I’ve been following NEO closely since this summer when it was still called Antshares. I was incredibly impressed by the project at the time. Its super fast transaction times, smart contract capability, gas generation, and the possible support from the Chinese government made NEO incredibly attractive. However, after a combination of further research and observation of the project’s progression, I’ve identified a series of major red flags surrounding NEO and my opinion on the project has soured considerably.
NEO is incredibly centralized. The entire network only has 13 validating nodes. Developers whitelist who can run validating nodes
The core value proposition of a cryptocurrency is its decentralized and trustless nature. It is this property that enables users to store their funds securely on the network without needing to trust anyone else. For this to be possible, any user must be able to operate nodes to validate transactions in the network without having to be approved by a central authority. For example, both the Bitcoin and Ethereum networks have thousands of validation nodes running at any one time upholding network security. Even QTUM, a relatively new cryptocurrency, has more than a thousand validation nodes running concurrently (1,319 nodes at the time of writing).
NEO, however, only has 13 concurrently running validation nodes in the entire network. How is it possible that there are so few nodes? I was incredibly dismayed to discover that NEO’s team hand-picks their validation node operators. In fact, I believe that every validation node is currently owned and operated by the team. This is alarming. How can a blockchain project that is more than 2 years old with a market cap of more than $3 billion only have 13 validation nodes? Why is the public not allowed to participate in securing the network? Two years is a very, very long time in the cryptocurrency world and there is simply no excuse for this degree of centralization.
NEO’s blockchain disappeared for several hours in October
Because all 13 of NEO’s validation nodes are controlled by its development team, the team was able to shutdown the entire blockchain at a moment’s notice and they did so for several hours earlier in October. During that time, no blocks were generated and the lack of communication left many people confused and scared.
The official reason for the blackout? NEO’s team had to shut down the network in order to perform “manual checks” after unlocking 15 million of the 50 million NEO that the team held in reserve.
NEO’s GitHub has alarmingly sparse activity
As of this writing, the last commit to NEO’s GitHub repo happened 16 days ago. Think about it, more than half a month since the last time the project was updated.
In addition, the last 3 commits to the repo are incredibly inane and insubstantial. Look at the last 3 commit messages:
- An attempt at improving the English translation (November 2nd)
- Fix Grammer (November 1st)
- Confusing spacing (November 1st)
An inactive GitHub repo is one of the first signs of an abandoned project. Compare this to Ethereum, Bitcoin, Waves, Stellar, and QTUM. There are commits almost every day for these projects. What are NEO’s devs doing?
EDIT 1: some people are arguing that even though NEO’s GitHub is inactive, CityOfZion’s GitHub is very active. One needs to understand that CityOfZion builds peripheral tools in NEO’s ecosystem which, at a fundamental level, do not improve NEO’s fundamental blockchain technology. To say that CityOfZion’s developer activity makes up for NEO’s inactivity is like saying Bitcoin is fine if blockchain.info’s developers are still working when all Bitcoin client developers have stopped working (Bitcoin Core is an example of a Bitcoin client). Blockchain.info helps us explore the blockchain, Bitcoin clients are the software running Bitcoin’s nodes and miners.
EDIT 2: some people have claimed that NEO’s team doesn’t use GitHub. This is blatantly false since (a) the NEO team has been working in this repository since NEO’s inception and (b) there continues to be (sparse) activity in the repository. If the NEO team doesn’t use GitHub, why commit anything there at all? There’s no good reason to consistently make inane changes to an abandoned code repository.
NEO only has 6 smart contracts operating on the entire blockchain
NEO, a project that is 2 years old, only has 6 smart contracts deployed on its mainnet. In fact, up until October, the only 3 smart contracts on NEO were test contracts deployed by NEO’s lead developer, Erik Zhang.
Is this what a thriving smart contracts ecosystem should look like? Should NEO, a 2 year old, $3 billion smart contract platform have only 6 smart contracts?
You can checkout all of NEO’s smart contracts here: https://neotracker.io/browse/contract/1
The East has almost no interest in NEO - 90% of NEO’s volume comes from the West
If you were to visit NEO’s subreddit, you’ll see everyone talking about how NEO has connections with the Chinese government and that the government might be open to using NEO.
This cannot be more false. NEO is a little known project in China with minimal connections to the government. You’ll quickly realize this after asking around in Chinese cryptocurrency forums and messaging groups. Additionally, look at NEO’s volume distribution, more than 90% of NEO’s volume comes from Bittrex, Binance, and Bitfinex, three exchanges used mainly be Westerners. There is close to zero interest for NEO in Eastern exchanges.
How can anyone say that NEO is a Chinese project at this point? Almost all of NEO’s investors are from the West and many of them were duped into thinking NEO has a chance in the East.
NEO attracts questionable ICOs and dApps
NEO released its smart contract 2.0 system in August. Until October, only 3 projects announced that they will be building on NEO, and all of them are incredibly sketchy.
The first project, AdEx, looks incredibly bad. They announced that they would switch from Ethereum to NEO. This announcement subsequently pumped the token’s price from $0.30 to $2.45. It has since dropped back to $1. I looked over AdEx’s GitHub repo and I don’t like what I see. No only is there very few commits, all of the commits are incredibly unsubstantial and consists of copy changes and adding image assets. Additionally, the team still has a Solidity code in the repo and continue to make commits in November referencing Solidity. Hold on? Solidity is Ethereum’s smart contract language. Where is the code for NEO integration? Why is the team still working with Solidity. AdEx is a project with a $60 million market cap. I’m scared.
The second project, Red Pulse, was NEO’s first ever ICO. The project appears to be incredibly sketchy as well. Here’s a blog post detailing its many red flags. For example, the team claims that their 2-year-old non-cryptocurrency service has more than 60,000 subscribers, yet their iOS app only has 1 review. The company’s CEO has also apparently said that RPX can only appreciate in value because other people might consider RPX to be valuable. In other words, the CEO basically admitted that most of RPX’s value derives from speculation.
The other project, Aphelion, looks even worse. Even devout NEO investors have raised red flags on the project. The team is incredibly small. It consists of 3 founders and that’s it. What’s hilarious is that there are 10 advisors, meaning the project’s advisors outnumber the project’s employees by more than 3 to 1! For a project with so little people working on it and almost no work in progress, its ICO asks for an incredible $30 million. That’s $10 million per founder. It would be too exhausting to list everything wrong about this project so I’ll just link a comprehensive post from NEO’s subreddit (267 karma, 96% upvoted), on why this project is likely a “money dump”.
Aphelion is NEO’s second ICO. It’s clearly shaping up to be a giant scam and it’s incredibly worrying that no one from the NEO team has warned NEO holders about Aphelion. You can’t build a thriving smart contract ecosystem on top of scams.
NEO makes announcements of announcements
Making announcements of announcements have become one of the most frowned upon activities in the cryptocurrency world. Doing so purely serves to introduce unhealthy speculation into the market and pump a token’s price. Several projects have already been burned by their communities for doing so in the past few months (e.g. OmiseGo and TenX) and have since stopped.
NEO, on the other hand, continues to engage in this unethical behaviour. The project recently released a poster stating that something big will be announced in 3 days. This caused NEO’s price to pump from $28 to $45 in a single day. Completely. Unhealthy. Speculation.
It’s incredibly uncomfortable seeing NEO’s team encouraging speculation and rumours to manipulate the market. This is the kind of activity that forces governments to introduce harsh regulations. Just look at what happened in China.
NEO is a blockchain built purely on promises and rumours. There is no substance.
It should be clear as day by now that everything associated with NEO is filled with rumours and promises. There is no substance. Nothing really works or creates value in any way.
Be careful of what you buy.