NEO is a platform with a purpose. Can it compete with Ethereum? Or better yet, does it even need to?
Why Read This Article?
NEO and Ethereum — which pill will you take? Sorry, couldn’t help myself. We care about this debate because we’re investors. From a developer’s perspective, functionality is the most important. There is no brand loyalty in blockchain yet. So if a platform can do something better than its competitors, it will win over developers. So which one does it better?
This article is long because I have chewed through all the information I could find about NEO and Ethereum and digested it for you. There are lots of articles summarizing the “differences” between Ethereum and NEO, but they do the debate little justice. They skim over things, don’t explore them well, explore only one aspect, or aren’t holistic in their analysis and don’t explain why the differences even matter and what their relevance to the real world is. I was frustrated by the lack of a comprehensive article. This article is my response.
I will admit that I explore NEO more in-depth than Ethereum. This is because so much information is widely available for Ethereum. With NEO, there is much less. As such, I focus on explaining NEO and then comparing that explanation to Ethereum’s capability.
So bear with me, grab yourself an espresso and lock yourself in that room you “do work in.” This will be well worth your time. I also won’t blame you if you just read the TLDR — Too Lazy, Didn’t Read — under the articles.
Let’s begin
If Ethereum is Goliath, NEO is David. If Ethereum is Brad Pitt, NEO is Brad Pitt’s cousin, Zach Pitt—younger, better dressed, and more talented — but right now relegated to serving cocktails to Brad and his friends while he acts on the side. Ethereum did it first. It was revolutionary and exciting and took the crypto world by storm. Web 3.0. Today almost every ICO is built on Ethereum’s ERC20 token platform and Vitalik Buterin is one of our time’s greatest minds. Yet if we’ve learned anything from the fact that Alibaba is closing in on Amazon’s market cap and WeChat dominates China’s social media scene, it’s that China plays by their own rules. The Land of the Red Dragon uses their own technology, their own networks, and cares little for what the U.S. is doing. The question is, can NEO compete with Ethereum, and does it even need to?
Ultimately, NEO and Ethereum are aiming for similar roles in the crypto community. Both want to be platforms for the new internet: for DApps (Decentralized Applications), ICOs (Initial Coin Offerings), and smart contracts.
Overview of Ethereum and Neo
While both NEO and Ethereum have generalized blockchains that provide a toolbox for would be developers, their objectives differ. I would summarize each platform’s objectives as such:
Ethereum’s goal is to create a platform for the development of DApps in order to create a “more globally accessible, more free, and more trustworthy Internet:” an internet 3.0.
NEO is a blockchain project “that utilizes blockchain technology and digital identity to digitize assets, to automate the management of digital assets using smart contracts, and to realize a “smart economy” with a distributed network.”
That’s a mouthful. Let’s breakdown these objectives to fully understand the projects. It’s important to understand that both platforms share many of the same capabilities, but the distinction in their branded objectives is very important.
Ethereum: Ethereum’s goal is to be the platform for DApps and they are largely accomplishing this. They own the DApp market right now. Their roadmap is all about giving users and developers more control and more options in developing their applications.
NEO: NEO is working towards developing a product for the future. It not only rebranded from Antshares to NEO in June of 2017, but they refocused their marketing as well — with enormous success. Neo’s objective, while ultimately utilizing many of the same technologies as Ethereum, is to be the platform for a new smart economy.
In short: Ethereum is developing in response to new demands. NEO is developing their platform in anticipation of future demands.
What is a Smart Economy?
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.
A smart economy will feature digitized physical assets. All of these newly digitized assets will have proof of ownership in the blockchain. These assets can be sold, traded, and leveraged through smart contracts. Their ownership can be protected and validated through the decentralized model of the blockchain. We’ve already seen iterations of this: from proposed supply chain overhaul to DAOs (decentralized autonomous organizations — essentially decentralized companies without a leader). I offered some real world examples of this economy in this article. Now while Ethereum will likely support many of the same capabilities that NEO has, the distinction between Ethereum and NEO’s objectives is what we care about.
The distinction is important because a smart economy will still be under a government and under governmental regulation. I don’t trust the government as much as your next libertarian; I’ve read 1984 too many times. But the fact remains that governments aren’t going anywhere. Thus, for a platform to service this “smart economy,” that platform needs to put specific thought and intention into how it will accommodate governmental regulation. So while Ethereum might offer the similar blockchain capabilities, the fact that NEO is developing FOR THIS PURPOSE is crucial.
TLDR: A smart economy is in our future. To accommodate the needs of this smart economy, the platform will need to be specifically designed for this new economy.
What is NEO doing to prepare itself for the smart economy?
NEO places particular emphasis on staying regulatory compliant.
To do this, they need:
Governments don’t love these guys
Digital Identity
Anonymity is great. I think privacy should be at the forefront of today’s technological developments and discussions. But if companies and governments are operating on the blockchain, digitizing their assets, and issuing smart contracts, all under the watchful eye of the government, they can’t have anonymity. For a platform to be regulatory compliant, digital identity — a verifiable identity in digital form — is a necessary evil.
Today, digital identity is based on a system called the PKI (Public Key Infrastructure) X.509 standard. This probably means about as much as it does to you as it does to me. It just means that there is an international agreed upon standard for what constitutes a digital identity. NEO’s plan is to issue digital identities in accordance to this standard and then secure them using the blockchain. Bookkeepers (read about them later) will have digital identities and real names. Because of this, judicial action can be taken against them if ever need be. This is imperative when registering financial assets on the network and staying regulatory compliant.
There could also be businesses and projects that will only transact with people who have a digital identity, for regulatory reasons. NEO enables that possibility.
NEO is already working in a strategic partnership with THEKEY — a project being developed on NEO’s platform that will assist with providing digital identification.
What about Ethereum: Ethereum requires other DApps to develop digital identities which can then be secured on the Ethereum blockchain. This isn’t so unlike how it will work with NEO — however NEO has made it clear, through its plan to incorporate digital identity with its bookkeeper nodes, that integration of digital identity is of central importance to the NEO ecosystem.
TLDR: Governments don’t like anonymity. Industries don’t like pissing off the government. If NEO wants industrial adoption, it needs to have digital identities.
Digital Assets
A future digital asset?
If you want a smart economy based on smart contracts, you need to be able to leverage and exchange assets beyond currency. We need to be able to digitize assets like house, property, and car ownership; gold, diamonds, and other precious elements; computers, clothes, and food; even those baseball cards your mom keeps begging you to throw away. Smart contracts become so much more powerful when we have the ability to digitize all of these assets.
What about Ethereum: Very similar to the digital identity blurb. Ethereum absolutely can secure digital assets, but they won’t necessarily be regulatory compliant. NEO is ensuring that issued digital asset certificates will be compliant.
TDLR: Just read it
NEO’s complex network
The economy is complex; it has so many interconnected pieces. NEO’s platform is complex, with partnerships galore. Fully researching and understanding this is difficult. But I did it, so you don’t have to! Refer back to this visual to have a solid picture of how this network interacts.
Even though this looks like the deranged drawings of a conspiracist, it will make sense as you reference it while learning about NEO’s network
OnChain
NEO’s founders Da HongFei and Erik Zhang founded a company called OnChain. Understanding OnChain is critical to understanding NEO. They’re not the same company, but their interests align and they have a partnership together. OnChain’s system, known as DNA (Decentralized Network Architecture) aims to work with Chinese businesses and government. NEO acts as the foundation of DNA. If OnChain can integrate with Chinese businesses and government, that will greatly spur adoption of NEO.
Ultimately, DNA develops public and private blockchains for businesses. These blockchains then link up to NEO to join the decentralized economy. Businesses then have all the benefits of both private and public blockchains. Think of NEO as providing the public blockchains and OnChain’s DNA providing the private blockchains. Then, they can link up and get the best of both worlds.
OnChain also has several projects and partnerships and newsworthy mentions that all contribute to the DNA ecosystem:
Established in 2014, this is not a fresh-off-the-shelf company
First Chinese blockchain company to join Hyperledger — a collaboration of projects that work towards integrating blockchain with established businesses.
Legal Chain — works with Microsoft China in digitizing and securing signatures via blockchain technology.
Strategic partner of Microsoft China on multiple projects
Worked with the Japanese Ministry of Economy, Trade and Industry
Voted as KPMG’s top 50 Fintech Company in China
Partnership with Alibaba to provide an email certification service for Ali Cloud
Investment from Fosun Group—China’s largest private conglomerate — to integrate OnChain across their businesses.
Collaboration with Chinese regional government — using OnChain to develop public services and digital identity
OnChain’s recent development was of the ICO Ontology. Ontology uses the same architecture as NEO but ultimately works with businesses in creating a private, encrypted data network. Essentially, this is important when we have information that we need securing, but we also need it to be private. This will enable people to bring this information in a secure manner to blockchains.
References on OnChain’s roadmap
Honestly, I don’t understand why NEO doesn’t advertise their collaboration with OnChain more. NEO in itself is solid, offering several potential benefits over Ethereum. But combined with OnChain, NEO truly has the potential to implement itself as THE smart economy platform of the East.
The Ethereum Comparison: Ethereum’s equivalent is the Enterprise Ethereum Alliance, an open source blockchain initiative dedicated to linking Ethereum with the business world. Their list of partnerships is robust and impressive — no surprise for those familiar with Ethereum. Included among their members are: BP, HP, Toyota, MasterCard, Microsoft, and Intel, among many others.
TLDR: OnChain is a company partnered with NEO. They have extensive experience and many accolades in bringing blockchain to businesses. They work with companies and governments in the East. They are a huge component to NEO’s potential.
NEOX:
NEOX is NEO’s version of atomic swaps (directly swapping tokens without any exchange) and cross-chain integration. Think Ark Ecosystem. This will enable people to swap crypto assets and transact across different blockchains. It also allows smart contracts to interact across chains.
NEOX is important because it allows collaboration between the blockchains (both private and public) created by OnChain and by NEO’s public blockchain. As more components of the Smart Economy develop, NEOX will link them all together.
Ethereum Comparison: Ethereum has the ability to do atomic swaps, but has only completed this once — this isn’t to put down Ethereum; NEO has never completed one. However, Ethereum will need an outside application to accommodate large scale cross-chain integration.
Not quite the City of Zion we’re talking about…
City of Zion:
City of Zion (CoZ) is an independent, open source community of developers, translators, and designers who work towards the betterment of NEO. They have received funding from NEO to help incentivize project development. The community has contributed considerably to NEO. They have developed the NEON wallet, created a NEO block scanner, translated documents for NEO, and developed the NEX platform (see below). They recently received NEO funding to award $270,000 to 10 winners as part of their DApp competition. It is incredibly advantageous to have a network of support such as CoZ.
Ethereum Comparison: There isn’t really a good comparison for this on the Ethereum network.
NEX:
Nex is an upcoming ICO developed by City of Zion that offers a platform for the creation of payment solutions and decentralized exchanges on NEO. It links to NEO with NEOX.
Because of differences with NEO in the token model, account balances, and way smart contract interact — in comparison to Ethereum — NEO needed a solution to be able to effectively house decentralized exchanges. NEX offers that solution.
Ethereum Comparison: Already ERC20 tokens are easy to transact with on decentralized exchanges.
ProjectICO:
A turnkey, all-in-one ICO company that helps blockchain companies develop: from initial idea to ICO. They recently decided to move from Ethereum to NEO. They have an interesting Reddit AMA on their reasons for switching.
Ethereum Comparison: TokenHub is a similar project developing on Ethereum.
Microsoft China:
NEO is currently hosting a developer competition in partnership with Microsoft China with $490,000 as prize money.
Ethereum Comparison: Ethereum is incredibly well connected with established corporations. NEO is playing catchup.
DApps and ICOs:
The bread and butter of platforms; until now, NEO has only had one ICO (Red Pulse) and one DApp (AdEx). However, with several planned in the near future and with an upgrade last month which will enable NEO smart contracts to interact with website interfaces, I think this is only the beginning for NEO.
Ethereum Comparison: Ethereum hands down beats NEO in this area. Ethereum is the go-to platform for ICOs and DApps.
Ecosystem Recap
We hopefully have a strong understanding of the differences in the goals of Ethereum and NEO, as well as a good overview of NEO’s network and the network’s advantages in the smart economy. It’s important to understand this network for NEO because NEO is more than just a public blockchain, it is a piece in the larger picture. When NEO’s public blockchain can link up with OnChain’s private and business oriented blockchains and ultimately with all other DApps on it’s platform, it could truly become a smart economy.