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Can NEO 3.0 Return NEO to the Top 10 Cryptocurrency Projects?

Can NEO 3.0 Return NEO to the Top 10 Cryptocurrency Projects

Over this past weekend in Seattle, NEO’s DevCon 2019 shed light on major updates that will be coming to the platform, branded as NEO 3.0. These include new features that should drastically improve network performance and functionality, aimed at making NEO the blockchain of choice for large-scale business applications.

On the eve of the DevCon, NEO announced to CoinTelegraph that the blockchain platform was opening a Seattle NEO Global Development (NGD) office, headed by ex-Microsoft executive John deVadoss.

The activity in Seattle comes after a long period of declining interest in what was once hyped by many in the cryptocurrency world as “the Chinese Ethereum.” This is a label always explicitly rejected by those within NEO – co-founder Erik Zhang recently told CCN that the “Chinese Ethereum” tag was “hype,” adding “I’m personally against this labelling” – but it was a tag that helped NEO generate a lot of hype during crypto’s 2017 bull run. Both NEO and Ethereum are aiming to create open networks and smart contract platforms, but as Zhang explained, there is a key difference in the two projects’ philosophy: “Ethereum wants to be a world computer that cannot be stopped while NEO wants to serve the smart economy.”

These fundamental differences are reflected in a variety of technical differences between the two platforms, from their consensus mechanisms to the variety of programming languages that can be utilized to develop smart contracts on each platform. The most obvious difference for ordinary token holders is that holding NEO generates a proprietary token, GAS, which can be sold on exchanges and is used to power network activity. Ethereum is gearing up to switch to a similar reward system for ordinary token holders as it prepares for a long-term move from a miner-driven Proof of Work (PoW) consensus mechanism to a Proof of Stake (PoS) system, where transaction fees are distributed to token holders in proportion to their ETH holdings. At the same time, NEO 3.0 will introduce several new features that will help further distinguish the protocol from Ethereum.

Since NEO first rose to prominence within cryptocurrency communities, other projects have muscled in on some of NEO’s most unique selling points. As we reported on the hype-filled launch of the BitTorrent Token, TRON has become the most talked-about Chinese blockchain platform in recent months. This hype is reflected in the cryptocurrency rankings by market cap, where TRON is currently in 8th place and NEO has spent months outside the top ten. EOS has also stolen a lot of NEO’s thunder in attempting to establish itself as a more industry-friendly Ethereum alternative. Regular blockchain rankings sponsored by the Chinese government have frequently ranked EOS as the top blockchain platform, with December’s rankings placing Ethereum in second, NEO-affiliated Ontology in fourth, and NEO itself in eighth place.

In a lengthy recent interview with the Crypto Brad YouTube channel, NEO co-founder and figurehead Da Hongfei said he was unconcerned by short-term market performance and figures such as NEO’s falling market cap. Instead, NEO was focusing on improving its functionality and providing a platform for the smart economy.

In a Bitcoinist article reviewing Erik Zhang’s DevCon announcement of NEO 3.0’s most important new features, NEO’s co-founder is quoted as saying, “No blockchain is currently capable of supporting large scale commercial applications.” NEO 3.0 is designed to make NEO one of the best options available for these “large scale commercial applications,” fulfilling NEO’s long-stated goal of becoming a protocol that powers the smart economy.

With big changes on the horizon for NEO, it seems a good time to look at the NEO story so far and examine what exactly to expect from NEO 3.0.

The Rise: From Antshares to Ontology

OnChain first began developing a blockchain platform in 2014, with AntShares then raising $4.5 million through a two-round initial coin offering (ICO). As a Bitcoinist article reported in 2016, the first stage of the ICO attracted 2,100 Bitcoin and finished in October 2015, with a second stage finishing in September 2016 and adding 6,119 BTC to the total. This article sums up much of AntShares early appeal being its Chinese roots and a Microsoft connection, describing the project as “the first organic Chinese blockchain project to work with both Microsoft Azure and the Hyperledger Project.”

Hype continued building throughout 2017, with this Medium article from June 2017 hyping AntShares connections with Microsoft Azure and Alibaba, as well as implicit approval from the Chinese government related to the project’s participation in a government-sponsored blockchain industry conference. This article was written after a sudden enormous surge of interest in the project as 2017’s crypto bull run started heating up. After months of trading at below $0.20 per token, AntShares hit $0.30 by the end of April, $1.64 by late May, and then rocketed to almost $10 by late June. Late June 2017 also saw OnChain reach a decision to rebrand AntShares as NEO.

In blockchain conference held in Shanghai in November 2017, OnChain announced the launch of Ontology. Ontology was described as a distributed trust network, connecting various blockchains and databases for clients, and utilizing the technology of NEO smart contracts and NEO’s NEP-5 token format. It was announced that 20 million Ontology tokens would be distributed to holders of NEO. The announcement sparked he next big jump in NEO’s price, as it went from just under $30 preceding the mid-November announcement to over $80 by mid-December.

The Fall & ONT Confusion

NEO has experienced a tumultuous time over the past twelve months, even when compared to the declining fortunes of other major cryptocurrencies. Like most other cryptocurrencies, NEO hit an all-time high in mid-January 2018, soaring to almost $162 on January 16. However, while most cryptocurrencies begin their long bear market slide immediately following these mid-January highs, NEO actually surpassed this peak, recording a new all-time high above $162 on January 30. NEO’s price then held relatively strong as others dropped, with NEO ranking as high as 7th place in the cryptocurrency rankings by market cap in February 2018.

But as the bear market began to really bite in March 2018, NEO’s descent massively accelerated. NEO dropped out of the top 10 cryptocurrencies in May 2018. It’s currently ranked 17th with a price-per-token of $8.17 and a near-$133 million market cap – a massive 95% collapse since January. And while most cryptocurrencies have experienced similarly massive losses, NEO’s descent from 7th to 17th largest crypto by market cap is suggestive that the project has lost a lot of its lustre among crypto enthusiasts.

The March 2018 decline in NEO coincided with the airdrop of Ontology (ONT) tokens to NEO holders. Conversely, ONT was one of the few cryptocurrencies to experience real explosive growth of any kind in 2018, rocketing from $1.11 per token on March 18 to $10.22 on May 4. The pump was not sustained and ONT has fallen as hard as any other project in crypto’s protracted bear market, currently trading at less than $0.65 per token with a $209 million market cap.

The divergent fortunes of the NEO and ONT tokens in Spring 2018 reflected a lot of confusion about the relationship between the two projects. One widespread belief was that ONT was replacing NEO as Da Hongfei’s primary concern. This belief was addressed head-on in Da Hongfei’s recent interview with Crypto Brad, where he explained that NEO is his actually his core focus and that he has limited involvement in Ontology’s day-to-day operations. The fundamental difference between the two projects is that NEO is an open platform, whereas Ontology is aimed at creating tailored blockchain solutions for industry. Rather than seeing a focus on one project detracting from the other, Da Hongfei told Crypto Brad that he saw the success of any one project as being directly beneficial to the success of the other.

As transcribed in this Coin Central guide to Ontology in March 2018, Da Hongfei has previously provided a more in-depth explanation of the distinction between NEO, Ontology, and OnChain:

“First, I need to clarify that NEO and Onchain are separate entities, so Onchain doesn’t own NEO, or NEO, Onchain. They are separately funded – NEO is funded by the community, and Onchain is funded by a very famous financial group in China, Fosun. They bought a lot of insurance companies and banks in Europe. So they are separate. Second, Onchain benefits from the NEO ecosystem. The product, called DNA, is very similar to NEO, but it is written in the Go language. OnChain is helping other blockchains and financial institutions to build their blockchains with DNA. It’s basically very similar to NEO, and in the future, with NEOx (the cross-chain protocol) everything can be linked together.”

To clarify some of the confusion surrounding the various interlinked projects, OnChain is a for-profit blockchain company of which Da Hongfei is the CEO. Ontology is the blockchain network which is utilized by OnChain for developing tailored blockchain solutions. NEO is an open blockchain network that allows for smart contracts and DApp development. NEO Global Development (NDG) is a project which makes invests and generates funds which are then used to pay for NEO’s continued development.

NEP-5: The Projects Launched on NEO

One likely cause of NEO’s diminished status among crypto enthusiasts is disappointment with many of the projects which launched as NEO NEP-5 tokens. There was a lot of excitement surrounding the launch of the first few NEO-based tokens, including crowdsourced Chinese economy and capital markets platform Red Pulse and distributed AI computing network DeepBrain Chain. Both experienced explosive growth after hitting exchanges in December 2017, with KuCoin being one of the most-used platforms for trading the tokens. Red Pulse jumped from $0.04 per token on December 11 to $0.77 by January 9, while DeepBrain Chain went from $0.07 on December 29 to $0.60 by January 10. Both pumps were incredibly short-lived, and by January 17, Red Pulse had dropped to $0.24 and DeepBrain Chain had tumbled to $0.14. The price of both tokens flatlined immediately afterward, and neither is currently worth more than $0.01.

A similar story can be found across most of the first wave of NEP-5 tokens to reach exchanges. The payment solution Trinity Network Credit token hit exchanges at above $0.20 per token, hit $0.38 by the end of January, then immediately tapered off and sunk to below $0.01 by September 2018.

But perhaps the worst performing NEP-5 token was TheKey, with an article from Blokt referring to it as “the worst ICO of 2018.” TheKey was a heavily-hyped project to provide blockchain-based identity verification to Chinese citizens. The project drummed up huge interest, with almost 40,000 passing Know-Your-Customer (KYC) compliance checks to register for the ICO. However, only 10,000 NEO worth of tokens were available during the sale. As NEO tokens are indivisible, this meant an absolute maximum of 10,000 people would be able to purchase TheKey’s TKY tokens. The general crowd sale also saw prices that were three times higher than a more restricted pre-sale, and thanks to NEO’s enormous price appreciation prior to the January 2018 ICO, the pre-sale’s success meant TheKey had already achieved its $22 million fundraising goals. This resulted in a lot of anger at the botched ICO, which only grew as TKY hit exchanges such as KuCoin at 20% lower than its ICO price. The token never recovered to ICO levels, and has joined the over first-wave NEP-5 tokens in the sub-$0.01 club.

Some of these tokens poor performance can be blamed on timing. Most were conducting their ICOs and hitting exchanges when the bull run was reaching its peak, and the whole crypto market experienced a massive collapse soon after their launch. However, it seems very likely that the disappointment of these much-hyped projects has done a lot of damage to NEO’s standing among crypto investors.

NEO 3.0: The Future of NEO

Both Da Hongfei and Erik Zhang have described themselves as unconcerned with market cap and token price. In his recent interview with Crypto Brad, Da Hongfei said we are still likely a few years away from real widespread adoption of cryptocurrency and its underlying blockchain tech. NEO’s focus now is on building an infrastructure for the smart economy that will be built on this technology.

Erik Zhang appeared via videolink at the Seattle DevCon to outline some of the updates that can be expected for NEO 3.0. As outlined by Bitcoinist, the biggest changes include the introduction of native NEO smart contracts, access to internet resources from within smart contracts, improvements to NEO’s dBFT consensus mechanism, and the introduction of a native file storage system.

NEO’s smart contracts are currently run in the NEO virtual machine (VM). With NEO 3.0, native contracts will be able to run code directly and changes to the contract will not change network hashes. This will allow transactions to be verified instantly, which will play a major role in achieving NEO’s goal of processing 100,000 transactions-per-second.

As explained in a video from the Cryptocurrency Australia YouTube Channel that attempted to predict NEO 3.0’s features prior to the DevCon, this type of huge transaction throughput will be necessary to see smart contracts fully utilized on a widespread basis.

Zhang also told the DevCon audience that all digital assets will be a part of smart contracts with NEO 3.0. This directly refutes one of the predictions voiced in Cryptocurrency Australia’s video, that NEO 3.0 would introduce a new non-fungible token standard that could be used for things such as in-game items and other similar transferable digital assets. Zhang said that there are already ways of creating non-contract assets in NEO, but these are rarely used, since contract-based assets are more practical.

One prediction that did prove true was the introduction of a native distributed file storage system. This is one aspect of NEO 3.0 that should help further set it apart from Ethereum, which relies on proprietary plug-ins such as the Interplanetary File Storage (IFPS) system to store data. Zhang explained that NEO is already capable of file storage, but this is currently prohibitively expensive. In NEO 3.0, a new NEO File Storage (NEOFS) will be introduced, providing a low-cost file storage solution and also allowing users to earn GAS by offering storage space to other users.

Not mentioned in Bitcoinist’s breakdown of Zhang’s speech is any suggestion of interchain operability, which Cryptocurrency Australia’s video predicted would be the most important of NEO 3.0’s upgrades. This is something which Da Hongfei did reference in the Crypto Brad interview, however, explaining that cross-chain compatibility could allow smart contracts to be deployed on Ethereum and access some functionality of NEO, and vice-versa. Da Hongfei has repeatedly attempted to downplay talk of a rivalry between NEO and Ethereum, referring to Vitalik Buterin as one of the few people he truly respects in the crypto space during his interview with Crypto Brad. Similar statements were echoed when Da Hongei met the Ethereum Foundation’s Special Projects Lead Virgil Griffiths at September’s Consensus: Singapore 2018 event. As shown in this NEO News Today transcript of the pair’s on-stage debate, both platforms have a mutual respect for each other and see many advantages to working alongside each other.

Bitcoinist also points out that Zhang made no mention of a potential hard fork to achieve the wide-ranging upgrades necessary for NEO 3.0. Again, this is something that Da Hongfei addressed directly during his Crypto Brad interview, where he said a hard fork would probably be required to achieve the upgrade.

Another important update coming to the network is a two-layer scaling solution that will directly integrate Trinity with the neo-gui. As explained by NEO News Today, this integration will allow users to choose whether to make transactions on- or off-chain. The introduction of off-chain transactions is another step which should greatly increase transaction speeds.

No firm date has yet been given for the implementation of these upgrades, with most signs indicating NEO 3.0 won’t be launched until 2020 at the earliest.

NEO’s Global Development

The presence of ex-Microsoft executive John deVadoss as head of NEO’s Seattle NDG office is a reminder of the early hype that surrounded AntShare’s connections with Microsoft Azure. This is just a small part of NEO’s expanding team, with this Medium article from a month ago outlining recent hires NEO has made to its software development, engineering, marketing, and ecosystem growth departments.

NEO may have been hit particularly hard by the end of the crypto bull run, but as Da Hongfei and Erik Zhang have repeatedly stated, short-term price appreciation has never been part of their strategy. NEO is still focused on long-term development of a smart economy infrastructure. The “Chinese Ethereum” hype may have long worn off, but it is still looking to be one of the key players in the development of real-world cryptocurrency and blockchain adoption.

About Christopher Williams

Christopher Williams is a British writer based in South Korea with a strong interest in emerging technologies, cryptocurrency, and the development of decentralized apps.

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