Neo N3 - Roadmap to MainNet and Migration

Last week we launched Neo N3 RC4, which we are hopeful will pass all our stability tests and graduate to become the Neo N3 Formal TestNet. Once we have achieved this milestone, we will begin rolling out the Neo N3 MainNet, along with migration and governance.

While we are not yet ready to finalize dates, we can outline how we intend to move from Neo Legacy to Neo N3. We can also reveal some of the migration options that will be available at a high level.

Essentially, the rollout will occur in three phases: TestNet, MainNet Setup, and Mass Migration. Various tasks will be completed during each phase to ensure that the Neo N3 MainNet is ready to support healthy network operations by the time the public migrates tokens en-masse.

Token holders will have two migration options to choose from, depending on their preferences.

The first option will be "Early Bird" migration, which will closely follow the minting of the Neo N3 genesis block. This will provide token holders with an opportunity to be among the first to participate in voting, potentially offering opportunities for a larger than usual GAS yield for a short period of time.

The second option will follow the start of the Mass Migration phase, and will offer token holders direct bonuses based on the amount of NEO tokens they migrate.

Each option has its own benefits which are expanded on further in this article. Additional information will also be provided as we move closer to kicking off migration.

The phases will be carried out as below:

TestNet
The deployment of the Neo N3 RC4 TestNet was the first step on the final road to Neo N3 MainNet. We have already begun onboarding critical components of the network, such as Initial Council members, NeoFS nodes, and Oracle nodes.

Once we have verified that the network is running with stability, the RC4 codebase will be re-published as Neo v3.0.0 and we will move onto the MainNet launch.

Some of the tasks that will be completed during this phase include:

Governance setup (in progress)
The Neo Foundation recently announced the initial members of the Neo Council, responsible for governance of the Neo blockchain. The initial members of the Neo Council have already onboarded onto the RC4 TestNet to ensure that they are ready and equipped to handle steady operations of Neo before migration to MainNet.

NeoFS & Oracle setup（in progress)
The initial NeoFS and Oracle networks will be operated by Neo SPCC and Neo Foundation, respectively. These are being set up to ensure smooth functionality for the first round of dApps deployed to the Neo N3 network.

Token migration testing (in progress)
The Neo Foundation, community development groups, and exchanges have begun testing NEO and GAS token migration from Neo Legacy using PolyNetwork. Tests have already been completed from Neo Legacy to Neo N3 RC3.

Application testing
The first wave of N3 dApps will begin deploying contracts to the TestNet. Some of these dApps will be participants of the Neo Frontier Launchpad, while others will be projects supported by NGD's Early Adoption Program.

MainNet Setup
Following the graduation of RC4 to Formal TestNet, the Neo N3 MainNet will be launched with the minting of its genesis block - a major milestone for the Neo project. The initial Neo Council members and node networks deployed to the Formal TestNet will begin migrating over to the Neo N3 MainNet.

Early token migration and voting will open during this phase. However, migration options and access to external services, such as exchanges, will be limited.

The focus during the MainNet Setup period will be exactly that - setting up the MainNet. Neo will be laying the foundations to ensure the Neo N3 network can stand up on its own and is ready for mass migration.

Some of the tasks that will be completed during this phase include:

Network setup migration
The initial Neo Council, NeoFS nodes, and Oracle nodes will be migrated to MainNet following a period of smooth operation on the TestNet.

Neo Foundation token migration
The Neo Foundation will migrate its NEO and GAS token supply from Neo Legacy to the Neo N3 MainNet. The Neo Foundation intends to use an allocation of its NEO tokens to vote in the Neo Council, while GAS will be used to support the onboarding of dApps, governance candidates, nodes, and other early setup initiatives.

"Early Bird" token migration / Voting-Starting one week after genesis

Individuals can choose to participate in "Early Bird" token migration via Neo's official website roughly one week following the MainNet launch. Voting will also open alongside migration.

There will be advantages and disadvantages to participating in Early Bird migration.

NEO and GAS can be migrated from Legacy to N3 tokens at a 1:1 ratio. NEO holders who migrate early will have the opportunity to be the first to vote in Neo's new governance system.

Under the rules of Neo's new economic structure, the majority of newly minted GAS is distributed to NEO token holders who have successfully voted for a Neo Council member. As fewer NEO tokens will be used to vote during the Early Bird phase, the GAS will be split among less NEO and may yield a larger than usual GAS generation rate.

However, during this time, there is likely to be very limited N3 support from external service providers such as wallets and exchanges. This may mean that you could find yourself unable to trade your N3 NEO and GAS tokens or store them in your preferred wallet.

Additional migration channels and incentives will be made available in the next phase.

More information on migration will be available in the coming weeks.

Application migration
dApps that intend to be ready for use from day one of mass migration will begin migrating to the Neo N3 MainNet.

Relaunch of Grant programs
Updated versions of the Neo Grants programs will be launched, including the General Grants, Core Developer Grants, and Research Grants. Neo is always looking for talented teams and individuals to join our ecosystem. The Neo Grants programs are a great way to get involved.
 
Mass migration
Upon conclusion of the MainNet setup phase, we will begin the mass migration of NEO and GAS tokens. We estimate that this phase will begin roughly one month after Neo N3 has minted its genesis block.

By this point, all the pieces should be in place for stable MainNet operation, the first wave of dApps should be ready to start accepting users, and most of the ecosystem infrastructure such as explorers and wallets should be equipped to support the migration.

A token migration incentive program will be launched to encourage token swaps from Neo Legacy to Neo N3. Various migration channels will be available, including Neo's official website, alongside selected wallets and exchanges.

We should note that although we are working hard alongside major exchanges to ensure speedy support for the Neo N3 MainNet, we do not have control over the internal timelines of external organizations. We will make every endeavor to ensure wide and speedy adoption of N3, but ultimately, universal support may come gradually.

Some of the tasks that will be completed during this phase include:

Token migration incentive program opens
An incentive program will begin starting the first week of Mass Migration, offering the following bonuses for NEO migration:

Weeks 1 & 2: NEO holders who migrate will be rewarded with a 1% bonus of the amount of NEO migrated
Weeks 3 & 4: NEO holders who migrate will be rewarded with a 0.75% bonus of the amount of NEO migrated
Weeks 4 - 8: NEO holders who migrate will be rewarded with a 0.5% bonus of the amount of NEO migrated
As NEO is indivisible, incentives of less than 1 NEO will not be issued. Centralized exchanges that facilitate migration may choose to offer fractional NEO rewards at their own discretion. All the token incentives will be issued to the appropriate accounts within 1-3 days after users complete the migration. There is no plan for GAS migration incentives at this moment.

More information on migration will be available in the coming weeks.

Neo Legacy GAS generation stopped
The Neo Legacy blockchain will move into long-term support following the launch of Neo N3. However, having two blockchains that continually generate GAS at slightly different rates makes things complicated for providers, such as exchanges who need to calculate circulating supply.

To solve this issue, Neo Legacy NEO tokens will cease to generate GAS tokens at a yet-to-be-specified block height. The final GAS generation block will be selected after Neo N3 migration has been open for a period of time. The block height and estimated date will be communicated with plenty of advance notice to ensure all NEO token holders have ample warning and time to complete migration.

We have already seen some stellar dApp development using N3 during the Neo Frontier Launchpad. In just a short period of time, developers brand new to Neo and its tooling have been able to produce amazing results. It is a testament to the hard work that has gone into making Neo N3 a public blockchain platform that not only stands up to its competitors, but exceeds them in many respects.

As our tooling continues to mature, documentation continues to improve, and more sample code is written, so will the Neo ecosystem continue to grow. We can't wait to see all the amazing dApps you will build on Neo, and we are grateful to have you along for the journey.

New Infrastructure Bill Looks to Raise $30B Through Crypto Taxes

A bipartisan infrastructure bill in Congress proposes to raise $28 billion from crypto investors by applying new information reporting requirements to exchanges and other parties.

According to a draft copy of the bill shared with CoinDesk, any broker that transfers any digital assets would need to file a return under a modified information reporting regime. The draft defined digital assets as "any digital representation of value … recorded on a cryptographically secured distributed ledger" or related technology. It also includes decentralized exchanges and peer-to-peer marketplaces in its definition of brokers.

A separate summary of the bill further clarified that cryptocurrencies are treated as a subsection of the broader digital asset umbrella.

"The provision includes updating the definition of broker to reflect the realities of how digital assets are acquired and traded," the document said. "The provision further makes clear that broker-to-broker reporting applies to all transfers of covered securities within the meaning of section 6045(g)(3), including digital assets."

This could bring up to $30 billion into the bill's "pay-fors," according to a fact sheet also shared with CoinDesk.

"Additionally, digital assets are added to the current rules requiring businesses to report cash payments over $10,000," the fact sheet said.

The crypto reporting requirements are among a list of 14 new "pay-fors" included in the bill, which also includes repurposing COVID-19 relief funds, auctions, Superfund fees, fuel sales and other sources of revenue.

Kristin Smith, executive director of the Blockchain Association, told CoinDesk the draft language could mean a number of individuals interacting with crypto may have to start reporting their transactions.

"We interpret this to mean software wallet developers, hardware wallet manufacturers, multisig service providers, liquidity providers, DAO token holders and potentially even miners," she said.

The $1 trillion infrastructure bill also includes provisions for funding public transit, particularly passenger rail; investments in bridges, clean drinking water and wastewater infrastructure; and high-speed internet access for all Americans, among other provisions, according to a White House fact sheet.

The U.S. Senate may conduct a test vote as early as Wednesday, Senate Majority Leader Chuck Schumer (D-N.Y.) said.

In a statement, U.S. President Joe Biden praised the team that negotiated the bill, saying neither side got 100% of what it wanted.

"Everyone from unions to business leaders and economists left, right and center believe the public investments in this deal will mean more jobs, higher productivity, and higher growth for our economy over the long term. Experts believe that the majority of the deal's benefits will flow to working families," he said in a statement.

Now Open: Registration for Initial Neo Council Members

The launch of the Neo N3 MainNet is gradually approaching after the release of multiple TestNet versions. One of the most prominent changes in Neo N3 is an entirely revamped governance model, which will push Neo towards a more decentralized future.

NEO token holders will be empowered to vote on a 21 member Neo Council, of which the top seven will also become Consensus Nodes. The Neo Council will be responsible for maintaining the health of the Neo network, with rights to adjust critical blockchain parameters such as fees.  

In order to ensure the stability of the Neo N3 MainNet in its early phases, the Neo Foundation is seeking candidates to become the initial members of the Neo Council. The primary goal is to ensure that the first members of the Neo Council have a fundamental understanding of the Neo platform and are technically capable of carrying out their duties.

Neo Global Development will seed up to 10 candidates into the Neo Council. The remaining places will be filled by the Neo Foundation, including the seven consensus nodes.

This will be the default Neo Council composition upon MainNet launch. NEO holders can immediately start voting for candidates to receive increased GAS generation rates. Interested parties can also start registering as candidates on-chain and begin soliciting votes.

The Neo Council will remain in the default setting until 20% of the total circulating NEO has been used to vote. Once the 20% threshold is reached, the Neo Council will adjust to reflect the will of the people.

What are the incentives for Neo Council members?
5 GAS is generated every new block and will be rewarded to voters and Neo Council members alike. 10% of the released GAS will be evenly distributed among the 21 members of the Neo Council, while the consensus nodes will also receive the network fees packaged within each newly generated block.

Neo Council members also have the power to adjust blockchain parameters such as system fees and the ability to elect other on-chain roles such as oracle nodes.  

What are the requirements to become a Neo Council candidate?
Anyone can register their interest to be an initial member of the Neo Council. Ideally, we are looking for candidates with the following qualities:

A solid understanding of Neo technology and its ecosystem needs
Experience working within blockchain or related technical fields
The ability to reliably host a consensus node
Once the Neo N3 MainNet launches, anyone can register on-chain to become a candidate and be voted into the Neo Council.

How to apply to become an initial member of the Neo Council？
Applications to become an initial Neo Council member are now officially open. The Neo Foundation will be selecting up to 10 foundation members according to the schedule below:

June 6- June 30 - Application period to become initial Neo Council members
July 1- July 10 - Applications review period
July 10 - July 14 - Announcement of initial Neo Council members
July 15 - Launch of the governance website and community voting
To submit an application, please email eg@neo.org with the below information, or complete the registration form found here.

Registration details:
Your full legal name
Organization
Position title
Contact phone number
Contact email address
Brief introduction to yourself or your organisation
Why do you want to be a Neo Council member？
What are your plans for governance？
We welcome everyone to join us in building the Neo Smart Economy of the future.  

More information about Neo N3 governance can be found at here.

Has the Biden Administration Lost the Plot on Crypto Regulation?

While we understand the Biden Administration's approach to crypto regulation is in the process of being defined, we have yet to see any definitive proposals or policy statements that will bring clarity and consistency.

What we have glimpsed through statements by Treasury Secretary Janet Yellen and Chairman Jerome Powell, and from recent congressional hearings, appears defensive and reactionary. It also appears to be influenced more by recent ransomware attacks, China's policy regarding CBDCs, environmental issues, and El Salvador's adoption of bitcoin as legal tender than any effort to clarify markets and assist the industry's growth. It appears that agencies that are responsible for crypto regulation have shifted to national security concerns instead of competitive markets and products. The lack of progress is disappointing.

Olta Andoni is Chief Legal Officer at Nifty's. Donna Redel is a Professor at Fordham Law and Board Member at NY Angels.

This state of affairs contrasts starkly to the increasing institutional adoption of crypto currency assets, the approval of ETFs by  Canada, Brazil and states in Europe) the movement among states here (especially Wyoming, Texas and New York) to create comprehensive legal frameworks for crypto-digital assets and the widespread crypto ownership by the public.

Furthermore, recent enforcement actions/settlements around 2017 ICOs are not instructive in the current environment where DeFi projects with VC backing operate without apparent regulatory oversight. A recent plenary meeting of selected DeFi projects and regulators happened behind closed doors, giving the public and other projects little guidance. The action brought against Ripple and other associated entities is only in the discovery stage, so it is doubtful that any outcome will occur in 2021 that might provide greater legal clarity. There are no cases likely to lead to judge-made law suggesting when a token is or is not a security, still the number one issue of regulatory confusion among several of them.

Chairman Gensler recently stated "…[t]his (crypto) is quite volatile, one might say a highly volatile asset class, and the investing public would benefit from investor protection on crypto exchanges." The emphasis on a federal framework for exchange regulation is, in our opinion, long overdue as we advocated in our CoinDesk article in response to Peirce's Safe Harbor Proposal 1.0.  But more certainty is needed, whether that certainty is the result of judge-made law, a binding rule promulgated by the SEC or a new law created by Congress.  

The beginning of the Gensler tenure doesn't bode well for the crypto market which is still seeking clarity on existing products, much less an ETF product with as many as nine proposals before the SEC for consideration. ETFs are popular with retail investors who currently have little or no access to regulated bitcoin products, thereby "forcing" them into more risky unregulated altcoin alternatives.

The recent CBDC hearings on Capitol Hill, most notably that of Sen. Warren's subcommittee and the committee of Rep. Maxine Walter , have demonstrated a dual-pronged approach to protect the dollar's hegemony. The committees proposed task forces to study a digital dollar and restrictive crypto regulation aligned with national security and crime concerns. In our opinion, this is the wrong approach because it is based on the lack of understanding of the environmental impact of bitcoin, and underplays the need to move quicker on the adoption of CBDCs to be globally competitive while simultaneously protecting citizen privacy. At the same time, USD CBDC might reduce reliance on stablecoins like tether, which were recently labeled by a federal official as a short-term financial destabilizer.