A lot of cryptocurrency investors are making the mistake of dismissing NEO as nothing but an “Ethereum clone.”
A good way to think of NEO is an effort to create an improved version of Ethereum’s blockchain technology. That might make NEO more valuable in the long run because it might be better built and more-tightly controlled than Ethereum.
What are Ethereum and NEO anyway?
Both NEO and Ethereum are far more than cryptocurrencies. Each product is intended to be a “distributed smart economy network.”
Such a network is actually a massive blockchain-based ecosystem or operating system. The cryptocurrencies are simply software applications that operate in that operating system. That makes Ether and NEO coins somewhat like Microsoft Word a solution in the Windows operating system.
A very good way to think of Ethereum and NEO altcoins is as interfaces between their ecosystems and wider payment networks. The coin is a gateway that lets consumers, businesses, and developers transfer funds between their accounts or network and the Ethereum or NEO ecosystem.
The altcoin is only the tip of the iceberg because the hope is that there will be a wide variety of blockchain-based solutions operating in both ecosystems someday. Currently, both systems are offering smart contracts, smart-contract generators or Virtual Machines, and the ability to generate initial cryptocurrency offerings.
What is the Difference between Ethereum and NEO
The major difference between Ethereum is one of strategy. The strategy of Ethereum creator Vitalik Buterin was to make the cryptocurrency first and build the ecosystem as the market for it expands.
The strategy of NEO architect Da Hongfei appears to be to build the infrastructure and technology before the market develops. The advantage to this is that it gives Da and company more control over their network. Buterin has recently publicly complained about some aspects of Ethereum development he has no control over.
Therefore NEO is a more centralized system in which somebody appears to be in control. That might be why the Chinese government and the People’s Bank of China (PBOC) appear to approve of, or at least tolerate, NEO. This may also be why NEO has been able to cultivate a relationship with a giant and a rather conservative company like Microsoft.
Is NEO the Google of the Blockchain?
This difference might exist because Da and his team have access to greater resources. They may have enough money or credit to build the infrastructure first.
Most blockchain projects work by coming up with a product or idea first then building the system. The hope is that they will be able to sell enough of their product or ICO tokens to pay for the system.
The NEO team is building the system first, and worrying about paying for it later. That enables them to devote a lot more and time effort to it, which means they come up with better products that actually work.
This sounds more like the methodology employed by Google or Alphabet. It developed the solution, a search engine, and the ecosystem before selling stock. Once it had a working system, Google was able to raise vast amounts of money by selling advertising so it did not need to sell stock to pay the bills. That might be the business plan at NEO.
Like NEO, Alphabet operates a number of open-sourced solutions including Android, Chrome, Google Docs, and the search engine. Alphabet operates as sort of combination research and development organization and a clearinghouse for the data moving through its system. It works by developing the technology first and looking for ways to monetize it later.
This business model has proved extremely profitable, shares of Alphabet (NASDAQ: GOOG) stock were trading at $978.89 apiece on October 6, 2017. Alphabet (NASDAQ: GOOGL) makes a lot of money, on June 30, 2017, Google posted revenues of $99.28 billion, an income of $19.34 billion, and $36.21 billion in cash from operations. Alphabet had $94.71 billion in the bank on the same day.
Another similarity between NEO and Alphabet is that both companies are quiet. They like to operate off the radar and avoid the press. Almost nobody outside of Silicon Valley was aware of Google until it started issuing stock in 2004 – six years after the search engine went live in 1998.
Who controls the Blockchain
Another major difference is that Ethereum is a wide-open network similar to Linux that any developer can participate in. NEO appears to be tightly controlled by a small team based in Shanghai.
Anybody that visits the NEO website will spot another key difference between most cryptocurrency projects and it. Almost all the members of the NEO team appear to be Chinese. That might indicate that the Chinese government or the PBOC organized NEO as an effort to counter Ethereum.
The thinking here might be that some control or influence over the blockchain is better than no influence, which is what governments have now. Creating a centralized variation of Ethereum might be a smart way to get control or influence over the technology.
China’s central bank, the PBOC, has a well-publicized effort to create a national cryptocurrency. Some PBOC officials have gone on record as supporting the notion of replacing China’s paper money with government-issued digital cash. These revelations have prompted unproven speculation that NEO is part of those efforts.
Why is NEO so Popular
The official interest or least tolerance from Beijing might explain NEO’s sudden price increase over the summer of 2017.
A NEO coin was trading at $1.91 on June 14, 2017, a price that shot up to $47.58 by August 16, 2017. The price increase followed a press conference at Microsoft’s Chinese headquarters in Beijing on July 20, 2017. At the conference, the change of the cryptocurrency’s name from Antshares to NEO was announced.
The conference’s venue; Microsoft headquarters in China’s capital Beijing, lends credence to the theory that both the Chinese government and Microsoft support NEO’s efforts. Even though most of the media ignored the event, the altcoin market clearly got the message.
Ethereum vs. NEO
The best way to evaluate Ethereum and NEO is to compare the two blockchain solutions.
From a technological solution, the two applications have a great deal in common. Here is a rundown of the attributes of both.
- Open-sourced architecture.
- Smart contracts
- Virtual Machine (smart contract generator)
- Ability to sell services via Ethereum Gas.
- Totally decentralized nobody is in control.
- Widely accepted.
- Traded and accepted by most large centralized exchanges including CEX.IO and GDAX (coinbase).
- Visa and MasterCards that can convert Ethereum into fiat currencies are available on a limited basis.
- Totally decentralized. Organizations like the Ethereum Project act as clearinghouses for projects rather than as an authority.
- Based, or created in Switzerland, so it is theoretically politically neutral and not connected to any government.
- Has been adopted by larger corporations including IBM. IBM and the Linux Foundation are collaborating on the HyperLedger project to make Ethereum a data storage solution.
- Has the potential to become a data storage solution.
- Widely used for ICO creation via ERC-20.
- Open-sourced architecture
- Smart contracts.
- Virtual machine.
- Possible connection with Microsoft.
- Based in China.
- Possible connections with Chinese government and People’s Bank of China.
- A small group appears to be tightly in control.
- No known MasterCard or Visa products that convert NEO to fiat currencies are available.
- Not accepted by most digital wallets and centralized cryptocurrency exchanges.
- Corporate structure of authority with a CEO (Da Hongfei).
- Only a handful of NEO ICOs exist.
Which is a better investment NEO or Ethereum?
NEO and Ethereum are good investments right now. Both are far cheaper than Bitcoin, and Ethereum seems to be less susceptible to extreme price fluctuations than Bitcoin.
Ethereum is a better all-around investment right now because it is widely accepted as a payment solution. Almost all of the centralized cryptocurrency exchanges allow for trading in Ethereum and some of them accept payment in it. There are also a few Visa or MasterCard debit cards that convert Ether to government money planned.
This makes Ethereum a good hedging mechanism – a hedge is an investment that is supposed to protect your cash against inflation. The hope is that money in the hedge will retain its’ buying power when other cash loses it. Many people in nations experiencing inflation or hyperinflation are using Bitcoin and Ether as hedges right now.
NEO is a far better value investment because it is currently much cheaper than Ether. A unit of NEO was trading for just $33.23 (.000778 BTC) on October 7, 2017. An Ethereum coin was trading at $308.92 (.07 BTC) on the same day.
That means a person that wants to buy and hold cryptocurrency for the future might be better served by NEO. Somebody who needs an altcoin that can be converted into fiat currency fast will be better off investing in Ethereum.
A smarter strategy would be to buy both NEO and Ethereum. Both are really good coins with a lot of potential for growth because of the unique capabilities. A combination of them would diversify a portfolio against market losses.
Why NEO and Ethereum might become one
The most intriguing possibility for these currencies is that Ethereum and NEO will converge into one ecosystem at some point in the near future. Such a convergence is more likely than you think because of the similarities between the two solutions.
Since there are already digital wallets that can convert several different cryptocurrencies into altcoins at once such a synthesis is technologically possible right now. The interesting question will be, will the developers behind the solutions accept it.
An example of such a convergence would be a smart-contract bond that pays out in both Ethereum and NEO. Another would be a blockchain security that contains both Ether and NEO. Also likely is a digital wallet that would pay in NEO in China, and Ethereum outside of the People’s Republic.
The long-term result of this will be a vast blockchain ecosystem similar to the Internet in which both Ethereum and NEO apps operate. Ethereum or NEO applications would serve as gateways to the ecosystem, much as Google functions as a gateway to the internet for many users.
At that point, there would be no real distinction between Ethereum and NEO for most users. Many people would use them interchangeably and not realize that they are doing so.
Who will win Ethereum or NEO?
Another great question to ask here is which will become the standard open-sourced blockchain architecture: Ethereum or NEO.
Ethereum has a head start, but NEO has more resources behind it. Currently, Ethereum has the edge because there is far more you can do with it. That may change as more NEO-based solutions appear.
A big advantage that NEO may have is that the Chinese government may adopt it and force Chinese citizens to use it. Another is that large corporations might have to use Ethereum if they want to operate in China or do business with the Chinese government.
Another possibility is that the Chinese government may try to ban or suppress Ethereum, which would make NEO the only solution available to 1.379 billion people. A final scenario is that NEO might be the only cryptocurrency converted by debit cards in China.
Any of those scenarios would cause NEO’s value to skyrocket and Ethereum’s price to plummet. Investors need to watch for such events because China is currently the world’s largest cryptocurrency market.
Both Ethereum and NEO are advanced cryptocurrencies that have far more potential value than Bitcoin because of their greater versatility. If instruments like smart contracts become widely accepted, both Ether and NEO will greatly increase in value.
All cryptocurrency investors need to research both NEO and Ethereum. Each of these solutions has the potential to be the world’s most popular altcoin and the basis of a massive payment ecosystem in the near future.
Any time that you spend researching NEO will be well-spent. It is likely to become the next big cryptocurrency and drive up the price of Ether in the process.