Removing the anonymity of individuals and enabling governance structures from the outset is key to bringing public blockchain technology into the mainstream, according to the creator of China’s leading blockchain platform, NEO.
Speaking at the APAC Blockchain Conference in Melbourne, NEO’s Da Hongfei said the use of digital identities would enable regulators to crackdown on fraud and ponzi schemes, while proposals could be executed by “consensus nodes” (groups with the power to block transactions on NEO) to enact court orders.
“Blockchain is meant to be transparent, but the trading on the exchanges is not very transparent. I do believe there are manipulations of the price of different tokens these days and there are no regulations right now,” he said.
“So I believe if it’s regulated there will be less fraud and ponzi schemes and it will bring the mainstream financial institutions on board so we can do real business on blockchain.
“[And] if there is a public blockchain that is compliance ready, it will eliminate regulatory uncertainty.”
Mr Da is one of a large group of Chinese fintech and blockchain specialists in Australia this week. Other visitors include executives from WeBank, Gingkoo, Ant Financial and Wanxiang.
As well as co-founding NEO (previously known as AntShares) in 2014 alongside Eric Zhang, the pair have also started a for-profit blockchain business focused on building solutions for corporate customers called Onchain, which is backed by large private Chinese conglomerate Fosun Group.
Often likened to Ethereum, NEO also allows for the use of smart contracts and the development of digital assets, as well as having its own cryptocurrency.
But, unlike Ethereum’s central goal of creating a platform for the development of decentralised apps (dApps) to create a more trustworthy, globally accessible internet, NEO hopes to provide the infrastructure for what it deems the “smart economy”.
Mr Da said the smart economy would be characterised by three main features – digitisation (of currency, assets, identities and IoT devices), being programmable (everything digitised can be manipulated and managed via programming languages) and being “trustless” (intermediaries like lawyers or auditors are not needed to establish trust in a transaction).
“A third to a half of the cost of every transaction today is linked to trust between trading partners. We’re paying for lawyers, we’re paying for auditors, we’re paying for government and regulators,” he said.
“If we had technology rather than a politician to establish trust, the cost will be much lower.”
The NEO cryptocurrency has the 10th highest valuation of the more than 1500 cryptocurrencies tracked on Coinmarketcap, with a market capitalisation of $US5.7 billion ($7.2 billion).
On Tuesday it was trading at $US87.88, but like other larger cryptocurrencies such as bitcoin and ether, it has suffered about a 40 per cent price drop since hitting a high in January.
Ambition to be No. 1
Mr Da’s mid-term vision for NEO is for it to be the No. 1 blockchain platform by 2020.
“That doesn’t mean it has to have the highest price or biggest market cap. It means we want it to be the most popular platform for decentralised applications by providing advanced performance, a diversified ecosystem and compliance-ready solutions.”
When quizzed by The Australian Financial Review what it meant to be “compliance ready”, Mr Da said NEO was engaging with some government bodies and was designing the distributed ledger to be adaptable to the changing regulatory environment.
Ultimately though Mr Da, who splits his time evenly between NEO and Onchain, said he believed international standards would need to be developed and that engaging with governments in only one country would not be enough.
It published its first line of code on the developer website GitHub in 2015, before raising $US700,000 in its first initial coin offer and a further $US3.8 million in a later ICO.
Reflecting on huge amounts of capital currently being raised via the controversial ICO process, Mr Da said the term did not even exist when NEO was first raising and the group had adopted an approach more similar to traditional venture capital.
“At the time the funding was good, but compared to today’s ICOs it’s peanuts,” he said.
“[Eventually] most tokens will disappear. [Things like] decentralised dentists just don’t make sense.
“It’s like the dotcom bubble. It’s still the early days and only those doing infrastructure businesses will survive and make profits, like Cisco did at the time. But eventually the profits will shift to companies that are closer to consumers, like what happened with Apple. We’re the building blocks.”
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