Neo: at the right place at the right time

Although Neo has been around for quite some time now I really wanted to do a review since this is one of my favorite projects out there. I first heard about Neo in September just around the China ban of cryptocurrencies. Although initially seeing it as a risk for a project to be based out of China over the course of time I have come to see this more and more as an opportunity as well, as long as project manages to position itself in the right way. Also, the more I have come to learn about Neo the more optimistic I get on its long-term success.

Antshares and Onchain
The project has been around for quite some time now and was originally branded as Antshares. Antshares was founded in 2014 by the Onchain company. Onchain is a Shanghai based blockchain technology company founded by Da HongFei and Erik Zhang. It took Onchain 22 months before the released their whitepaper in April 2016.

China’s Ethereum
The term Ethereum killer has become somewhat of a cliché since any project launching a new blockchain pretty much has been given this name. Next to Ethereum killer Neo has also been called China’s Ethereum. While initially a compliment this name right now seems to be selling Neo short as it’s receiving more and more global adoption. Recently Neo has partnered for instance with Dutch telecom provider KPN, which is going to be running a consensus node on the Neo blockchain. Also at this point around 40 ICOs are scheduled to launch on Neo and they are coming from all over the globe. Also, more and more project are moving their token sale over from Ethereum to Neo, for instance Kik and Narrative which delayed its crowd sale as a result of this.

Smart economy
Although Neo is able to support quite some similar functions as Ethereum it is good to note the differences there are in terms of the way Neo presents itself to the market. The biggest difference between Neo and Ethereum is Neo’s focus on a smart economy. If we want to fully understand Neo, we need to understand why this distinction is important. Smart economy means an economy where assets can be traded and transferred via the use of Smart contracts. These can for instance be physical assets like a house or a car or already digital assets like for instance a Youtube of Instagram channel or account. In case of a house the ownership can thus be separated into separate pieces tradable as tokens on a decentralized exchange and any gains from rents can be transferred to the owners of the tokenized asset. When dealing with physical assets legislation is extremely important, therefor Neo emphasizes close ties with governments and the importance of a digital identity. On both points Neo is way ahead of most competitors having close ties with the Chinese government and in the area of digital identify the company Thekey seems to be able to provide this for them. Thekey is a company which is already working together with various government on IDV (Identity Verification) solutions and currently is already traded as a NEP-5 token on the Neo platform. Due to the above market position you can see why Neo can simultaneously be an Ethereum competitor while at the same time already being the leader in its own market niche.

At the right moment on the right time
There are quite some very promising blockchain projects which are scalable and can take advantage of some of Ethereum’s short comings. The reason why Neo will most likely benefit the most, is because it right now is the furthest along with its technology, development community, and governance structure. Cardano and EOS for instance are very promising, but for Cardano we need to wait for it to release the Cardano Control Layer before any Smartcontract functionality can be supported. For EOS of course we have to wait until the release of their mainnet in June after their crowd sale has fully been completed.

Scaling and consensus mechanism
The main reason for Ethereum leaving room for other blockchain projects to take market share is its scaling issues. Neo can handle with proper optimization up to 10,000 transactions per second on-chain, this while Ethereum can handle only 15. I believe that in the future Ethereum will solve its scaling issues possibly via a new hardfork, sharding or by utilizing their off-chain scaling solution Raiden. However, until this has been achieved Neo is in the perfect position to gain market share. Also, even after the theoretical maximum for Neo is reached also for Neo an off-chain scaling solution called Trinity is already in the making.

Furthermore, Neo will be operated via a proof of stake (PoS) mechanism where a number of master nodes will validate the Neo blocks. However, to speed up the validation process the amount of master nodes is very limited and in order to still have a democratic validation process, Neo uses a protocol called delegated Byzantine Fault Tolerence (dBFT). This makes it so that all owners of Neo's main token NEO, which acts as a share in the platform, will be able to vote for validator master users. The once receiving most votes will become validator nodes, that will construct and validate new blocks. This also enables Neo to have what is called finality. Finality means that as a new block is proposed all the validator nodes have to vote on the correctness of the block, if at least 66% of the votes are in favor, the block is final and its transactions cannot be reversed. This is important as with platforms which do not have finality forks can occur for instance if the other 44% in such a case would disagree, these validators might decide to split of the main chain and start and continue on the new forked chain. Such forks would be very destructive for the type of smart economy that Neo wishes to support. Let’s say that as with the earlier example your house would be a digitized asset on the Neo blockchain in case of a fork it may become unclear who owns what as the two chains have two different versions of the truth. Neo having finality thus makes it extremely fit for purpose as the type of smart economy it aims to support cannot exist without this.

Conclusion
Neo is in the right place to capitalize on some of the short comings of its competitors. Although it cannot be overstretched that Neo offers its own set of capabilities and targets its own market with its focus on a smart economy. Thus, Neo is perfectly positioned to be one of the largest players in the blockchain economy for years to come.

Let me know what you think about Neo's future? What do you think will be Neo's biggest competitors in the smart economy space?

The above references an opinion and is for information purposes only. It is not intended to be investment advice.

References:
https://www.crypto-economy.net/what-is-neo-smart-economy/?lang=en
https://www.cryptocoinsnews.com/china-support-blockchain-development-new-five-year-plan/
https://cryptocanucks.com/head-head-neo-neo-ethereum-eth/
https://hackernoon.com/neo-onchain-and-its-ultimate-plan-dna-4c33e9b6bfaa
https://www.coindesk.com/chinas-central-bank-vows-push-blockchain-five-year-plan/
http://www.gov.cn/xinwen/2017-06/27/content_5205951.htm
https://www.easyaq.com/news/1476613044.shtml
http://www.51cto.com/art/201705/539824.htm?mobile
http://www.bergamosmartcity.com/smart-economy.html
https://stateofneo.com/ico/
https://steemit.com/blockchain/@anonimnotoriu/narrative-project-is-moving-from-ethereum-to-neo
https://hackernoon.com/neo-versus-ethereum-why-neo-might-be-2018s-strongest-cryptocurrency-79956138bea3
http://www.gov.cn/zhengce/content/2016-12/27/content_5153411.htm