongfei, introduced a new supported by Neo. This update sparked interest in the blockchain community, leading to a 20% rise in Neo’s price. The new network is more than just Ethereum-compatible. Specifically, this sidechain offers protection against MEV, a demanded feature by DeFi users.

Understanding MEV: Implications for Traders

Miner/Maximal Extractable Value (MEV) refers to the total amount that can be extracted from traders by opportunistic network participants by rearranging, including, or excluding transactions in a block.

Decentralized finance, or DeFi, facilitated by dApps like UniswapFlamingo, and dYdX, thrives on the blockchain. Here, assets frequently change ownership, resulting in slight price differences across platforms. Traders exploit these differences through arbitrage, buying low on one platform and selling high on another, equalizing prices across exchanges and pocketing the difference.

However, the transparent nature of blockchains exposes these arbitrage opportunities.

Opportunists observe and then act on these visible transactions, employing various strategies to benefit from them.

While one common tactic is to ramp up transaction fees to prioritize their transaction, MEV goes beyond just this. It involves rearranging the order of transactions or even censoring them to gain an unfair advantage.

Miners play a crucial role in this. They can decide which transactions get included in a block and in what order. When miners act in collusion with or as these opportunists, they can intentionally structure the contents of blocks to their benefit.

In essence, MEV allows for manipulating transaction sequences, typically to the detriment of ordinary traders and in favor of the ‘attacker’.

MEV Resistant and EVM Compatible Sidechain

Ethereum is by far the largest DeFi marketplace in the world. This creates a demand and an opportunity for decentralized services that benefit traders. In this scenario, Neo’s new sidechain comes to address the needs of these users.

By enabling private and fair access to Ethereum DeFi platforms, Neo’s new sidechain becomes a suitable option for seasoned traders looking to operate on more fair terms while granting access to the open market.

If the project delivers on its promises, we could see a significant increase in network activity.

Improved Privacy and Anonymity

This new service will allow transactions to contain private encrypted data while ensuring user anonymity through proxy contracts. Although the network directly benefits DeFi users through MEV resistance, these capabilities should be considered.

Powered by Neo Technology

This new sidechain will inherit all the advanced technologies from the Neo blockchain, including the high-performance consensus algorithm(dBFT) and the distinctive dual token model.

Increased utility for GAS tokens

According to the latest official release, $GAS will be the primary token. Those holding $GAS will be responsible for selecting the Consensus Nodes for the Neo Sidechain, and it’s expected that $GAS will be used to cover network operations. Details on how Ethereum’s network fees will be handled await further clarification.

Where to get $GAS?

Since the new sidechain will rely on GAS, it could be a good option to acquire some tokens. The GAS token can be either purchased or generated by holding NEO tokens. You can find a list of exchanges on the NDapp website. Check the GAS Calculator to see how much you can earn.

If you are looking to generate GAS yourself, you will need to vote using $NEO. Another option is to convert existing NEO to bNEO, which wraps the tokens and handles voting for you.

Since NEO is required to generate GAS tokens, we should expect an increase demand of both tokens.

Game Changer?

By addressing challenges like MEV and improving transactional privacy, Neo showcases its commitment to enhancing the trading experience.

The introduction of the sidechain isn’t just a tech addition; it highlights Neo’s ongoing investment in technology development. This approach benefits today’s traders and also paves the way for a more balanced and transparent decentralized finance ecosystem in the future.

Vote for the Linkd Academy

If you are looking to support the network beyond purchasing tokens, you can help by casting your votes to the Linkd Academy. This will ensure that educational resources and training programs continue to be available to users.

The Linkd Academy provides tutorials, workshops, and other learning materials to ensure that both new and seasoned users understand the join the Neo’s ecosystem. By supporting such Linkd, we can foster a well-informed user base, driving innovation and promoting secure, informed trading practices.

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