Chinese tech companies were once seen as copycats of their Western peers: Alibaba was a knockoff of eBay and Baidu imitated Google. More recently, Chinese firms like TikTok and Huawei have established such dominant international positions that U.S. authorities have tried to hold them back.
Now, the technological arms race is playing out in the cryptocurrency industry, where one Chinese company is taking on Ethereum, the world’s second-largest blockchain, which U.S.-based developers have used to build semi-automated trading and lending networks under the rubric of decentralized finance, or DeFi.
Neo took aim at DeFi in late September with its launch of a new platform called Flamingo. Da Hongfei, a Neo co-founder, told CoinDesk in an interview that the protocol will eventually provide users with features found on popular Ethereum-based projects like Uniswap, Curve Finance, yearn.finance, and Synthetix.
Flamingo is not simply a product of “copy and paste,” the co-founder said in an interview. “It’s like rebuilding a parallel universe.”
Within a few days of its launch, Flamingo had attracted more than $1.6 billion of collateral locked into the protocol, according to a tweet from its official Twitter account. That was despite unexpected delays in the project’s early days due to “an overwhelming amount of network traffic,” as company officials described it.
The amount represents more than half of the $2.35 billion of crypto collateral locked into Uniswap, the top-ranked DeFi project, according to DeFi Pulse.
Some developers focused on the Ethereum blockchain say Flamingo is little more than a knockoff.
“It’s the first credible, wholesale, blockchain-scale ‘vampire’ attempt,” money market protocol Compound’s founder Robert Leshner tweeted on Sept 27. He described Flamingo as an attempt to “clone and launch” all the popular DeFi projects on Ethereum at the same time.
“The success or failure of the project has extremely important ramifications for how we think of Ethereum’s network effect and composability lock-in,” Leshner wrote.
Neo is not the first project that has been trying to challenge Ethereum’s dominance and on the list of “Ethereum Killers.” The roster also includes EOS, Tron and Algorand. And for Neo, one of its biggest “selling points” to developers has been its nearly zero-transaction-fee model since its birth.
As of Tuesday, Ethereum’s average transaction fee was at $2.24, according to BitInfoCharts.
Neo’s DeFi ambition comes amid heightened geopolitical tensions between the U.S. and China, and while there’s no evidence yet of any intervention on behalf of either country’s government, the brewing competition for Ethereum’s business might represent a new front in the technological arms race.
Ethereum’s native token, ether (ETH), has been beating its Chinese challenger in digital-asset-markets this year, with an approximate 170% gain in 2020 versus around 100% for Neo’s NEO token, according to data from Messari.
A rare recent report from Chinese state-controlled media labeled cryptocurrencies “the top performing investment” of the year, seen as a sign the central government is encouraging development in the space.
Da says approximately 90% of the people he talks to on Neo’s group chats on Discord are English speakers. That suggests Neo has a broad, geographically diversified user base, he said.
“We are not attracting people,” Da said. “We are attracting crypto assets. As long as it’s an asset, then it is welcomed. We don’t care if the private key is Chinese or American.”
One question that might loom in the minds of crypto traders is how much control or oversight Neo might cede to Chinese authorities.
Neo is currently working with the Blockchain-based Service Network (BSN), a Chinese state-sanctioned blockchain infrastructure project, which aims to attract international decentralized applications (dapps) developers to build their projects on it, according to Da.
Neo is like any other startup working furiously to bring new products to market, he says.
“We don’t want to simply do a Uniswap copycat,” he said. “We are trying to do something original.”