Happy 4/20 to the meme enjoyers, partakers, and degenerates across the globe. Not only is today a giant meme in the crypto space, but the Bitcoin halving took place yesterday! To celebrate the day and milestone in the crypto space, I present my top-down and bottom-up thesis for Neo’s approach to success in 2024.
(It should undoubtedly go without saying that the thoughts expressed in this essay are those of mine, and mine alone. They don’t reflect those of any project I’m affiliated with, or the people who work on those teams. In this essay, I am merely a degenerate providing entertaining content for other degens.)
Cryptocurrency markets are all about narrative
The proper narrative can propel or thwart a project at any time, but especially during bull markets. Make the wrong choice, and the ecosystem will have to deal with its consequences during the bear market that will inevitably follow.
A botched product launch in a bull run can result in detracting new devs and users from joining the ecosystem.
This makes that inevitable bear market even more difficult, as it becomes saturated by a community of OG’s who have “round tripped” the underlying asset (possibly for even two cycles).
Likely, this will result in a “loud minority” of upset HODLers who misdirect their anger – that should be geared toward their own decision making process – at the developers and builders who continue to create during the bear market.
We saw this happen with Neo N3, which launched in Aug. 2021 at the top of the recent bull run and wasn’t able to attract any of the waning attention in 2022. 2022 was plagued with the collapse of blockchain networks like Terra-Luna, large-scale investing firms like 3AC, and the world’s second largest exchange, FTX.
This was not a market for attracting new Web3 users, and those who remained were members of whatever community they joined the year prior.
Alternatively, Neo can successfully launch a functioning network during the current 2024 bull run, which has been accentuated by the approval of Bitcoin ETFs, stablecoin legislation in different parts of the world, and new EVM L2’s attract massive amounts of liquidity (i.e., Base).
A solid Neo X launch can attract developers and users that will stick around during the hard times and keep BUIDLing.
My NEO thesis is simple: there is a top-down and bottom-up approach, and Neo must pursue both in order to take off in 2024 and beyond.
First, keep making positive headwinds in Hong Kong – aim for real-world assets on Neo as a result. (Top-down.)
Second, ship a secure and usable Neo X during the current bull run, and make sure to bridge to as many projects as possible once live. (Bottom-up.)
Neo’s double-pronged path to success.
From the top-down, Neo Global Development is engaging with centralized entities and locating their offices in jurisdictions that have favorable regulations for blockchain companies.
What Neo Foundation and Neo Global Development can do
At the regional regulatory level, NGD needs to ride any momentum coming out of the positive strides being made in Hong Kong. The ETFs and Neo’s connections are one such opportunity, but there are others, like onboarding real-world assets (RWA) onto the Neo blockchain.
At the Neo APAC Hackathon Finale in Oct. 2023, Hong Kong’s regulators were very present and participated in multiple panels. Beyond the attendance of regulators, companies were on-stage talking about the relationships they’ve built with the regulators and the forthcoming assets the region hopes to attract via tokenization: US debt instruments.
Back in October, the primary focus of conversations was on stablecoin legislation and using RWAs like US Treasury bills to back digital assets. Hong Kong legislators were actively pushing forth stablecoin legislation and guidance, and financial companies located in the region were talking about digitizing RWAs and building products. The region is well positioned to capture market share for product digitization, especially as larger firms like Black Rock start to enter the Web3 space.
Stablecoins
In April 2024, Hong Kong-based stablecoins issuer First Digital Trust announced planned expansions of its $3 billion dollar-pegged FDUSD token to the Sui blockchain network. FDUSD is the fourth-largest stablecoin and is backed by US T-Bills and bank deposits to peg the price to US $1.
Sui is a smart contract platform that launched in May 2023. The blockchain was built by ex-META employees who worked on Facebook’s failed Diem stablecoin project. The ecosystem is purportedly largely backed by VCs and has seen its fair share of positive (i.e., transaction speeds, throughput) and negative (i.e., lack of airdrop, manipulated on-chain activity) articles.
None of this to bash on Sui, all of it to say that Neo has a proven track record of liveliness dating to 2015. The blockchain can serve as an equally viable network, with ties in the region, that can host RWA-backed stablecoins. According to CoinGecko on 4/20 2024, Sui sits at a market cap of US $1.8 billion, whereas Neo sits at $1.3 billion.
Tokenization
Another trend to keep an eye out for is tokenization via large scale financial behemoths. Fund tokenization is simply the creation of an on-chain contract that represents a portion of ownership in a fund and its underlying asset.
Tokenization has the potential to revolutionize traditional funds by making them more liquid, transparent, and accessible. Deloitte, a large tax, audit, and financial advisory services firm, believes tokenization will impact private equity, private debt, infrastructure, and real estate verticals.
Current workflows for asset managers are siloed and intermediated, which increase administrative burdens and operating costs. Tokenizing traditional financial instruments and funds can potentially become a solution that addresses these distribution challenges and drives $400 billion a year in revenue.
In March 2024, Black Rock announced plans to tokenize its wide holding of diverse assets, from bonds and equity to real estate and cultural assets. The international firm is the largest in the world and manages $10 trillion across various asset classes. Black Rock CEO Larry Fink said,
ETFs are step one in the technological revolution in the financial markets. Step two is going to be the tokenization of every financial asset.
Black Rock’s first tokenized fund was recently issued on Ethereum, the BlockRcok USD Institutional Digital Liquidity Fund, or BUIDL Fund. It currently offers qualified investors the opportunity to earn US dollar yields.
In February, the Hong Kong Monetary Authority released guidance on tokenization to local authorized institutions (i.e., banks). These guidelines pertained to structured products, that are not securities or tokenized commodities, and focussed on due diligence, risk disclosures, risk management, and custody.
Cyberport
In addition to regulatory relationships, Neo has prime access to build upon guan xi, a Mandarin business term for forming relationships through networking. In Jan. 2024, Neo opened an office in Cyberport, Hong Kong’s government-founded digital technology flagship and incubator business park.
Following Hong Kong’s push to establish itself as an international hub for Web3, Cyberport reported that more than 150 Web3 firms registered to get an office in the professional park.
Fret non, anon, Neo has already begun to take strides in making a footprint in Hong Kong.
In March 2024, the first eight participants in the Web3.0 Global Acceleration Program were announced. The program is a collaborative initiative with Web3Labs, a gateway for Web3 startups in Hong Kong. Neo contributed US $1 million to the $10 million fund.
And that’s it – those are the things from the top-down that leadership can go after to bring real-world, actual use to the Neo blockchain by leveraging their geographic positioning. Neo needs to keep making strides toward bringing RWAs on-chain, onboarding institutions that are exploring technological innovation, and making fruitful relationships with local entities.
Pardon the interruption, but I’d like to take us on a completely theoretical exercise designed wholly for the speculator. With approval of spot BTC and ETH ETFs, perhaps we start questioning other digital assets that might also gain approval for these “TradFi token wrappers.”
When Neo ETF?
The Smart Economy becomes a tangible concept when thought-exercising on how Hong Kong regulations might have an impact on the Neo network.
HashKey is one of the two regulated VASPs in Hong Kong, which basically means it’s one of two exchanges that retail users can trade on. Further, HashKey is going to be responsible for providing the infrastructure for Bitcoin and Ethereum ETFs that launched in the region in April 2024.
After the listing of the two “blue chip” digital asset ETFs, the next question is, who’s next?
Though speculative, if we assume that other assets are granted approval for ETFs, then let’s examine the HashKey and Neo relationship.
Per Neo News Today, the HashKey Group is a suite of professional, stable, secure, and compliant blockchain services catering to international clients. The services within the umbrella include an exchange, a brokerage, venture capital, custody solutions, and Web3 infrastructure.
HashKey provides a cradle-to-grave solution for both institutions and retail token buyers in one of the world’s most forward-looking jurisdictions.
Reading tea leaves, there could be a there, there with this relationship.
At the very least, should there ever be anything as monumental as a NEO ETF being approved, then there’s a direct relationship with the asset manager that would provide the infrastructure to custody the underlying NEO.
The last time an entity with such regard was a consensus node on the Neo blockchain was KPN in 2018. KPN is a Dutch telecom company that offered landline phone service, cellular phone service, and internet access to over 30 million customers across Western Europe at the time.
Given that telecom companies move in quarters and years, this relationship likely formed in the prior year or so, when Neo was experiencing peak mainstream attention in late 2017, early 2018. Connecting the dots, the last time Neo had such a large and respectable name securing the network, it was a chain that many people talked about (and its price was parabolically moving upward).
While such a financial instrument and an ETF would be a major contribution to Neo’s success, it’s speculative, and outside of the Neo Foundation’s control. However, shipping tools that people use is wholly within its power.
Neo X Will Empower Grassroots Developers and Enhance Interoperability
For the bottom-up approach, Neo needs to launch Neo X and lets the BUIDLers BUIDL.
Neo was such a large name in 2017/18 because it served a simple market need: the ability for any project to launch an initial coin offering. Neo must also go back to its beginnings, and offer an environment for bootstrapped project founders to grow their visions from the grassroots.
Bane Labs (a collection of developers from NGD, AxLabs, and Neo SPCC) is building Neo X, an EVM sidechain that will run concurrently with the Neo N3 blockchain. With EVM compatibility, the Neo ecosystem can natively build into other products/dApps/ecosystems and leverage the tools of composability to create multi-chain use cases.
Ethereum’s EVM is the most robust developer ecosystem in Web3, boasting more developers than any other blockchain community. It has the largest market share of developers, features, toolkits, and composable “building blocks” for others to iterate on and build a new dApp.
As the Ethereum Layer One becomes increasingly congested, EVM Layer 2 solutions are so popular because they leverage the code stack that was pioneered by the builders on the first chains. It is easy to copy-paste code, and begin building.
Over the years, many project teams have expressed interest in the builders and unique features available in the Neo ecosystem, as well as the potential in connecting their projects to Neo.
However, the time-consuming nature of migrating code to NeoVM’s tooling and tech stack is not as intuitive to Web3 developers as that of EVM. It becomes a costly burden for the project looking to add support for Neo N3, and they opt to move on.
With Neo X, Ethereum’s composability now becomes a positive factor for Neo. Builders can simply migrate their existing EVM dApps to Neo, or vice versa. The amount of new dApps that can spring forward in the Neo ecosystem will exponentially increase. With new dApps comes the migration of assets from Ethereum into other ecosystems.
Furthermore, relationships with teams between EVM ecosystems can improve cross-chain interoperability, and establish a resilient ecosystem of multiple blockchain networks that will thrive for decades.
GAS Games
With the launch of Neo X, Neo Council members have a new source of “leverage” with the GAS income they generate on N3. While nothing is finalized, plans are for GAS include:
- Vote for consensus nodes on Neo X
- Reward for voters on Neo X
- Pay for transactions on Neo X
Many of the Council members are independent developer communities from within the Neo ecosystem. They have a different perspective on tools, community, and development than that of the NF or NGD. With this unique view, the arbiters of the GAS can choose to wisely invest into teams that build tools they deem valuable for the Neo ecosystem, either on X or on N3.
There’s potential to see a whole new breadth of developers bringing concepts from projects they’ve worked on in EVM land, and for Neo’s Council to embrace and support those teams! Ultimately, the new network can garner excitement from both developers and users alike, and new community members for years to come.
Wrap it up, sir
At the end of the day, this degen’s formula for Neo’s success in 2024 and beyond is simple.
Leverage relationships in Hong Kong, add real world use cases to the Neo blockchain and ecosystem. And, launch Neo X in the bull run to expand the Neo ecosystem to EVM, where the ecosystem will connect to the largest community of blockchain builders in the world.
Both of these approaches create fertile ground for people, businesses, and enterprises to plant and nurture their visions into fully conceptualized use cases. When there’s increased activity in an ecosystem, there tends to be a positive correlation with the underlying asset price going up – but, hey, this is all speculation.
