Investing Idea: NEO

China’s clampdown on the cryptocurrency industry has raised serious questions about the future of blockchain adoption in the country. Neo, often referred to as the Ethereum of China, has been on the receiving end of both positive and negative speculation concerning Beijing’s appetite for all things blockchain. China’s regulatory landscape, often shape-shifting with respect to crypto, has been cited as a major hindrance to Neo’s ascendancy. But as it turns out, China’s regulatory landscape is precisely why Neo may succeed in a nation that is treading carefully in this new economy called crypto.

Despite issuing a blanket ban on cryptocurrency trading and initial coin offerings (ICOs), the People’s Bank of China (PBOC) is actively pursuing new regulatory standards for the crypto industry. PBOC also happens to be leading in blockchain research, having filed dozens of patent applications with the State Intellectual Property Office (SIPO).

Investors can take this to mean that crypto is coming back to China in a big way, though the timeline for regulatory approval and rectification remains unclear. Neo just happens to be in regulators’ good books for its focus on compliance. In fact, compliance frameworks are built directly into Neo’s structure and the founding team’s operating model has already received glowing endorsement from China’s regional governments.

NEO Value Metrics

  • Current Price: $11.32
  • All-Time High: $96.85
  • All-Time Low: $0.0722
  • YTD Performance: +49.9%
  • Market Cap: $735.5 million
  • Market Cap Ranking: 16th
  • ROI Since Launch: 6,135%
  • Primary Markets: Bit-Z, BitForex, LBank, Binance

Investment Case

Founded in 2014 as AntShares, Neo is the brainchild of Da Hongfei and Eric Zhan. The co-founders envisioned a blockchain-based platform that supports its own native cryptocurrency and enables the development of smart contracts for the digital economy. The platform seeks to automate the management of digital assets via smart contracts with the ultimate goal of creating a ‘smart economy’ ecosystem fully equipped with its own decentralized internet and operating system. Neo offers a theoretical basis for a cashless society – one that is fully supported by a scalable blockchain.

Although NEO is the platform’s native cryptocurrency, the network offers a complementary token called GAS, which facilitates contracts and transactions. In other words, NEO is for ownership/voting rights and GAS is for operations. GAS can also be viewed as a dividend of NEO and is used to pay for smart contracts.

GAS is a publicly-traded token equipped with its own price, market cap and daily trade volumes. It is currently ranked 141st by market cap and is valued at $3.07 at the time of writing.

The basis of Neo’s smart economy is digital assets, digital identity and smart contracts. The platform enables developers to digitize physical assets in an open, transparent manner free of any third parties. The platform allows physical assets to be linked with their digital counterpart fairly easily and offers asset protection through validated digital identity. Every person or entity working on the Neo blockchain is required to have a verifiable digital identity.

Neo recently held its second annual DevCon, where founders Da and Zhang provided an update on the development path of their protocol. According to them, the Neo blockchain will probably need a hard fork or a genesis block sometime next year. The founders also disclosed key changes to the network’s architecture and consensus algorithm. To achieve higher scalability, Neo will also require a second-layer scaling solution similar to bitcoin’s Lightning Network. This second layer will run decentralized applications and enable higher transactions per second for the top layer.

Analyst’s Take

The concept of digital identity is where Neo differs from its counterparts and why it is poised for ascendancy in China – that is, as soon as regulators decide that blockchain technology is too big to ignore. There’s also a growing belief that Chinese authorities are keen on Onchain, the company that preceded AntShares and Neo.

Onchain designed the Distributed Network Architecture (DNA) that powers Neo’s digital asset applications. It is also heavily focused on compliance and, unlike most blockchains, employs a centralized approach that is likely to carry favor with Chinese regulators. For crypto purists, this isn’t necessarily a good thing but for investors it means a potentially rewarding opportunity to buy and hold NEO for the long haul.

In dollar terms, NEO is trading at a tiny fraction of its all-time highs. However, to purchase the cryptocurrency, you will need to buy bitcoin, Ethereum or USDT first.

NEO will continue to benefit from the broad market uptrend that began earlier this year. An investment in the cryptocurrency should be considered a bet on future adoption and the likelihood that Neo applications succeed in China. At this point in time, the prospects look very promising.

Disclaimer: The author does not own NEO. He owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi