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Neon Exchange Rating Review

Positive

Investment Rating

Expiry date : Expired 24 Oct 2018

Rating report

Based on the analysis performed and issues identified we rate the NEON as “Positive”.

Blockchain could add value to games for gamers by suggesting new ways of monetizing personal data, and help small developers by eliminating entry and marketing fees and some difficulties in cooperation with end-users.

Via the NEON traders can combine safety of decentralized exchanges and speed and liquidity of centralized exchanges via its off-chain matching engine for cross-chain transfers.

The project has the following strengths:

• Part of NEO Smart Economy with a possible function of Digital bank for the whole system

• Easy to use and low entry threshold to attract a wide audience

• Off-Chain Matching Engine и JSON API for a high-speed trading, liquidity and tech. partnership

• Payment Service cross-chain and fiat-based transactions

However, the project has the following significant risks:

• Delay in product launch

• ICO date is not announced due to delay in receiving European Security license

• Absence of investors interested in the project and seed funding

• High competitive market with a stable market leader

• Fundamental factors which put pressure on the token price in the long run

ICO information

· Platform: NEO

· Foundation date: end of 2017

· Location: Liechtenstein – HQ, Delaware, USA - subsidiary

· Restricted countries: USA

· Website

· Whitepaper

· MVP: beta version of web extension is available on GitHub

· GitHub:

· KYC: closed, details were submitted through NEX Suites

· Founders: Fabio C. Canesin, Fabian Wahle, Ethan Fast, Luciano Engel, Thomas Saunders

· Team: 11 members, including developers and back-office specialists

· Advisors: 3 advisors, one of them is CEO of NEO – parent company of NEON

· Investors: n/d

· Community: ~94k. Reddit, ~69.5kTwitter, ~7.7k Medium, ~1.4k YouTube followers, no Telegram, no Instagram, no Reddit, no Facebook channels

Twitter

Medium

YouTube

LinkedIn

· Partners: only legal partners are mentioned


ICO details

 

ICO, Round 1

ICO, Round 2

Start date

July 2018

End date

July 2018

Token

NEX

Token Distribution

25 000 000

Total Volume of Tokens

50 000 000

Whitelist

March 12th, 2018

March 30th, 2018

Participants

25 000

~ 6 000

Maximum contribution

1,000 USD

9,000 USD

Soft Cap

n/d

Hard Cap

$25,000,000

Exchange Rate

1 NEX = 1 USD

Bonus Ratio

n/d

Currencies accepted

NEO, GAS

Restricted list

USA

KYC procedures

Yes

 

Neon Exchange (NEX), a platform for decentralized cryptocurrency trade and a payment service on NEO blockchain, is a part of NEO Smart Economy.

NEO is a non-profit community-based blockchain project that utilizes blockchain technology and digital identity to digitize assets, to automate the management of digital assets using smart contracts, and to realize a "smart economy" with a distributed network.

Core members of NEX represent City of Zion project that officially supports the NEO core and ecosystem.

Neon exchange is planning to hold its ICO in July 2018, according to the following scheme:

The project provides a planned distribution of all 50,000,000 tokens:

The tokens distributed to the partners and NEO council, who oversee the framework of the NEO blockchain, are sold with no discount. The amount of discounts and bonuses given for tokens bought in the crowdsale are not disclosed.

Tokens distributed among the founders are locked in a smart contract and slowly released over 2 years.

NEX is a limited company registered in Vaduz, Liechtenstein ("Neon Exchange AG").

NEX made the decision to register its token as a European Security to ensure full compliance and to protect investors.

To acquire an Organized Trading Facility license Neon is supported by several legal advisors:

Brown Rudnick LLP: An international law firm that represents clients from around the world in high-stakes litigation, international arbitration and complex business transactions.

Naegele Rechtsanwaelte GmbH: A law firm that specializes in public and private commercial law, with an emphasis on IT, Internet, capital markets, telecommunications, business, corporate, employment, contract, and property law.

Ernst & Young AG: A consulting firm that offers corporate finance and accounting advisory services.

IdentityMind Global: A consulting firm that provides an on-demand platform, offering next generation risk management and anti-fraud services for the e-commerce ecosystem.

GN Treuhand Establishment: An international active trust corporation that assists with the formation and management of trusts.

The process of receiving final approval from the Financial Market Authority has taken more time than expected, forcing NEX to delay its Token Sale.

The project has also established bank accounts and banking relationships in Liechtenstein, Switzerland and the U.S. and has plans to implement fiat pairs as well.

Due to NEX’s concerns about copycat projects emerging, they decided not to disclose any architectural information. There is also no data on the budget plan available either.

Despite the delay of the ICO, the project has continued in its development and has announced the process of beta testing the program.

Only one partnership has been announced, the project’s partnership with Thor, a blockchain-powered gig platform for contractors and entrepreneurs. Thor is going to utilize NEX in their infrastructure:

Summary: Despite the experience of the team and advisors, their unwillingness to disclose information on part of the architecture development, the absence of a Telegram channel and the delay of the ICO, raise some concerns.

NEX made a decision to register its token as a European Security and established bank accounts in 3 locations. These steps could positively affect the establishment of partnerships with banks in the future.

The project does not disclose any information on investors. This could affect the delay of the ICO and planned product releases. However, it should be mentioned that Neon continues to develop its product and engages in partnership with the Thor project within the NEO smart economy.

 

Project and product analysis

The NEX off-chain matching engine will be built in Elixir, a functional language designed for building scalable and maintainable applications .

The user’s encrypted private key will be stored on the user’s browser. This preserves the security guarantees of the decentralized account model, while allowing users to login into NEX through the traditional web format that asks for a username and password.

As of July 2018 the project had released an alpha version of the Neo web extension, a wallet for NEO and an extension for Chrome to cooperate with decentralized applications. The extension provides the following services: to create a new wallet or import existing wallets, check transaction history, add friends and switch between the mainnet, testnet and the NEX testnet.

The latest update of v 0.1.18 includes the following features:

· An improved node selection algorithm and new settings page to manually update nodes.

· Better transaction history performance and numbering.

· The removal of the requirement to send a drop of gas to yourself during invocations.

· The first part of preparations for cross-chain support.

All of the releases scheduled for Q2 2018, have not been implemented.

Summary: The development of the project lags behind its roadmap. As of the beginning of July 2018 only the NEX web extension was launched in its alpha version, with the latest improvements to the algorithm for getting token balances and cross-chain support. Perhaps information on the development of the other milestones is not disclosed due to the team’s concerns about copycats or they still haven’t started to work on them. There have been no updates made to the GitHub profile since March 2018.

Description of services & their applicability

Cross-chain exchange is the process of trading or transferring assets that exist on two different blockchains (for example, trading NEO for ETH). Neon introduces a new approach that simplifies cross-chain transactions through a combination of off-chain and on-chain facilities.

The aim of Neon Exchange is to combine the performance of centralized exchanges (CEX) with the trust and security properties of decentralized exchanges.

To achieve this objective NEX introduced 3 main components to its platform:

Off-chain matching engine: It is based on the FIFO (first-in – first-out) valuation method.

Orders are signed and sent from the user’s address to the matching engine (1-4). A user authorizes NEX to access the traded amount of tokens using NEP-5 (the NEO token standard, like ERC-20 for Ethereum) and submits a signed JSON (JavaScript Object Notation, a data-interchange format) request to the matching engine.

Orders are matched off-chain via high-performance hardware (5) and submitted to a smart contract for execution (6). To confirm the integrity of the matching engine any user can verify the exchange by using the publicly specified deterministic algorithm. In the future this option will be replaced with a smart contract.

Since transactions take place off-chain, NEX is able to handle tens of thousands of requests per second.

Due to the speed and flexibility of the matching engine, two types of orders will be available on NEX:

- Limit: exchange tokens above or below a given price ratio.

- Market: exchange one token for another at the current market price.

 

Smart contract: Smart contracts are powered by the NEP-5 token standard and carry out trades between users.

Once the matching engine computes a match, it sends a smart contract for the trade to the user addresses of all involved, including information about the type and amount of tokens to trade, and then it completes the trade.

Payment service: The payment service ensures compatibility with the exchange by means of conversion of global assets such as NEO and GAS to tokens. There are also plans to support multi-chain transfers and fiat pairs.

When a trade is committed, but not executed, funds could be moved back to the smart contract vault to commit another trade at a higher price, for example. This smart contract vault can be created on both Ethereum and NEO blockchains to support trades between any combination of NEP-5 and ERC20 tokens.

NEX will launch the NEX web extension to handle the users’ interactions with the ecosystem of decentralized applications, such as payments to a website using blockchain based assets, converting assets to services or interaction between blockchains.

The NEX web extension is a browser extension, and it has the following features:

Wallet and asset management: It also allows the user to monitor ongoing trades on the NEX platform, convert balances between cryptocurrencies and, in the future, purchase them with national currencies. The wallet will support NEP-5 tokens with a planning extension for ECR20 tokens. The asset management software will interact with webpages within users’ browser.

Website interactions: These will allow users to provide relevant user information, initiate transactions and create smart contracts.

Cross-chain interaction: Cross-chain interaction allows cross blockchain interactions through cooperation with the NEX matching engine.

The security of the NEX web extension is audited by Cure53, a web security service provider offering website testing services.

 

Summary: The Whitepaper provides a good description of the platform and its features. Neon offers a combination of properties provided by decentralized and centralized exchanges by matching off-chain orders and fulfilling them on-chain. This will allow users to execute more complex orders .

As a part of the NEO smart economy, it could be assumed that NEX will play the role of a digital bank, providing services such as asset transfer and exchange, and basic payments.


Roadmap

The following roadmap provided by the team describes a detailed plan for 2018.

 

Summary: The roadmap provides a detailed overview of the planned activities for the current calendar year. It includes the main milestones of the platform development, that are mentioned in the Whitepaper. However, it should be mentioned that there are delays in the realization of plans. As of beginning of July 2018 (Q3 2018), regulatory approval was not received (expected and listed in the Whitepaper for Q1 2018) and the Token Sale has not yet been announced. Despite this, development is continuing and at the end of June 2018 the NEX extension was updated.

Competitive landscape

Market analysis

Bitcoin was the first blockchain-based cryptocurrency, and most cryptocurrencies were created as a peer-to-peer (P2P) payment system that allows its users to transfer value with no central authority or third party involved. Despite the existence of decentralized exchanges, almost all trades between currencies take place on centralized exchanges. Centralized exchanges are easy to use, easy to access and provide advanced trading functionalities like margin trading. However, they bear certain security and legal risks.

Both of these concerns can be solved with decentralized exchanges. These systems are trying to build peer-to-peer marketplaces to differing degrees. Some try to take ideas from the structure of centralized exchanges and add decentralized elements, while others take a more radical peer-to-peer approach in the decentralization of digital asset trading. Most adopt the concept of an order book in their design, while some embrace a more peer-to-peer alternative of directly swapping assets with others.

However, decentralized exchanges have come downsides too, like low liquidity and only supporting basic features, which affects their popularity.

Below is a comparison of Neon Exchange with IDEX, a popular Ethereum DEX and Binance, one of the largest CEX.

Project

Neon Exchange

IDEX

Binance

Type

DEX

DEX

CEX

Fee structure

Trade fee:

- maker - 0%

- taker - 0.13-0.25%

Trade fee:

- maker – 0.2%

- taker – 0.1%

- Deposit fee - free

- Trade fee – 0.1%

Features

- Cross-chain transactions (NEP-5 and ERC20 tokens).

- Off-chain matching engine.

- Web extension (wallet, website and cross-chain interactions).

- Off-chain trading engine.

- Ways to track orders compared to other DEX.

- Quarterly payback up to 100 million tokens.

Token

NEX

AURA and IDXM

BNB

Platform

NEP-5

Ethereum

Ethereum

Total supply

50,000,000

1,000,000,000

200,000,000

ICO price / Market price

1 NEX = 1 USD / N/A

1 IDXM = 3,000 USD,

1 AURA = 0.06 USD /

IDXM = 2,364 USD

AURA = 0.1157 USD

1 BNB = 0.10 USD / BNB = 14 USD

ICO date

July 2018

January 2018

July 2017

Hard cap / Market cap

25,000,000 USD/ N/A

4,800,000 USD / 115,699,000 USD

10,000,000 USD / 2,749,106,159 USD

Benefits for token holders

- Profit sharing: 25% per one-day stake, up to 75% per two-years stake.

- A rewards program for limit orders: 50%/50% taker/maker proportion.

- IDXM membership: free or discounted trades.

- Trading fee discount - with a decreasing percentage from 50% to 0%.

- Referral fee: 20% commission of friend's trading fee.

- Voting for listing.

- Conversion of a small amount of Token Holders balance to BNB.

Upsides

- Plans to support multi-chain transfers and fiat pairs.

- Announced high speed of transactions, up to 10,000 requests per second

- Loyalty among the trade community.

- Ease of use and good reputation.

- Large supply of Ethereum tokens.

- High volume of trades and fully competent.

- Plans to build a DEX.

- Can process 1,400,000 orders per second.

Downsides

Delay in development and only one of the announced products has launched.

- A large number of other DEX platforms that serve Ethereum.

- No Bitcoin & non ERC20 tokens.

- No fiat.

- No fiat payment options.

- No cross-chain transactions.

 

The major upsides of centralized exchanges are speed and flexibility, and the loyalty of traders to Binance is represented by its market capitalization. Decentralized exchanges provide security, but each of them has their downsides. For IDEX they only accept ETH tokens. Also it is worth noting that IDEX and Binance don’t offer cross-chain transactions, which is a major advantage for NEX.

Summary: Decentralized exchanges are an example of a new type of trading technology facilitated by blockchains. The rapid growth of the number of decentralized exchanges and the increase in the number of users of these exchanges indicate their rising popularity. The upsides of decentralized exchanges vastly outweigh their downsides and they have a clear competitive advantage over centralized exchanges: funds and data are secured and controlled by the user.

Compared to other exchanges NEX has its own competitive advantage in cross-chain transactions, as well as their plans for fiat pairs. However, it is worth mentioning that in the crypto community, there is almost always an alternative project offering the same or similar features.

Analysis of the token’s behavior on the secondary market

The core of the platform is the NEX token, is used to:

· Reward NEX holders. To claim a share of the profit, users should stake NEX tokens in a smart contract. The base rate of the fee share will be 25% for a one-day stake, increasing up to 75% for a two-year stake. A user could claim a reward across each token on the exchange, but the reward would be done in one preferred asset type based on the automatic conversion.

· Pay fees for trade or transfer of assets.

NEX assumes the following fee structure:

NEX computes a user’s 30-days moving average volume using the volume of trades associated with their public key, as a percentage of the total exchange volume.

Fees will be deducted from the taker in the token type of the trade.

It should be noted that NEX tokens are going to be registered as European securities with plans for expansion to other jurisdictions. This means that listing is only possible on exchanges where digital securities can be traded.

Summary: The Whitepaper discloses the main features of the NEX token, including its fee structure and benefits for token holders. As token holders will receive a share of the fee profit, the NEX token will probably play the role of a security token, which will prevent its circulation on alternative exchanges.

Also it could be assumed that since Neon Exchange will be the only decentralized exchange for NEP-5 tokens, it could dominate on the market, specializing on NEO projects. However, there are not many NEP-5 tokens in the market right now.

 

Team

 

Fabio C. Canesin

Position

Co-founder & Developer

Total experience

10 years

Relevant experience

10 years

Previous experience (positions) - years

Co-founder at City of Zion (NEO Smart Economy) - since 07'2017

Research Engineer at Schlumberger - since 05'2016

Professional achievements

IT certificates and courses

LinkedIn

Yes

Connections

500+

Endorsements / Recommendations

Yes

 

Fabian Wahle

Position

Co-founder & Developer

Total experience

6 years

Relevant experience

4 years

Previous experience (positions) - years

Founder at Altoida AG (clinical trials) - since 4'2016

Professional achievements

Patent at Method and apparatus for identifying transitions between sitting and standing postures.

Machine Learning certificate.

LinkedIn

Yes

Connections

400+

Endorsements / Recommendations

Yes

 

Ethan Fast

Position

Co-founder & Developer

Total experience

9 years

Relevant experience

9 years

Previous experience (positions) - years

Co-founder at City of Zion - since 07'2017

Founder of Proxino (monitor and debug client-side JavaScript) - ~1.6y

Professional achievements

Awards at National Science Foundation's (NSF) Graduate Research Fellowship and Conference for Human-Computer Interaction.

Publications.

LinkedIn

Yes

Connections

500+

Endorsements / Recommendations

Yes


 

Luciano Engel

Position

Co-founder & Developer

Total experience

8 years

Relevant experience

8 years

Previous experience (positions) - years

Co-founder at City of Zion - since 07'2017

Mechanical Engineer at SIGMA - since 8'2010

Professional achievements

Project NeoScan - NEO Elixir Block Explorer

LinkedIn

Yes

Connections

500+

Endorsements / Recommendations

Yes

 

Thomas Saunders

Position

Co-founder & Developer

Total experience

10 years

Relevant experience

10 years

Previous experience (positions) - years

Co-founder at City of Zion - since 07'2017

Lead Software Developer at Institute for Design Innovation - since 12'2015

Professional achievements

Project for POM Press Kit Microsite and Desctop Application

LinkedIn

Yes

Connections

200+

Endorsements / Recommendations

Yes

 

David Schwartz

Position

Developer

Total experience

10 years

Relevant experience

10 years

Previous experience (positions) - years

Member at City of Zion - since 08'2017

Software Engineer at Leaf Group - ~1.3y

Professional achievements

Project for NEO Blockchain Open Source Developer

LinkedIn

Yes

Connections

500+

Endorsements / Recommendations

Yes

 

Evgeny Boxer

Position

Developer

Total experience

14 years

Relevant experience

14 years

Previous experience (positions) - years

Senior Fronted Developer at Propeller Aero - 1y

Senior Software Engineer at CrazyLister.com - <1y

Professional achievements

4th Place Hackathon Winner ( ng-coding ), 2nd Place Hackathon Winner, Certificate of Excellence.

Certificates in IT

LinkedIn

Yes

Connections

500+

Endorsements / Recommendations

Yes

 

Advisors

 

Muzzammil Zaveri

Position

Partner at Gradient Ventures

Total experience

8 years

Relevant experience

8 years

Previous experience (positions) - years

Partner at Gradient Ventures - since 2018

Founder of Proxino (monitor and debug client-side JavaScript) - 1y

Professional achievements

2018 - Forbes 30 under 30

LinkedIn

Yes

Connections

500+

Endorsements / Recommendations

Yes

 

Da Hongfei

Position

Founder of NEO

Total experience

13 years

Relevant experience

4 years

Previous experience (positions) - years

Founder & CEO at Onchain - since 1'2014

CEO at IntPass Consulting - 9y

Professional achievements

No relevant achievements

LinkedIn

Yes

Connections

300+

Endorsements / Recommendations

No

 

Erik Zhang

Position

CTO at Onchain

Total experience

4 years

Relevant experience

4 years

Previous experience (positions) - years

CTO at Onchain - since 8'2014

Professional achievements

No relevant achievements

LinkedIn

Yes

Connections

400+

Endorsements / Recommendations

No

 

Summary: The team features 11 core members working in both development and back-office areas. In the table above there is a short overview of the co-founders’ and developers’ previous experience. All specialists have relevant experience, with the majority of them being involved in the City of Zion. City of Zion is a group of open source developers, designers and translators formed to support the NEO core and ecosystem.

The three advisors are experienced professionals in the blockchain sector. One of the advisors, Da Hongfei, is the CEO of NEO, which indicates involvement and support from another blockchain platform.

 

Token price factor analysis

Once the full description of the project is released, all of the factors may need to be re-evaluated:

Factor

Description

Price effect

Development and release of new products according to the roadmap

There are delays with the realization of plans. At the beginning of July 2018 (Q3 2018) regulatory approval had not been received (expected and listed in the Whitepaper for Q1 2018). The Token Sale has also not been announced yet. Only one of the products scheduled for Q1/Q2 has been launched.

Bearish

Demand for the platform

NEX will probably play the role of a digital bank for the NEO smart economy, providing asset transfer and basic payments. As it would be the first solution for NEP-5 tokens, this would increase demand for the platform.

Bullish

Token distribution

The distribution proposal mentions a lockup period for founders - 20% of the token distribution for a vesting period of up to 2 years. The solution looks logical and confirms the interest of the team in the development of the project.

 

 

Bullish

Competitors

There is a wide range of both centralized and decentralized exchanges, with competitors who are well-known and accepted by the community. Ethereum solutions are more popular, but there is a lot of competition in that sector. Within NEP-5, NEX won't have any competitors, at least not in near future anyway.

Bullish / Bearish

Volatility of the crypto market

Tokens will be used as an internal payment mechanism, therefore due to the high volatility of the crypto markets, the token price could fluctuate or even be subject to speculative activities (pump and dump etc.).

Bullish / Bearish

 

Summary: The token price analysis highlighted potential risks for the stability of the token price in relation to the development of the project. It should be noted that these factors were analyzed before the release of the other solutions, the Financial Market Authority approval and the ICO announcement.

Investment risk analysis

Based on the analysis performed, the following risks were identified:

Risk

Description

Level

Product launch

The development of the project lags behind its roadmap. Only at the beginning of July 2018 was the alpha version of the NEX web extension launched.

High

Market

There are a number of strong competitors among both CEX and DEX solutions. An increase in demand for cross-chain solutions would result in the creation of other projects with similar features. However, we note that Neon Exchange has significant competitive advantage in the form of the NEO Foundation backup

Medium

Roadmap

At the time of writing, July 2018 (Q3 2018), regulatory approval had not been received (expected and listed in the Whitepaper for Q1 2018). The Token Sale has also not been announced either. Only one of the announced product has been launched.

Medium

Use of proceeds

The use of proceeds is not disclosed. Taking into account that the Hard cap is 25 million USD and the product is not yet launched, all efforts can be concentrated on development.

Medium

Legal risks

The privacy of data is a very important concern nowadays, and legal implications differ from country to country. However, blockchain is probably the best solution when it comes to data privacy. NEX made a decision to register its token as a European Security and accept a fiat pair. These steps may delay the ICO of the project and could lead to dependence on legislation.

Medium

Partnership & Investors

There is only information on one partnership available – Thor, a blockchain-powered gig platform for contractors and entrepreneurs. There is also no information available on investors. The absence of information on investors and partners could affect the project. We note that the project seems to be supported by the NEO Foundation, which is a promising fact

Medium/ Low

Information disclosure/community

There are no Telegram or Facebook accounts. The teams confirmed its unwillingness to disclose information on part of the architecture development due to their concerns about copycats and imitations.

Low

Summary: The main risk for the project is the delay in product development.

The information contained in the document is for informational purposes only. The views expressed in this document are solely those of the ICORating Team, based on data obtained from open access and information that developers provided to the team through Skype, email or other means of communication. Our goal is to increase the transparency and reliability of the young ICO market and to minimize the risk of fraud. We appreciate feedback with constructive comments, suggestions and ideas on how to make the analysis more comprehensive and informative.