In the last 7 days, the price of NEO has jumped by more than 23% in the NEO/BTC market. With no other popular smart contract platform showing a similar movement, the research team at CoinDCX decided to carry out an investigation to know what’s happening on Neo’s platform and whether there was any reason behind the rise in NEO’s price.

This blog covers the various possible reasons behind the spike in the price of NEO. But before we begin, let us first understand what Neo (NEO) is and how it works. 

 

What is Neo (NEO)?

Formerly known as Antshares and often recognised as the “Ethereum of China”, Neo offers opportunities to build decentralized applications (Dapps) and smart contracts while also allowing the hosting of tokens for ICOs.

Neo enables developers to write smart contracts in a variety of coding languages like JavaScript, C, C++, C#, Python and Go. This makes it easier for developers to write smart contracts. It uses Proof of Stake (PoS) consensus mechanism with delegated Byzantine Fault Tolerance (dBFT) instead of the Proof of Work (PoW) consensus algorithm used by Bitcoin and Ethereum, which needs a lot of computing power. The consensus mechanism used by Neo is even more energy-efficient than Ethereum and transactions are much faster in this case. 

It has two tokens called NEO, which is the main token on the platform, and GAS, an automatic creation that comes about when NEO is held in a wallet which is officially approved.

 

Pros and Cons of Neo

Neo is one of the largest open-source blockchain projects that use cryptographic encryption for transactions without the need for any third-party interference. Having a fixed number of tokens i.e. 15 million tokens being mined each year ensures that there is no uncalculated inflation. The network uses PoS and dBFT which increases the transactions per second (TPS) to approximately 10,000 as compared to the limited 15-20 TPS on Ethereum. Neo has got some big investors like Microsoft, Alibaba and Hyperledger. Similar to Ethereum, it is also Turing complete. Lastly, it supports various programming languages that coders are comfortable with. This will increase the onboarding of developers from other smart contract platforms to Neo as more and more Dapps start launching on its platform.

Since Neo is developed in China, its future depends on the right and the authority that the Chinese government will give to Neo. It is said that the restriction put on the supply of GAS might lead to unwanted speculations on the network. 

While Neo has got its set of pros and cons, more people will only adopt its platform if it solves the issues of scalability that Ethereum faces. Neo has a vast network and a community that supports it. 

In our opinion, the main reason behind the surge in the price of NEO is the crypto users speculating the rise in the price of NEO due to its demand once the DeFi protocol named Flamingo Finance (FLM) gets launched on its platform. 

While Neo already supports many DeFi protocols like Nash and Switcheo (two leading DEXes) that provide a reliable market for an array of products, extending this market from synthetic assets to stable coins will further help to unleash the power of DeFi! This is where Flamingo Finance comes into the picture. 

 

Source: Flamingo Finance, Medium

 

Flamingo Finance – The DeFi Protocol 

Flamingo Finance is an interoperable full-stack Defi protocol on Neo that has features such as Wrapper – a cross-chain asset gateway, Swap –  an on-chain liquidity provider, Vault – a one-stop asset manager, Perp – an automated market-making (AMM) based perpetual contract trading platform and also a DAO – a decentralized governance mechanism.

Source: Neo Global Development

 

According to Neo founder, Da Hongfei, 

Flamingo aims to deliver a comprehensive array of modules and tools to support a variety of use cases, from asset cross-chain and on-chain liquidity provision to deposit assets and reward distribution. FLM is set to become a key Neo-based asset which will comprise fees, collaterals and governance functions.

 

Da acknowledged that the network missed essential DeFi components and this new protocol could help resolve that. 

Flamingo will be the first financial protocol on the DeFi market that will be able to support the mobility of multi-chain assets. So far there have been limitations where only single-chain markets existed in the DeFi market. Flamingo Finance will allow frictionless access to crypto assets on Neo, Ethereum, Ontology, COSMOS SDK-based networks and more. Users will therefore be able to wrap different types of tokens like BTC, ETH, NEO, ONT and more on the NEO blockchain as NEP-5 tokens. 

Moreover, the integration of AMM based swaps and perpetual trading contracts will help in the maximum utilization of the assets on the network. 

Lastly, the distribution of FLM, the governance token, will take place based on network participation. Unlike other tokens that have pre-mining and pre-distribution, this token will be distributed completely based on the stake each participant has. This will prevent traders and investors who could buy these tokens in ICOs from dumping them and taking profits. Distributing FLM tokens will also help in increasing community participation.

There are four different ways in which users can earn FLM –

  • Staking of cross-chain assets
  • Contributing to the liquidity pool
  • Staking of the synthetic stable coin FUSD to provide margin liquidity.
  • Participation in governance processes.

 

FLM Smart Contract Security Audit

To ensure that the smart contract of FLM does not have loopholes it is getting audited by Peking Shield currently.  Peking Shield has also carried out audits for other DeFi projects such as Harvest Finance, OneSwap, StarkExV2, SushiSwap, and more.

 

Our Opinion

Though there are several DeFi protocols similar to Flamingo, there are many unique features that no other protocol has. 

The launch of Flamingo on Neo will allow it to be interoperable across blockchain networks through cross-chain atomic swaps. This is possible because of the launch of Poly Network, a new protocol alliance formed to facilitate cross-chain transactions between all participating blockchains. The initial collaborators on the project include Neo, Ontology, and Switcheo. 

Da has also encouraged other developers to join them in building a better DeFi ecosystem. With a vision to expand Neo’s DeFi infrastructure from lending to insurance and index funds, there is a high possibility that the network will get busier as more developers jump in and join the bandwagon. 

With a very strong community and a better distribution policy of FLM, it is likely that many people will jump on the network and explore the protocol when it launches on September 23, 2020. The demand for NEO tokens has therefore been high since the official announcement as traders have been speculating about its increased demand and price. We believe this will be the case until Flamingo Finance gets launched. 

Read this article to know more about the technicalities of Flamingo Finance. 

To read more about Yield Farming, Decentralized Finance (DeFi) and various other topics, click here.

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