In March 2017, there were approximately 700 different cryptocurrencies. Today, that number has more than doubled. This trend spotlights the increased enthusiasm for the industry and its accelerated growth over the last twelve months. However, despite such proliferation, there are questions about how many cryptocurrencies in total can be justified given the nascence of the industry.
Each cryptocurrency represents a product, technology or platform aimed at solving a problem punctuated by centralized systems. Tellingly, though, not every cryptocurrency is able to show the traction that supports the viability of their visions. The industry seems overbalanced by enthusiasm with material progress from projects still working to catch up.
However, one project in particular, that is signaling its early legitimacy is China’s largest cryptocurrency, NEO.
A smart economy
NEO, formerly founded as AntShares in 2014, is building a smart economy that aims to make ownership of non-digital assets more transparent, verifiable and universally connected. According to the cryptocurrency’s white paper, it seeks to do this by digitizing, “real-world assets… enabling registration, depository, transfer, trading, clearing and settlement via a peer-to-peer network.”
Specifically, this will involve recording the ownership of everyday assets such as houses, vehicles or any physical possessions on the blockchain. By digitizing these assets, their ownership can be linked to digital identities via smart contracts. This facilitates what NEO hopes will develop into a “smart economy” by affording a layer of immutability and accessibility not previously possible under the status quo.
In my recent conversation with Da Hongfei, Founder of NEO, he echoed the core objective of the platform and what his team is focussed on building.
“NEO is an open network for a smart economy so it’s not just a platform for smart contracts. We’re aiming to serve the future smart economy, which we define as a digitized, programmable and trustless economy.”
A first for crypto
The manner in which this vision has been received is reflected by the platform’s industry standing. Currently, NEO is ranked in the top 10 cryptocurrencies by market capitalization, reaching over $10 billion in January 2018, and is recognized as the largest cryptocurrency originating from Asia.
However, further exemplifying its recognition in the eco-system, NEO became the first cryptocurrency to receive an A-rating from Weiss’ Cryptocurrency Ratings. These grades provide a relative benchmark to which cryptocurrencies can be compared intra-industry. To illustrate, the ratings are evaluated on weighted combinations of a cryptocurrency’s risk factors, reward potential and technology fundamentals.
In a letter to its subscribers, Weiss analyst, Juan Villaverde lauded NEO for its balance across grading criteria rather than a material specialization in any one area: “It’s not one outstanding feature that explains NEO’s good rating. It’s the balance of mostly positive scores across the board. A technology that allows the platform to scale to thousands of transactions per second, relatively strong usage metrics that go beyond mere speculation, plus, I might add, trading patterns indicating it’s a favorite of the investment community.”
Although the A-rating rating indicates the platform’s strong direction, there are industry commentators that question NEO’s material difference relative to other cryptocurrencies with similar use cases. An example of such a comparison is with the industry’s second largest cryptocurrency, Ethereum, which also operates its own blockchain and utilizes smart contracts.
When asked about the purported parallels between the Chinese cryptocurrency and other tokens, Da Hongfei says that NEO was focussed on building a platform that was unique in its fundamentals.
“We’re not trying to be a copycat of Ethereum. We are quite different. I respect the work from the Ethereum community because they proved that smart contracts are achievable but our smart contact system is very different from Ethereum’s. It’s the same as calling Alibaba the Chinese version of Amazon. They’re really quite different.”
But despite NEO’s ambition and industry reception thus far, Da acknowledges that the cryptocurrency still has areas to improve. Specifically, he singled out the technical design of the platform that allows users to vote, validate and govern a cryptocurrency’s activity.
“I really want to improve the onchain governance model. Currently the user, the new token holder, has the ability to vote on consensus nodes. But ordinary users just do not do that. Apart from technical difficulties, they are not incentivized to do that so we are trying to encourage people to really take part in administrative work to govern the blockchain, not just speculate on the price of the tokens.
Down the road
This scope for improvement seems inevitable given the magnitude of the project’s vision. With the plethora of cryptocurrencies in the market, NEO’s ability to demonstrate material progress seems to differentiate the platform as legitimate. The inaugural A-rating from Weiss is a reliable testament to the weighting of such a foundation.
But ultimately, NEO show this by focusing on improving its technology to actualize real value for its community. In a market that will begin to saturate as the industry grows, such prioritization of tangible value creation may prove significant.
DISCLAIMER: I have investments in crypto assets and digital currencies.
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