WHAT IS NEO?
NEO is sometimes referred to as “China’s Ethereum” as it is built on a very similar concept. Their goal is to “digitize all assets” to facilitate a new “NEO Smart Economy”. The idea is that digital assets are easier to manage, validate, transfer etc, so digitizing them will exponentially increasing the efficiency of everything we do.
It is an open source blockchain platform, used for the development of dApps and smart contracts, just like Ethereum. However, it is being developed in Shanghai by a local company known as Onchain (the same people developing Ontology). It is currently the biggest open source blockchain to come out of China.
The neo Team
NEO has a large team.
One thing I don’t like about NEO personally is it is quite difficult to find information on their team. Most key members are not on Linkedin and don’t have bios on the NEO website.
In my opinion team is probably the most important factor in startups and crypto. The best idea in the world is useless if you don’t have the quarterback and head coach to make it happen.
However, we do have some information on the two head honchos.
Da HongFei is the founder of NEO and the founder/CEO of it’s backing company, Onchain. Both of these were among the first blockchain development projects out of China.
Onchain has some great partnerships in China, including Alibaba and Microsoft. Even if that might or might not influence NEO directly, it does show Da HongFei has some great connections which will undoubtedly be valuable.
He has a BA from South China University of Technology.
Before NEO, he worked as CEO of a business called IntPass Consulting. I have not found any information on them.
As for Da HongFei himself, he is very active in the crypto community both inside and outside of China. He travels and talks about NEO and blockchain regularly, including a tour through Europe where he addressed members of parliament in Brussels.
His coding/dev skills are unknown or unproven, but as a pioneer and ambassador for the industry he is certainly a respected figure.
Erik Zhang’s career started in IT, where he worked at a company called Shanda Games. After discovering Bitcoin he moved to Huobi (a crypto exchange). After meeting Da HongFei, they started to conceptualise the NEO platform. Erik Zhang was the responsible for creating the first prototype.
He doesn’t seem to be in the public eye as much as Hong Fei. Other information on him is limited.
Let’s talk about NEO itself.
The NEO mainnet was launched in October 2016, so it has been operational for some time now.
Many ICOs have already successfully listed on NEO, and dApps are currently running on chain, so the product is not just a whitepaper or a prototype but a real, working product.
One major difference between NEO and Ethereum is on NEO you can code in Java and C#, whereas on Ethereum you have to develop using the native Ethereum language Solidity. This makes it significantly easier for developers to build on the NEO platform.
How is the platform secured? NEO uses a proof-of-stake model and has opted for dbFT (if you’re interested, learn how that works here). This differs to Ethereum’s current proof-of-work model, which relies on coin mining.
Proof of stake means the network is validated by staking coins in a wallet. Your percentage of token holdings is then used to secure the chain. In return, you receive GAS (more below).
NEO TOKEN METRICS AND UTILITY
NEO raised 6119.53 BTC / $4.5 million during an ICO that completed on September 7th 2017. There are 100 million tokens, and the cap is fixed. No more NEO tokens will be created ever.
The fixed hard cap is good. Also the fact that they only raised $4.5 million is promising. Projects that raise hundreds of millions of dollars during the ICO generally are being greedy and trying to milk investors money. The fact that NEO raised such a small amount and has built such an excellent product is promising.
However, let’s look at token distribution.
- 50 million (50%) were distributed to ICO investors. Exactly 50%.
- 10 million (10%) will be used to “motivate” for NEO developers and NEO Council.
- 10 million (10%) will be used as “motivate” developers working within the NEO ecosystem (I assume this means products that integrate/support NEO, such as maybe Ontology).
- 15 million (15%) will be used by the NEO Council to invest in other blockchain projects that benefit the NEO ecosystem.
- 15 million (15%) will be retained for “contingencies”.
- Whitepaper states that the maximum yearly expenditure is 15 million tokens.
A few thoughts:
50% is a lot to be retained by the NEO Council. The lockup period was only for one year and already ended in October 2017. While it is understood that all these tokens will be used to directly build and improve the NEO platform, it is a significant dilution that will take place.
Secondly, no lockup is a risk factor. If tokens aren’t locked, there is far less vested interest in the team to continue developing the project. Long lockup periods are always a confidence booster.
As mentioned above, the NEO token itself is used to secure the network via staking. The token then rewards you with GAS. GAS is the token required to actually use the network. An easier way to think about it might be NEO tokens are the road, the dApps are the cars, and GAS is the petrol. Without GAS, everything stands still.
GAS is generated with each new “block”. The total limit is 100 million GAS, which is estimated to be filled in about 22 years. No GAS tokens were pre-mined, so the starting amount of GAS tokens was zero – all GAS tokens will be generated as rewards. Each year around 2 million blocks are generated (approximately 15-20 seconds per block), and the reward is 8 GAS per block. Each year, or every 2 million blocks the GAS reward decreases by 1 GAS per block. This is similar to how Bitcoin mining rewards work (early adopters are rewarded more than late ones).
One big bonus about NEO tokens is the transfers fees are free. You can send NEO between your wallets and exchanges, submit to ICOs and send to other people for zero fees.
NEO’s governance is actually quite centralised, which can be frowned upon in this space. This compared to a platform such as Bitcoin, where decentralisation is stressed and celebrated.
The executive decision making on the NEO platform is done by a body known as the NEO Foundation, co-chaired by Da Hongfei and Erik Zhang.
The NEO Foundation, while overseeing NEO, also funds two separate units:
The NEO Global Development (NGD) is dedicated to technological R&D, community operations and marketing, and is there to execute strategies outlined by the NEO Foundation. Basically, the NEO Foundation is almost like the board of directors, and the NGD is the team that implements the decisions. NGD releases monthly statements on the NEO blog.
The other unit is NEO Global Capital, or NGC, which is a Singapore-based for-profit fund management company. NGC has invested in such projects as Zilliqa, Ontology and Bluzelle.
As for corporate partnerships, there are no major ones that I know of that have been confirmed by NEO themselves. However, they have shown to have a good relationship with the Chinese government which is puts them in a promising position.
B Money Verdict:
Overall, NEO is probably the most promising bet on the crypto industry in China.
Of course it is not limited to China which provides further upside.
The fact that it has a mainnet operating for two years without a major incident is a huge plus. The network is also extremely fast, transfers are free, and the GAS system has influenced many chains to develop as 2-coin networks (Vechain, Ontology are examples). Many chains have successfully ICO’d and are operating on the NEO chain.
There seems to be a little bureaucracy within NEO and governance is more centralised than most coins, but you may need to consider this as simply part of doing business in China. If NEO is greenlighted to be the foremost blockchain provider in China, value will likely skyrocket.
The biggest risk factor to me is the token metrics. In these early years investors are at risk of experiencing significant dilution (up to 15% of total supply per year). No lockup for developers and council means they can just sell and get out. I don’t expect that to happen, but risk factors aren’t about expectation.
The second risk factor is the Chinese government and the country’s adoption of blockchain. If NEO carves itself a place, upside is enormous. If NEO can’t make connections with the right people, project is as good as dead. As of now they seem rather well placed.
NEO looks to me the kind of project that if things are great, things will be really great. But if things go south they will go south very quickly. No in between.
Medium risk high reward on this one.
The Good Stuff
- First mover advantage in China.
- Two coin system provides passive income and secures the network.
- Good relationship with Chinese government.
- Can code in existing languages which lowers barriers to entry for development.
- Backed by a real company (Onchain).
- Good inter-operability with Ontology and ELASTOS.
- NGD and NGC provide further connections in the industry.
- Fees are low (transfers of NEO and GAS are free).
The Bad Stuff
- China regulation is unpredictable.
- Sparse information on team.
- Governance is centralised.
- Marketability outside of China might be limited.
Da Hong Fei is influential. Sparse info on dev team.
Operating mainnet with real dApps using the network. Can code in existing languages. Some hiccups but impressive overall.
Staking rewards are active. Token transfers are free and fast. GAS has value as it’s required to use the network. Poor token metrics lowers this score.
Very active in crypto community. Excellent marketing. Highly organised.
HOW TO BUY NEO IN NEW ZEALAND
In New Zealand, the best way to buy NEO is through EasyCrypto.
You can buy directly with NZD within a few minutes, and the process is easy.
You can get a free EasyCrypto account here.
- Neo token metrics: http://docs.neo.org/en-us/whitepaper.html#distribution-mechanism