NEO, China’s Fake Matrix

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NEO, formerly AntShares, has skyrocketed in the past two months from a price of around $1 in late June to a high of just above $50 with the currency currently trading at around $40.

The East Asia based project dubs itself as China’s ethereum after re-branding recently with a name that seemingly references the Matrix.

And China has been buying it, with much of the trading volumes coming from there. Giving NEO a current market cap of almost $2 billion.

Neo’s recent price action.

But the currency is somewhat peculiar because although it calls itself a public blockchain, it uses a Byzentine-Fault Tolerance (BFT) algorithm which is usually applicable mainly, if not only, in private blockchains.

We had a quick look at the currency a few days ago and tried to reach one of the NEO team members to better understand how such algorithm can work in a public blockchain setting when it requires some level of trust – which is applicable in private blockchains because nodes are permissioned – but no one was available.

We hoped to get some guidance from the whitepaper, but that document is the strangest “whitepaper” we’ve seen so far. It reads more like a draft wikipedia entry of a high level explanation regarding basic and general blockchain or smart contracts concepts. Rather than a semi-academic paper explaining in some depth how NEO itself works.

So that wasn’t of much help to us either, but a post shared on NEO’s subreddit, now removed by that sub’s moderators, argues that NEO is very centralized. Replying commentators agree, but suggest it will somehow become decentralized. The poster is quoted in full for the record:

“In Neo’s current format it does not exist as a ‘public’ blockchain, it is a private blockchain owned and run by OnChain.

This is because no one can ‘mine’ NeoGas yet (called Validating or Accounting in the Neo whitepaper). All of the validator nodes appear to be set up and run by OnChain because the functionality to nominate yourself as a validator is not yet coded into any of the Neo wallets.

Furthermore, Neo’s dBFT algorithm is incomplete and totally void of public oversight. Neo holders are supposed to have the right to vote for honest Validator Nodes. However just like how you can’t nominate yourself to be a validator you also cannot yet vote for validators because it is not coded into the wallets yet.

In no other major public blockchain can the public NOT be part of the consensus mechanism. As such, Neo should not be considered a public blockchain. Some may argue it is public because you can scan the blockchain but that point is moot if OnChain runs all the validators. As a holder I really hope this functionality comes soon.”

It would be a breakthrough of some kind if it does because solving the double spending problem in a public blockchain with a BFT algorithm is not trivial. So it’s no surprise the “protocol” is currently centralized.

They could, of course, add other ID-ed and AML/KYC-ed nodes to the network, but that may face some considerable regulatory hurdles. Especially as the way tokens were issued seems interesting.

Their “whitepaper” is inaccessible at the time of writing, showing a 404 error, so we had to use Google Cache because we wanted to quote a very important part. Since the site is down, we’ll quote it at some length for the record:

“100% of the total amount of NEO shares in the creation of a block was created. Before the creation of NEO the team set certain rules on the distribution of NEO shares.

About 10% of the NEO shares were allocated to the early supporters of NEO in June 2014, earning $600,000 in seed funding. Of which 400,000 yuan by a number of individuals after a 5 million overall valuation of investment and 200,000 yuan by the venture capital institutions Ra Li capital after a 10 million yuan overall valuation of investment. Individual contributors also provide all kinds of support in full time or part-time free of charge.

Approximately 17% of the NEO shares were completed in October 2015 for ICO 1 and assigned to the participants, earning more than 2100 bits. Of which about 1,200 bits are from individual investors and about 900 are from a single institutional investor.

Approximately 23% of the NEO will be allocated to participants in ICO 2 launched in August 2016. The ICO does not set the price and ceiling, but the design of the return mechanism, see ICO rules.

The remaining 50% of the NEO shares held by the NEO team, will be in the NEO net after the use of NEO smart contract locked for 1 year. 1-year lock-up period, this part of the NEO will be used to maintain the long-term development of Neo.”

It’s not very clear what NEO shares means exactly. We assume it means the actual NEO token itself. Which suggests there is no mining as such or proof of stake in NEO with the tokens created in a centralized manner where only 50% was distributed.

The set-up might also give them full liberty to create more if they please, with any project that wants to use their blockchain seemingly having to trust whoever runs that one NEO node.

Making it not a blockchain at all and inferior even to permissioned blockchains like ethereum forks or Hyperledger because they usually have a dozens or more nodes run by different organizations which also have considerable reputation combined with an easy means of legal recourse.

So the matrix reference seems to tell us exactly what we expected. An illusionary surface project with no foundations.

 

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27 Comments on "NEO, China’s Fake Matrix"

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What a load of rubbish. The authors bias shows completely throughout this whole entire opinion piece, nothing but FUD. If you look into the technology of NEO, you’ll see it’s an extremely solid platform with a huge potential for other ICO’s to integrate on top of it.

FUD?
Why?
At least this article provide some technical insights. Your comment was just useless.

And I know I’ll be downvoted by all these “wanabee” investors. Get some arguments beside of Downvoting…

Why don’t you address specific points? I came to the same conclusion after investigating NEO a bit deeper. Made good profit on the pump, but will not hold any for the long term.

Yeah, like I try to keep an open mind, but your arguments are a total BS. You can’t download the whitepaper? Really? wtf. It’s working normally. I’ve downloaded it now again just to make sure and what is so weird about the token distribution? I was waiting for some big reveal but there was nothing. And if you had read Reddit O&A with Da Hongfei and Erik Zhang they answer tons of similar questions to yours.

He couldn’t download the whitepaper at the moment. But , hey, that’s not the point.
For the rest everything said in the article seems to be backed up by much more knowledge and analysis of the basic than what you showed up by making a criticism without any critics of the elements outlined in this article.

I’m currently staking NEO and earning gas as we speak… Not sure how/why you claim that’s only possible for the NEO team. It works on any wallet/client. Try brushing up on your research before posting mate.

Maybe you should learn how to read.
He never told you nobody can “earn” GAS, but he told nobody can “mine”. That’s not the same.
Actually GAS are like a reward attributed by accumulation of NEO.
“All of the validator nodes appear to be set up and run by OnChain because the functionality to nominate yourself as a validator is not yet coded into any of the Neo wallets. ” => if you don’t understand this sentence (which is pretty sure by having a quick read to your answer) maybe you shouldn’t reply.
You are the one fuding here.

pure idiocy

Nice to see people are starting to wake up to the reality that NEO is basically a hype train that borders on being an outright scam, but the uninformed (and invariably non-technical) true believers will just cry ‘FUD!’

Funny, have you tried developing smart-contracts in NEO? I’m willing to be not.
Open up a new C# project and give this baby a go.. Let me know how it goes..
while (true) Process.Start(Assembly.GetExecutingAssembly().Location);

I have actually, and the NEO docs are complete crap :

http://docs.neo.org/en-us/sc/tutorial.html

If you have a link to some working SC code I’d be happy to take a look at it.

The whitepaper is working fine, the author provided a fake link, to try and have readers click through and not be able to access. The author is obviously short NEO, this would be an arrestable offense if it were a stock, but its crypto, so i guess not.

Where can I short Neo? I certainly want to. Because the author is not only mostly correct, he has missed a few far more damning problems. Like a protocol that doesnt prevent creation of an unlimited amount of NEO shares by whoever has the private key that created the first 100M (ie, the devs today, a hacker or disgruntled employee maybe tomorrow). Or the fact that their voting mechanism is inherently insecure, and currently only “secure” because Neo own 50% of voting shares. Or the fact, when the issue was raised on github, the only response of the lead dev… Read more »

Go to etoro.com and you can short anything you want. Now jog on and send us a screenshot so we are sure you put your money where your mouth is.

If you go to docs.neo.org you can find extensive documentation on Neo protocol, API reference etc, tutorial.
This article is also missing one point – this is a Chinese oriented product, perhaps some documentation/whitepaper is only available in Chinese?

you’re clearly not a dev if you think the NEO docs are anything close to “extensive” – they’re in fact the complete opposite.

Can you point to a single product that’s actually been built on NEO? Even CoZ barely has a template for smart contracts, nevermind that even if you could magically use those docs to build an actual dapp you wouldn’t be able to deploy it without $15,000 in GAS lying around.

Isn’t Eth implementing BFT too now?

This article would be ‘objective’ if claims made in it are commented on by the actual developers, claims are made and conclusions based on those claims without giving a profound base of those claims and the reasoning behind them from the developer(s) point of view.

Did you literately even try to write an objective article? Nope. Just another part of the FUD campaign. How much money do you think you’ll make off this FUD?

Qtum and Bcash holder?

Pretty shitty article, with a LOT of misinformation. For refutation of the inaccurate and misleading FUD in this article, check out the response from the NEO team in the NEO Reddit.

https://www.reddit.com/r/NEO/comments/6uuwyv/a_response_to_fake_matrix_article/

The author has been deleting the comments from I can see…

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