Neo Approaches Record High But Centralization Concerns Persist

After gaining 2,300% in six months and launching a string of eagerly anticipated ICOs, Neo is quite the success story. It’s that rare thing in the crypto space: a blockchain that’s actually seeing use. A bitcoin price equivalence of $580 per token (if Neo had a 21m supply) suggests there’s still plenty of room to grow. Neo is currently trading for $150, after peaking at $193 earlier this month. But behind the scenes, everything isn’t as rosy as it seems; the Chinese blockchain faces persistent claims of over-centralization and rumors of US exchange delisting.

The Neo Kid on the Blockchain

If 2017’s crowdsales were all about Ethereum, 2018 is shaping up to be the year of Neo. The Asian smart contract platform has some way to go before it can match the transaction volume, market cap, or number of ICOs as Ethereum. But if hype is any arbiter of things to come, Neo is on course to own 2018. The biggest token generation events this month have all been on the Neo blockchain, with tokens selling out in record time.

The Key raised $22 million in minutes, and projects such as Aphelion – a Neo P2P DEX – and Deepbrain – an AI platform – have also reported record uptake. Others still to comeinclude Zeepin, Narrative, and Apex, the latter boasting one of the largest crypto Telegram groups and guaranteed to hit its $25m cap. On the surface, everything is going smoothly, but beneath the waters the good ship Neo is sailing on, trouble may be brewing.

Who Controls Neo?

Da Hongfei

Da Hongfei, Neo’s CEO, is a man of few words and even fewer tweets. Binance CEO Changpeng Zhao is loquacious, personable, and approachable; Hongfei, on the other hand, is an enigma. The entire Neo team aren’t known for their communicative skills, preferring to let their community do the talking. One reason for this may be the uncertain regulatory environment in China. Like other crypto companies that originated in the country, Neo is obliged to keep government officials onside, as it walks a delicate tightrope, balancing its goals with its legal obligations. The core team has since relocated, but Neo retains close ties with its country of origin.

One of the biggest concerns regarding Neo, and indeed many other cryptocurrency projects, is the level of centralization. Ethereum, despite its “strong leader” handicap, is at least decentralized in terms of the nodes that secure the network, as a recent study has shown. With the majority of Neo nodes controlled by the project’s inner circle, the blockchain is susceptible to interference, either directly or at the say-so of government officials. Its Github also only has one branch.

Loads of Nodes (Just Not for Neo)

In its December monthly report, the Neo council spoke of plans to decentralize the network, explaining: “We want to have at least 3 nodes run by external parties…The initial phase of decentralization is planned as follows: 2 nodes will be run by City of Zion. 1 node will be run by the community and will be community funded (independent of CoZ). 2 nodes will be run by institutional for-profit companies with blockchain interest. 2 nodes will be run by the NEO Council.”

Like many blockchains, Neo seems to be working to a “future decentralization” model: get things up and running first and then, once the teething problems have been ironed out, decentralize. Great if it works, though as history shows, power, once gained, is hard to relinquish. Bitcoin and Ethereum have over 30,000 globally distributed nodes between them; the number of official Neo nodes is less than 10. The Neo blockchain is fast and has high throughput, but speed is of little benefit if it comes at the expense of security. Speaking of security…

Security or Utility?

One of the greatest challenges Neo may face in 2018 stems from a land beyond its reach: the USA. The Chinese blockchain doesn’t need America’s blessing to function, but with the US dominating the crypto market, Neo’s absence would be a major blow to Da Hongfei’s plans for global domination. With Bitfinex having closed its doors to US residents, the number of licensed exchanges where US traders can buy Neo is already limited. The token is currently available on Bittrex, but rumors suggest the US exchange may be poised to delist Neo…

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