It’s been a tough year for cryptocurrencies. Bitcoin (BTC-USD), the bellwether of this nascent industry, has seen its price drop by over 80% since its peak in late-2017. Now the price hovers around $3,400. Meanwhile, Ethereum (ETH-USD) is down even further. The price of a single ETH-USD is less than 10% of its all-time high.
This time last year, investors were bracing for the crypto market value to surge beyond $1 trillion. Instead, the entire market has shrunk to just over $122 billion, with Bitcoin responsible for over 53% of that. Many have thrown in the towel on this sector, but few realize that this is probably the best time to take a closer look at the most innovative and exciting blockchain projects. Investors forget that the price of a crypto token is more important for investors and traders rather than developers.
While investors were fretting over every plunge, developers spent 2018 innovating and fine-tuning their crypto projects. A vibrant and passionate base of developers will eventually solve the bottlenecks in blockchain technology and deliver products that are genuinely useful. This will ultimately act as a catalyst for market prices.
That’s exactly what’s happening behind the scenes at NEO (NEO-USD). Formerly known as ‘Antshares’, NEO was created by Da Hongfei and Erik Zhang in 2014. The blockchain-based network acts as a universal computer that can support crypto users and crypto applications. The NEO team believes their network could form the basis of the future ‘smart economy’ where digital assets such as crypto tokens, digital identity, and smart contracts can come together to help users, enterprises, and developers interact seamlessly.
The two NEO founders were inspired by Ethereum’s ambition to create a world computer powered by blockchain technology. However, they created their own framework to leapfrog Ethereum’s struggles with throughput and make it easier for developers to adopt the technology.
This ease-of-use, in my opinion, is a critical differentiator. Developers essentially look for two things when creating applications – network effects and ease-of-use. For example, Google (GOOG) (NASDAQ:GOOGL) managed to get millions of new developers to create applications for Android during its first few years by making the development platform open to everyone and easy to use. Similarly, Apple (AAPL) has managed to create a dynamic base of engaged developers by helping them with a special coding language called Swift that is a common programming language developers can use to create applications for iPhone, Apple Watch, Macintosh computers, and even web applications.
In both cases, Apple and Google have billions of users spread across the world, which offers the network effects developers seek to justify their effort. However, none of the existing blockchain projects have achieved this level of network effects yet, so crypto communities need to get creative to attract developers.
Over the past few years, NEO’s team has been making some smart moves to attract developer attention. Firstly, the network was created and is based in China. The founders have mentioned how they work with the Chinese authorities to create a constructive line of communication. This means NEO is the only major crypto project that has managed to crack China’s elusive market.
Secondly, NEO already has one of the largest and most engaged user bases in the industry. According to NEOscan, NEO has over 1.8 million wallets registered across the world and has processed over 20 million transactions since inception. For context, Ethereum is said to have over 50 million unique addresses but only about 328k active addresses.
NEO also manages to crack the top of the market in terms of network size and liquidity. It’s currently the 18th largest cryptocurrency listed on CoinMarketCap and has a market value of over $700 million.
All these factors have helped NEO attract over 1,000 regular contributors and groups of independent developers like City of Zion, NeoResearch, and NewEconoLabs. Together, the developer community has managed to launch over 80 different decentralized apps (or DApps) on the NEO network. Some of the most interesting include:
Bridge Protocol: A KYC and identity verification service
Travala (formerly known as Concierge): A travel booking marketplace with over half a million hotel partners
Switcheo Exchange: A decentralized cryptocurrency and crypto token exchange that has handled over $3 million in transactions and has 25,000 registered traders.
Effect.AI: A decentralized network of artificial intelligence services with over 2,000 members.
nOS: A virtual operating system that functions as a web browser and crypto wallet.
NEO’s team has managed to lay the foundation for future adoption by attracting top talent to develop solutions on the network. As the list of DApps grows, you can be sure more users will adopt the NEO platform, expanding transaction volumes and market size.
The community is now bracing for a slew of new announcements at next year’s DevCon in Seattle. Over 600 developers, investors, and users are expected to showcase the progress they’ve made with the NEO blockchain over the past year. Founders Da Hong Fei and Erik Zhang have made several major announcements about the network at last year’s developer conference. Any such major news could act as a catalyst for the NEO token price.
What is it worth?
The trickiest question in the crypto community at the moment is that of intrinsic value. Yes, Bitcoin, Ethereum, and NEO are great ideas and exciting technological breakthroughs, but what does it mean for investors? What is the network worth?
Well, for Ethereum and NEO, I think the most direct comparison is the closest thing we have to a world computer – Amazon Web Services (AWS). Amazon’s (NASDAQ:AMZN) most profitable subsidiary offers developers a chance to test and deploy cloud computing solutions with minimal hassle and attractively low prices. The AWS platform currently offers over 140 different applications to businesses and developers from across the world, which isn’t too far from the number of DApps on the NEO platform.
With $6.7 billion in quarterly revenue, AWS is already about twice the size of Salesforce.com (NYSE:CRM). Experts expect sales to reach $77 billion by 2022, which could mean the business is worth $350 billion.
If NEO can capture just 10% of that market by 2022, the network could be worth $7.7 billion. That implies an upside of nearly 11x from current market value in less than 4 years. In other words, each NEO token could be worth ten times as much if developers and businesses started tapping into its true potential and users came onboard.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.