Neon EVM: Ethereum & Solana in Synergy

Imagine a virtual machine that combines the reliability and trustworthiness of Ethereum with the performance and user-friendliness of Solana.

For a long time, there has been a debate between Ethereum and Solana, but what if we told you that now it’s possible to enjoy the best of both worlds? Sounds incredible, right?

Well, Neon EVM is making this a reality.

Let’s deep dive into it!!

Challenges with Ethereum

The challenges faced by Ethereum dApps and users include transactional challenges and ecosystem access challenges.

Challenges faced by Ethereum

Transactional Challenges:

• Limited Throughput: Ethereum’s TPS (transactions per second) is limited, affecting transaction speed.
• High Gas Fees: Transactions on Ethereum can become slow and expensive, especially during busy network times.
• Sequential Execution: Smart contracts on Ethereum must be executed sequentially, limiting throughput.
• L2 Scaling Solutions: Layer 2 scaling solutions like Rollups have reduced gas fees but still face limitations.

Cost of Neon EVM transactions

1. Cost for transfer of neon token in Dollars

The below table shows how much the transfer of neon tokens costs on neon EVM.

2. Cost of uniswap in Dollars using Neon.
Here is the quantitative study about how different operations might cost on the famous Decentralized exchange Uniswap using Neon EVM.

3. Cost of Aave in Dollars using Neon.

Here is the quantitative study about how different operations might cost on famous Money market AAVE using Neon EVM.

Ecosystem Access Challenges:

• Different Transactional Structures: Ethereum and Solana have different transactional structures, making it challenging for Ethereum dApp developers to access Solana’s innovations.
• Specialized Development: Developers specialized in Solidity find it difficult to adapt their dApps to Solana’s requirements.
• Cross-L1 Blockchain Development: Neon EVM protocol enables cross-platform development, allowing Ethereum dApps to operate on Solana with minimal code reconfiguration.

Neon EVM in simple words

Neon EVM, in simple terms, is a protocol that enables Ethereum dApps to operate on Solana by leveraging Solana’s high-speed and low-cost transaction capabilities.

It acts as a bridge between Ethereum and Solana, allowing developers to scale their Ethereum dApps on Solana’s efficient settlement layer.

Rayzor’s take on Neon EVM

Neon EVM is like a translator that helps Ethereum dApps communicate with Solana, ensuring they benefit from Solana’s advantages such as parallel transaction execution and low gas fees.

By using Neon EVM, developers can tap into Solana’s market, reach new users, and enhance their dApps’ performance with faster transactions and reduced costs.

Architecture of Neon EVM

The architecture of Neon EVM comprises several key components that work together to enable Ethereum dApps to operate on Solana efficiently. Here is an in-depth explanation of the architecture based on the information provided in the whitepaper:

Neon EVM Program

The Neon EVM Program is a smart contract written in Rust and compiled into Berkeley Packet Filter bytecode for Solana’s Virtual Machine (SVM). It allows Neon EVM to leverage Solana’s features, including parallel transaction execution.

Functions:

• Uploads EVM contracts to individual Solana accounts.
• Verifies signatures based on Ethereum rules before executing transactions on Solana.
• Executes Neon transactions iteratively, considering Solana’s resource constraints.
• Calculates gas consumption in SOL and NEON tokens.
• Manages payments in NEON tokens for gas consumed and fees.

Neon Proxy

Neon Proxy acts as an intermediary between Neon EVM clients and Neon EVM, providing an Ethereum-like Web3 API. It is a containerized solution available to all users.

Functions:

• Packages transactions into Solana transactions for seamless execution on Solana.
• Run by independent Operators to ensure redundancy and market independence.
• Allows dApps to choose Operators based on competitive attributes like transaction prices.

Neon DAO:

Neon DAO is a decentralized governance layer executed as an SPL Governance program on Solana. It manages fees and governs the design and function of Neon EVM.

Functions:

• Utilizes NEON holders to raise and vote on proposals impacting Neon EVM.
• Manages parameters, redesign, and updates to the Neon EVM Program.
• Responsible for setting up incentivization strategies and modifying variables like deposit requirements for Operators.

Lifecycle of Neon EVM transaction

The transaction lifecycle of Neon EVM involves several steps that facilitate the communication between Ethereum dApps and Solana. Here is a detailed breakdown of the transaction process based on the information provided in the whitepaper and search results:

Neon EVM transaction (Neon’s Whitepaper)

Neon EVM Transaction Lifecycle:

1. User-Initiated Transaction:

• The user initiates a transaction, which is a signed Ethereum-like transaction directed to a Neon RPC endpoint.
• The Ethereum API forwards the transaction to the Neon Proxy via the Neon API service.

2. Processing by Neon Proxy:

• The Neon Proxy processes the request, providing a gas usage estimate for transaction execution and initiates the broadcast by wrapping the Ethereum-like transaction as a Solana transaction.
• The wrapped transaction is then passed to the Neon EVM program hosted on Solana.

3. Execution by Neon EVM:

• The Neon EVM program receives the wrapped transaction, resulting in a Solana receipt and a corresponding Neon EVM receipt.
• The Neon smart contract unwraps the transaction, verifies the user’s signature, loads EVM state from Solana storage, executes the transaction inside Solana BPF, and updates Solana’s state to reflect the new Neon EVM state.
• Solana and Neon EVM undergo a state change, completing the transaction request.

4. Concurrent Transaction Processing:

• The Solana node’s concurrent transaction processor executes Solana transactions in parallel, ensuring independence by verifying Solana accounts.
• Packed Neon transactions are processed in parallel on Solana, calling the Neon EVM smart contract to execute transactions iteratively.

5. Iterative Execution:

• Neon EVM introduces iterative execution of transactions to accommodate restrictions imposed by Solana’s SVM.
• An incentivization protocol managed by Neon DAO determines fees, deposit size for iterative execution, maximum iterations per transaction, and waiting block limits.

Neon EVM features

Neon EVM offers a range of features that enhance the functionality and compatibility of Ethereum dApps on Solana. Here are the key features of Neon EVM based on the information provided in the whitepaper:

1. Full Ethereum Emulation: Neon EVM emulates Ethereum fully, ensuring compatibility with existing Ethereum tools and calculating gas consumption based on Solana rules.
2. Parallel Execution: Enables parallel execution of EVM bytecode contracts (Solidity, Vyper, etc.) on Solana, leveraging its high throughput capabilities for efficient transaction processing.
3. Access to Solana Infrastructure: Provides access to Solana’s infrastructure through Ethereum tools, allowing interaction with native Solana tokens via a wrapper interface designed for Ethereum contracts and tools.
4. NEON Token Payment: Users can pay for Neon EVM services using NEON tokens, which serve as utility tokens for gas fee payments and participation in Neon DAO governance activities.
5. Compatibility with Ethereum Tools: Ensures seamless operation for developers by maintaining compatibility with key Ethereum tools like Solidity, MetaMask, Remix, and Truffle, enabling easy migration of Ethereum applications to Solana.
6. Iterative Transaction Execution: Implements iterative execution of transactions to optimize resources and accommodate Solana’s constraints, ensuring efficient transaction finalization.
7. Decentralized Governance (Neon DAO): Neon DAO serves as a decentralized governance layer executed on Solana, managing fees, governing Neon EVM’s design and function, and engaging NEON token holders in decision-making through proposals.
8. Security and Independence: Neon EVM ensures implicit security and independence of operations within its ecosystem, enhancing the reliability and integrity of transactions processed on Solana.

Neon EVM Economy

The Neon EVM economy is centred around the NEON token, which serves two primary functions:

Payment of Gas Fees:
Users pay gas fees in NEON tokens for transaction execution within the Neon EVM. This mechanism is designed to leverage Solana’s low transaction costs, thereby reducing the overall cost for users and developers operating on the Neon EVM.

The Neon token serves as the primary means of payment for all transactions within the Neon EVM ecosystem, including fees payable to Neon operators.

When a Neon user initiates a transaction within a dApp built on the Neon EVM, they submit a request to a Neon operator. These operators bear two key responsibilities:

1. Converting the Neon transaction into a Solana transaction to enable its execution on a Solana cluster.

2. Covering the cost of executing each iteration of the Neon transaction.

This abstraction aims to streamline the payment process for Neon transactions, enhancing user experience.

With each iteration of a Neon transaction, the Neon operator disburses SOL tokens to both the Solana Validator and the Neon DAO Treasury. The latter payment, referred to as the Neon EVM platform fee, ensures the sustainability of the Neon EVM ecosystem.

In exchange, Neon users compensate Neon operators using NEON tokens, encompassing the Solana validation fee, the Neon EVM platform fee, and the operator’s commission.

Governance:
NEON token holders can participate in the governance of the Neon EVM through the Neon DAO (Decentralized Autonomous Organization). This includes voting on proposals that affect the development, parameters, and operational aspects of the Neon EVM.

Neon Tokenomics

The NEON token serves as both a utility and governance token within this ecosystem. Here’s a detailed breakdown of its tokenomics and key figures:

• Total Supply: 1 billion NEON tokens
• Circulating Supply: As of the latest data, the circulating supply is approximately 283.1 million NEON tokens, which is about 28.31% of the total supply.
• Market Cap: $ 86,241,170 (3 March 2024)
• Fully Diluted Market Cap (FDMC): $1,494,699,465 (3 March 2024)

Distribution of Neon EVM Token

• Token Allocation:
• Ecosystem Development: 31.92%.
• Treasury Ecosystem Growth: 23.93%.
• Early Purchasers: 16.12%.
• Founders: 15%.
• Key Partners and Advisors: 7.02%.
• Public Sale: 5%.

Additional allocations include early contributors and service providers.

Sale details of of Neon EVM tokens

Public Sale Details: The public sale price was set at $0.1 per token, with 50 million tokens allocated, raising $5 million. The sale was highly successful, selling out in 29 minutes and registering 717K participants.

Private/Seed Sale Price: The private sale price was $0.25 per token.

Utility and Governance: NEON tokens are used for transaction fees within the Neon EVM ecosystem and for participating in governance decisions through the Neon DAO.

Vesting Schedule: The token release schedule includes a mix of immediate unlocks for public sale participants and staggered vesting for other stakeholders, such as a 1-year cliff followed by monthly vesting for early purchasers, ecosystem development, founders, and advisors.

Team of Neon EVM

Here are a few details about the Neon EVM team.

Team of Neon EVM

Marina Guryeva used her business degree from INSEAD to get into the world of blockchain early. She worked in a few important roles before becoming the boss of Neon Labs.

Konstantin Goldstein mixes his knowledge of psychoanalysis and business with his tech experience from Microsoft. He spent nine years there before taking on the role of COO at Neon Labs, where he uses his skills to help guide the company.

Andrey Falaleev is really good at programming and has led teams at several tech companies. Now, he’s the CTO of Neon Labs, where he uses his tech skills to help the company grow.

Yuriy Yurchenko has a strong background in system management and has spent six years leading product development at a fintech startup. Now, he’s in charge of creating new products at Neon Labs.

Payment for Neon Transactions

Transactions within the Neon EVM are formed according to Ethereum standards, with ‘gas_price’ and ‘gas_limit’ properties dictating the transaction fees.

However, unlike Ethereum where fees are paid to miners, in Neon EVM, these fees are paid in NEON tokens to the entity submitting the transaction on Solana, typically a Neon Proxy Operator. The cost of executing transactions in Neon EVM is calculated based on Solana’s gas price, which is significantly lower than Ethereum’s, resulting in substantial cost savings for users.

Transacting with Tokens

Neon EVM supports transactions with ERC-20 tokens in two forms:

1. ERC-20 Tokens: These include both native tokens minted within Neon EVM and wrapped tokens bridged from other EVM-compatible chains. A bridging mechanism allows for the movement of ERC-20 assets between Ethereum and Neon EVM.
2. ERC-20-for-SPL Token: This solution enables dApps to utilize native Solana SPL tokens through the standard ERC-20 interface, facilitating seamless interaction between Ethereum dApps and the Solana ecosystem.

Neon DAO

NeonDAO is a decentralized autonomous organization (DAO) designed to foster and enhance decentralization, resilience, and self-sustainability within the Neon EVM platform and ecosystem.

It operates through a community-led and community-driven approach, where community members reach a consensus on solving issues, develop rules for the functioning of the Neon DAO, and can change governance rules through contractual amendments if necessary. The organization is structured around several decentralized Assemblies, organized into three focus areas: Ecosystem, Development, and Security.

These Assemblies are responsible for different aspects of decision-making within the DAO, utilizing SPL Governance for DAO creation on the Solana blockchain

Neon DAO

Objectives and Principles

The primary objective of NeonDAO is to allow the community of token holders to influence how the protocol evolves. This includes core developers, application developers, operators, users, and other contributors working together to come to a consensus on solving issues and developing governance rules.

The DAO aims to ensure any changes to Neon are secure and approved by the community, maintaining a high level of coordination and transparency in managing and technical processes.

The guiding principles for engaging with NeonDAO include respecting the rights of all community members, acting in good faith, seeking to resolve disputes constructively and collaboratively, encouraging diversity of perspectives, and promoting openness and transparency.

There are also prohibitions on improper behaviour, such as threatening other members, improperly influencing votes, and holding software developers blameless for unintentional mistakes.

Voting Process at NeonDAO

The voting process within NeonDAO begins with any participant bringing their ideas to the community via the Neon Forum on Discord. These ideas are discussed and evaluated off-chain to gauge community support.

If there is enough support, a participant creates an official proposal on the Neon DAO, moving the idea into on-chain governance territory. Proposals are implemented on Solana, and participants may lock up their NEON tokens to receive voting rights.

The voting process is straightforward: 1 NEON token equals 1 vote, and a proposal is accepted if the number of “Accept” votes exceeds a predetermined threshold and the number of “Reject” votes. Approved proposals can be executed by any DAO member after a hold-up period. The Neon Governance UI provides all parameters related to the DAO’s governance, such as the pass threshold, voting period, hold-up period, and the minimum token amount required to create a proposal.

Neon Pass

NeonPass is a system that facilitates the transfer of assets between Solana’s Associated Token Accounts and Neon EVM’s ERC-20 token accounts without the conventional wrapping process used by blockchain bridges. It allows for the seamless movement of SPL tokens (Solana’s native tokens) to be used within the Neon EVM ecosystem, making them compatible with Solidity dApps and behaving like any Ethereum account. NeonPass operates by packaging SPL tokens in an ERC-20 interface within the Neon EVM, rather than locking and minting equivalent assets on a different blockchain.

How does NeonPass work?

NeonPass works by utilizing an interface contract and an account storage strategy to make SPL tokens compatible with Neon EVM without wrapping them. Here’s how the process unfolds:

• Account Storage: SPL tokens are stored in Solana Associated Token Accounts. To interact with Neon EVM, these tokens are packaged in an ERC-20 interface deployed in the Factory contract of Neon EVM.

Neon Pass

• Transfer of SPL Tokens: The packaged SPL tokens are then transferred to Neon EVM ERC-20 token accounts, which are specialized Solana accounts within the Neon EVM ecosystem. These accounts are compatible with Solidity dApps and function like Ethereum accounts.
• Reverse Transfer: The process also works in reverse, where Neon EVM assets can be unpackaged back into the SPL standard and transferred to the Associated Solana Token Accounts, allowing assets to move seamlessly between the two environments within Solana’s L1 blockchain.
• Account Creation: When transferring an asset to a Neon EVM account from Solana without an existing balance of that asset, a new Neon EVM ERC-20 Token Account is created to store the balance, linked to the user’s Neon EVM User Account. The same applies to Solana; if there’s no existing balance for an incoming asset, a new Solana Associated Token Account is created.

Neon Roadmap and Growth till now

The roadmap for the Neon EVM ecosystem outlines the project’s vision and planned developments as it seeks to integrate Ethereum’s smart contract capabilities with Solana’s high-performance blockchain.

Full EVM Compatibility: By 2024, Neon EVM aims to achieve full compatibility with the Ethereum Virtual Machine, allowing Ethereum-native applications to run on Solana without any code changes.

High Throughput: Neon EVM targets a throughput of around 4,500 transactions per second (TPS), significantly surpassing Ethereum’s general limit.

Low Transaction Costs: The platform maintains an average gas fee of 0.002 NEON per transaction, emphasizing cost-efficiency.

Secure Environment: Neon EVM prioritizes the security of its platform, implementing measures to ensure a secure and safe environment for its users and developers.

Interoperability and Composability: Neon EVM aims to improve composability between networks, ensuring that applications built on it are compatible with each other, which is crucial for the Web3 ecosystem, especially in DeFi and NFT protocols.

Neon Roadmap

Neon Ecosystem

The Neon EVM” 's ecosystem has been growing at a great phase. Leveraging Solana and Ethereum’s best features builder are looking at the Neon as one of the potential ecosystems to build.

Here are some of the categories and products.

Neon EVM Ecosystem

Wallets

MetaMask
MetaMask is a popular wallet software that many people use. You can set it up to connect with Neon EVM, allowing you to interact with dApps on the Solana network. To do this, you’ll need to add Neon EVM as a custom network in MetaMask. ChainList can help make this process easier by providing verified network information for blockchain connections.

WalletConnect
WalletConnect serves as a protocol that enables smooth communication between decentralized applications (dApps) and mobile wallets, ensuring security through encrypted channels. When integrated with Neon EVM, it facilitates safe interactions with dApps operating on the Solana blockchain.

Ledger
Ledger, renowned for its reliable hardware wallets, now offers support for the Neon EVM platform. Through this integration, users can easily manage their NEON tokens and utilize Neon EVM’s functionalities directly from the Ledger Live application.

Crypto.com
Crypto.com offers a range of cryptocurrency services, including a wallet feature. They’ve recently added support for NEON, the native token of Neon EVM, into their app. This means users can now easily trade and store NEON tokens within the Crypto.com platform.

DeFi

MYSO Finance
MYSO Finance is a DeFi platform that harnesses the infrastructure of Neon EVM to provide financial services on the Solana network.

Vibr
Vibr is an exciting DeFi project that has been gaining momentum over the past few months, with a strong liquidity pool. Vibr will likely take advantage of Neon EVM’s capability to execute Ethereum-compatible smart contracts on the Solana blockchain. This integration could open up new opportunities for Vibr and further enhance its growth in the DeFi space.

Icecream Swap
IcecreamSwap, a decentralized exchange (DEX), has experienced a significant surge in its Total Value Locked (TVL). According to DefiLlama, the TVL of IcecreamSwap has reached $436,999, thanks to contributions from various blockchains such as CORE, Bitgert, Neon, XDC, Telos, ShimmerEVM, Base, Dogechain, Scroll, and Fuse.

Orca
Orca functions as a decentralized exchange (DEX) and automated market maker (AMM) on the Solana blockchain. It hosts various pairs and liquidity pools utilized by decentralized finance (DeFi) platforms and aggregators within the Solana ecosystem.

Explorers

Neonscan
Neonscan is like a special search engine for the Neon EVM network. It lets you see all the transactions happening, check wallet addresses, and find other important info about the blockchain.

Blockscout
Blockscout is a flexible blockchain explorer that lets you delve into different blockchain networks. It’s handy for examining the data on Neon EVM’s blockchain and offers a range of exploration options.

Bridges

Debridges
deBridge is a cross-chain interoperability and liquidity transfer protocol that supports a wide range of assets for transfer and bridging across multiple blockchains including Neon EVM.

Neonpass
Neonpass offers a bridging solution that allows Neon EVM to link up with various other blockchain networks or layers.

Oracles

Chainlink
Chainlink functions as an oracle network that delivers external data to smart contracts. It has the potential to be incorporated into Neon EVM to offer this service for decentralized applications (dApps) running on the Solana blockchain.

PYTH
PYTH serves as an oracle service bringing real-world data onto the blockchain. When paired with Neon EVM, it can provide precise data feeds for applications running on Solana.

Impact of Neon EVM on the Solana Ecosystem

The integration of Neon EVM with the Solana ecosystem marks a significant milestone, amplifying Solana’s appeal to a wider audience, especially Ethereum developers.

Boosted Scalability and Efficiency

Neon EVM smoothly integrates Ethereum’s smart contract features into Solana, allowing for simultaneous transaction processing and low transaction costs. This enhancement significantly boosts the scalability and effectiveness of apps on Solana, making it an attractive choice for developers looking to create high-volume dApps.

Magnet for Ethereum Developers

Neon EVM makes it easier for Ethereum developers to move their dApps to Solana by offering EVM compatibility. This means they can stick to familiar tools like Solidity, MetaMask, and Truffle, which streamlines the transition process. This could potentially attract more Ethereum projects to Solana.

Expansion of Solana’s Reach

Neon EVM’s feature of supporting Ethereum dApps without requiring code changes is helping to expand Solana’s ecosystem. This means that new applications, users, and liquidity are being introduced to Solana, making it a more diverse and welcoming community for developers and users alike. This expansion strengthens Solana’s position in the blockchain space, fostering a more vibrant and inclusive community overall.

Fluidity and Compatibility

Neon EVM strengthens liquidity and interoperability in the Solana ecosystem. It enables seamless asset transfers and interactions between Ethereum and Solana, enhancing the flow of assets across different blockchains. This benefits both users and developers by providing greater flexibility and efficiency in managing assets within the blockchain landscape.

Future Growth and Innovation

The introduction of Neon EVM on Solana is driving ongoing progress and creativity. With new features like a multi-token gas payment system and better compatibility with Solana programs on the horizon, Neon EVM is set to keep pushing the boundaries and fostering innovation within the Solana community.

Conclusion

Neon EVM has collectively used the best characteristics of Solana and Ethereum blockchain. Solving the problem of both ecosystems makes it a good infra for all the current and upcoming builders.

Neon EVM has seen a decent adoption till now as a couple of Dexs and defi protocols have been built but it has to look out for more ways to get more adoption and community although the community has continuously grown in the last few months.

Moreover, Neon Token and DAO have performed well and must grow more in future. Although, we can’t predict the future but Neon EVM can be a big game-changer for both EVM and the Solana Ecosystem.

References

[1]https://www.okx.com/learn/neon-evm
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[18] https://neonevm.org/blog/which-performance-metrics-matter
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[24}https://neonevm.org/whitepaper.pdf