One of the biggest challenges for NEO is decentralization. Decentralization is what distinguishes distributed ledger technology from centralized databases and what essentially provides the classical blockchain advantages such as as censorship resistance and immutability. NEO has received substantial criticism in the past due to the fact that the platform is not yet decentralized. The NEO Global Development Team has announced in December 2018 that it is looking for candidates that can potentially run NEO consensus nodes. Currently there are 7 consensus nodes of which 5 are run by the NEO Foundation. The City of Zion, a developer community directed at supporting the NEO ecosystem, and the Dutch telecom company KPN both run one consensus node. As it was announced on the NEO blog it is expected that the process of node decentralization will be completed by the end of 2019.
Recently the news came out that NEO is now supported by the Atomic wallet. Furthermore, Binance announced that it would use the same consensus mechanism as NEO for its BNB Chain. In terms of development capabilities NEO announced a new development team based out of Russia.
A report by Tencent about a security vulnerability in the NEO network caused for an alarm in the NEO community. Shortly after the report was published NEO co-founder Erik Zhang reassured that it would not be possible for users to lose their funds due to the reported vulnerability.
NEO was ranked among the top 10 cryptocurrencies by market capitalization on Coinmarketcap from February to April 2018. Shortly after the Ontology airdrop the market capitalization of NEO started to drop relatively stronger than the overall cryptocurrency market. Besides the mutual key persons it is not yet entirely clear how synergies between the two platforms will be achieved. Furthermore, it seems that both platforms are competing for the interest of long term investors. It remains to be seen whether NEO 3.0 and further decentralization will have the potential to bring NEO back to the top 10 cryptocurrencies by market capitalization in 2019.
Engagement on the NEO subreddit has declined throughout the bear market. As a consequence the moderator needed to replace the Daily Discussion with a Weekly Discussion. As of December 2018 the NEO subreddit counts with almost 100,000 subscribers. Based on subreddit activity, which is measured through number of posts and number of comments, r/NEO still is among the top 20 subreddits for cryptocurrencies. However, the activity in the subreddit has fallen behind r/eos and r/cardano while r/NEO still counted with a relatively higher subreddit activity in March 2018 than those platforms. As of December 2018 NEO counted with more than 316,000 followers on Twitter. This number has declined from more than 320,000 followers in summer 2018.
In terms of ecosystem development significant progress has been made in Q4 2018. Neo Name Service has launched its mainnet in November 2018. Lately, the travel platform Travala, that uses the NEO blockchain has gained traction and user interest. Essentially the platform wants to compete with large established travel platforms such as booking.com. However, Travala wants to offer lower fees to its users and establish trust between market participants through blockchain technology.
In a recent blog post in December 2018 the cryptocurrency exchange Coinbase announced that it is exploring to add further coins to its exchange. NEO was among the coins mentioned by Coinbase as a potential candidate for being added on their platform. Generally, the addition of a cryptocurrency to Coinbase provides the affected coin with a short term boost. Additionally, it is a significant advantage during a bull market because the cryptocurrency is easier accessible for new investors that enter blockchain technology.
NEO 3.0 was announced by the NEO team as the answer to evolving research and design patterns in distributed ledger technology. It is a promise to tackle many of the existing problems of the NEO platform and will enable cross-platform smart contracts which can act as a bridge between NEO and other blockchain ecosystems. Further features that are promised by NEO 3.0 are higher transactions per seconds, API functionalities, improvements to the Neo Virtual Machine and bug fixes. As of the end of Q4 2018 the current progress of NEO 3.0 according to the public Github repository is around 40%.
Further decentralization of the NEO platform is expected to occur in 2019. This should improve the standing of NEO in the cryptocurrency industry and increase NEO’s chances for becoming one of the leading smart contract platforms.
At the end of our analysis we need to note that there is one variable that is very hard to predict for NEO. Any news coming from China with regard to blockchain technology could fundamentally change the value proposition that NEO can provide. Adoption and regulation by Chinese institutions are factors that need to be watched closely when speculating about the future potential of NEO.