Wednesday, 21 February 2018

The Dazzling Allure of Cryptocurrency (Infographic)
The cryptocurrency world is evolving at a speed that leaves many newcomers lost in a haze of uncertainty. The following graphic will help dispell some of the most popular myths and help get you on track to a better and more complete understanding.
coincentral cryptocurrency myths
This article was originally published at”:

Tuesday, 20 February 2018

Startup Financing for Founders: Your Companion Checklist

Executive Summary

Why are Founder Finances Critical?
  • Having a complete understanding of their startup's financial situation helps entrepreneurs to be more proactive and credible when soliciting investment.
  • 75% of founders make no money from the eventual exit of their startup after raising startup financing.
  • A balanced opinion with weight away from the emotional/qualitative aspects of starting a business ensures that entrepreneurs take rational and well-judged decisions
Understand How Equity Works and Is Divided
  • Decide on an equity split among co-founders with a view toward the value of their future efforts. Take any previous work done as a separate sunk cost.
  • Be aware that equity might be required for non-co-founders, such as senior hires, advisors, and service providers.
  • Ensure that vesting applies over four-year periods to continually incentivize stakeholders and prevent dead equity.
  • Control and wealth can be mutually exclusive in a startup. Understand that dilution is necessary and losing control over time can be positive towards achieving financial success.
Take Budgeting Seriously and Have a Long-term Mentality
  • Planning out your entire first year will ensure that you are getting into a venture that has merit and that, if you do require financing, you raise the optimal amount.
  • Knowing from day one what metrics will determine the success of the business will allow you to build a budget for later years. This serves as both a guide and a milestone marker.
Keep Valuation at the Forefront
  • Appraise the likely endgame of the company through potential exit scenarios. Knowing the optimal route to exit in advance will allow for you to tailor your plans for the business.
  • Applying knowledge of ownership, dilution, and valuation will ensure that you are aware in advance of your potential windfall from a sale and prevent any nasty surprises.
  • Understand your opportunity cost that you are giving up by leaving the labor force. You must ensure that your potential gains from the business outstrip other work options available.
As a startup founder of an early-stage technology company called VitiVision, I recently went through the challenging process of setting up a business, raising funding, refining my business model, interviewing customers, and recruiting a team. Even as a CFA charterholder, former investment banker and VC, I realized during the process that there were many financial considerations that I wasn’t aware of or ready to make. Startup advice that I gathered from internet research was also fragmented, legally oriented, or biased towards a VC perspective.
In light of these experiences, I will now share with you my learnings in the form of a checklist of the eight important financial considerations that you will encounter as a founder. These are categorized under the themes of equity ownership, budgeting, and valuation considerations.
graphic representation of the eight important startup financing considerations faced by founders
Why is important to get “Founder Finances” right?
  1. It makes you look credible in front of investors and enhances your fundraising success rate and speed. Most investors will eventually ask you to provide much of the information below.
  2. It sets you up for personal financial success. If you eventually sell your business, don’t be the “75% founders” who don’t make a dime when they take VC money.
  3. It gives you logical and quantifiable guidelines to back your own decisions. For example, should you pursue your startup, or keep your full-time job? How much funding do you need to raise?

Firstly, You Must Understand the Mechanics of Equity for Startup Founders

How much equity you and other stakeholders will have, and when, is one of the most important financial decisions you will have to make as a startup founder. It’s important because equity provides financial rewards and motivation for co-founders, employees, advisors, and service providers. It also determines decision rights and control of the company.
Getting this wrong could not only risk underperformance and resentment among stakeholders but also result in your own termination from the company or dilution to an insignificant level.

How Do I Split Equity Among Co-founders?

Most likely you will begin your journey with a co-founder, or recruit one shortly thereafter. You will need to decide on the equity split as soon as possible.
Regarding the equity split, there are many articles written on this topic and various online calculators (e.g., here and here) to help you determine the exact amount. The broad factors determining the split should be:
  • Idea: Who came up with the idea, and/or owns the IP? While the initial idea is important to start, the execution thereafter is what makes a company last.
  • Contribution to the company: Consider the roles and responsibilities of each person’s job, their relative value to the company, and their importance as signaled by investors. The commitment level is also vital and necessary if anyone is working part-time.
  • Opportunity costs: How much would each co-founder earn, if they were to find a job in the open market?
  • Stage of the company: When does the co-founder join? The earlier they do, the riskier it is, and thus, deserving of more equity.
  • …or a simple 50/50 split, as advocated by Y Combinator, 50/50 split promotes equality and commitment, and is “fair.”
Whatever model you use, remember that the split should be forward-looking, in that it should reflect the “future value” of the company.
I made an initial mistake by basing my startup’s entire split calculation on a backward-looking, “How much work has been done to date?” method. In my case, that model gave the co-founder who invented the IP, but was only working as a CTO part-time, a disproportionately larger equity stake (>60% vs. typical IP licensing deal of only 5-10% equity) than my own. I was the one who created the entire business plan, pitched successfully for funding, and was working as the CEO full-time. The missing part of this decision was that it didn’t reflect the forward-looking elements of risks and potential contribution.
Instead of deciding the equity split up front, another approach is to just wait and see. In reality, startups and personal situations evolve quickly. Leave 15% or so of founders’ equity un-allocated for the future, and decide only when you reach the first significant milestone (e.g., MVP or first investment).
In summary, my practical advice from experiences with equity:
  • If you are the CEO, you need to have the majority (>50%) of the equity, so you can control the business and make critical decisions.
  • If you take a senior role full-time, you need >25% of the equity for a significant “skin in the game” element and to be considered a “co-founder.”
  • You need to be prepared for founder departure (including yourself) and have a Plan B to keep the business alive, such as having either a vesting schedule or clauses forcing co-founders to sell x% of equity to a new co-founder for quitting.
  • Even if you “wait and see” to determine the final amount, you should have a discussion early and have all co-founders sign a non-binding “co-founder agreement.” You’ll be surprised, no matter how committed and prepared people think they are, that until they have to sign anything (even non-binding), they can always change their minds. This was what I experienced when my former co-founder dropped out after months of working together.

Do I Need to Allocate Shares to Non-co-founders?

Over time, as you grow the team, you will need to give shares to employees, to incentivize their performance. Most VCs will also ask you to establish an employee share options pool (ESOP) and to top it up over time. Typically, at Series A, VCs will ask you to put in ~10% to the employee share options pool. Over next rounds, investors might ask you top it up to 15-20%.
How much to give, and when, depending on the stage of the company and the seniority of the employee. Common practices are:
Table 1: Suggested Equity Allocations for Non-Founders

Vesting schedules are put in place to protect other shareholders against early leavers and free riders. As co-founder, unless you have a milestone-based vesting schedule among the founding team, the usual vesting schedule is four years, with one-year vesting cliffs for 25%, and 1/36 of total eligible shares earned each month for the next 3 years. There are variations to this term, such as accelerated vesting, vesting cliffs, and percentage founder vesting earned before outside investors.

Vesting Is Insurance: Use It as a Carrot on a Stick

How Will Startup Financing Dilute My Ownership Along the Way?

You want to retain control throughout and have a healthy financial windfall when your company exits, right? Sadly, statistically, four out of five entrepreneurs are forced to step down as CEO during their tenures. The HBR article The Founder’s Dilemma argues that the control vs. wealth dynamic is usually a rich vs. king tradeoff. According to the article:
“The ‘rich’ options enable the company to become more valuable but sideline the founder by taking away the CEO position and control over major decisions. The ‘king’ choices allow the founder to retain control of decision making by staying CEO and maintaining control over the board—but often only by building a less valuable company.”
graphic representation of the trade-off entrepreneurs make
This article highlights how important it is for you, as the founder, to understand dilution and its impact for you as early as possible. After multiple rounds, you could end up with less than 30% of equity at exit; however, the value of your stake could increase significantly at each round.
You can do a dilution analysis by developing a pro-forma capitalization table (called a “cap table” by VCs) and continually updating it. The important input assumptions are:
  1. Financing needs or money raised (depending on your burn rate)
  2. Number of rounds
  3. Dilution in each round (new investors + ESOP)
The output of this analysis should be the founder percentage ownership at each round and the dollar value of the equity. What should you assume? Here are some typical assumptions you can make, followed by a demonstrative example (Table 2 and Chart 1):
  • Successful startups need 3-5 investment rounds before exit. The more rounds you raise, the more dilution you take.
  • At each round, a new investor will ask for 10-25% of equity (dilution), and a top-up of employee share options (ESOPs)
  • Round size increases by ~5x between each financing round
Table 2: Simplified Pro-Forma Cap Table (Illustrative Figures, in $ Millions)
chart of founder equity dilution analysis over time

Secondly, Take Budgeting Seriously and Have a Long-term View

Budgeting sounds boring, but doing it right ensures that you make rational decisions from day one and don’t let your biases cloud your execution.

A Robust First-year Budget Will Ensure That You Raise Enough and Don’t Waste Money

It’s important to have a clear estimate for the first-year budget so that you know how much you can self-fund or if you need to raise investment. The cost items on an initial budget should include:
  • Company registration and incorporation: ~$1k.
  • Accounting: $2-3k for a solo accountant on a one-year retainer.
  • Legal: ~$5-10k. Hiring a good lawyer can be priceless, as famously shown from the experiences of Facebook co-founder Eduardo Saverin. From personal experiences, my lawyer pointed out a clause in my investor’s shareholder agreement that could have forced me to sell all of my shares to investors in the event of a dispute (the “shotgun” clause). Don’t sign anything with an investor unless a lawyer has seen it first.
  • First Employees: only bring them on when absolutely necessary, use contractors in the interim.
  • Other: travel expenses, office space, and equipment.
  • Founders’ living expenses (don’t forget this!): These should be included in your internal budget version (not for outside investors), if you are full-time and not drawing a salary.
Table 3: Illustrative First-Year Budget

In summary, a realistic first-year budget for a startup of non-paid co-founder(s) and one FTE (contractor or employee) is in the range of $160k to $300k. You should have the confidence to raise this or be prepared to fund it yourself. There are some alternative funding sources out there, such as incubators or accelerators, where they either invest an initial amount or provide FTE resources, such as technical engineers, to help you develop an MVP and kick-start the venture.

Have a Three-year Startup Financial Model to Plot Future Milestones

This should be done in conjunction with a desired exit valuation (discussed in the next section) so that you can realistically project the next three years of P&L in lieu of an end goal.
I suggest that you focus on major items: milestones, key metrics (e.g., number of users), revenues, and expenses, as your business can pivot drastically during its life. Make assumptions and document them in detail so that you can continually iterate.
  • Major milestones. What are they, and when will they be hit? For example, they can be your first hire, MVP, first customer, and/or seed round.
  • Key metrics (other than revenues) such as the number of users, full-time employees or regulatory approval. This is especially important if you don’t envisage having revenues for a period of time, which can be common in sectors such as biopharma.
  • Cash burn rate (expenses). What do you have to pay to keep your business alive?
  • Revenues. Estimate revenues by making assumptions based on the number of customers, revenue per customer, and growth rate.

Thirdly, Get in the Mind of the Investor by Considering the Valuation of Your Business

As ex-VC and banker, I love building valuation models. It gives me a range of return that I can expect as a professional investor. And It’s fun—I can build a model valuing a company by playing with assumptions such as market size (TAM/SAM/SOM), growth rates, and exit valuation multiples. Usually, I would project out three potential scenarios:
  1. Base (e.g., user base grows by 20% p.a.)
  2. Upside (e.g., viral user growth of 200% p.a.)
  3. Downside (e.g., first customer in 2 years)
Now as an entrepreneur, I find it even more necessary to build valuation models, as it allows me to estimate the expectations placed on myself. Most importantly, as an early-stage entrepreneur, I can use the exit valuation analysis to steer my business towards:
  • Charting the strategic roadmap given my vision. For example, the model should tell me what milestones need to be hit by when.
  • Providing confidence for investor pitches. For example, I can say “According to my model, this is a $500 million business you’re investing in.”
I don’t want to discuss here on how to value at each round because valuation at earlier rounds is usually out of the founder’s control and driven by supply and demand of capital. You can find many good articles written online on different valuation approaches for early rounds, such as this one.
Instead, I want to talk about exit valuation and founder’s return projections, which are usually overlooked but important to analyze.

Take a View of Your Exit Scenarios and Build Toward Them

Exit valuations, if considered in advance and done properly, can help you to carefully plan the business’s path. Below are a few critical assumptions that will drive your valuation, exit value, and commercial strategy:
What metrics do you have to hit to achieve an exit? For example, if you are a new drug development company, you need to get FDA Phase II approval to be acquired by a major drug company, or IPO.
When can you hit the target metrics? This puts a ballpark number on the timing of exit. Typically, it takes at least five years to build a viable company.
How would you exit, IPO or M&A? This might sound too premature to think about, but it’s not. If you are targeting M&A, you need to build a company to be a valuable potential asset to the acquirers. For example, if you are building an electric vehicle startup targeting to be acquired by Tesla, you should get familiar with Tesla’s business strategy and technology pipeline. On the other hand, an IPO candidate needs to appeal to a wide range of institutional investors who don’t have specific needs but require an exciting story.
What’s the typical industry valuation approach applicable to your business? The main valuation approach for any financial models is discounted cash flow (DCF), public comparables, and precedent transactions. You can obtain the detailed approach from various finance textbooks and online tutorials.

Consider Your Own Potential Financial Windfall and Use It as a Motivational Barometer

Even though money is not the most important driver for starting a business, you will want to be properly rewarded for your blood, sweat, and tears. Now that you have projected out your expected equity ownership at exit and you know what your target valuation is at exit, you can calculate your return:
Your return = the expected equity % at exit x the target valuation x (1-capital gains tax rate).
For example, if you expect to own 20% of equity at exit, at a $100 million valuation, and your capital gains tax rate is 25%, you will earn $15 million from the transaction.
If you’re debating whether to start this business or not or try to convince someone else to join you can use this analysis to show the potential reward.
It is vital before starting a business that you compare this projected figure versus your own opportunity cost of earnings potential staying in the corporate world. Having this foresight will ensure that you start your business without any regrets and a clear understanding of what you are aiming to achieve.

If Planned Thoughtfully, the Internal Aspects of Startup Financing Will Set You Up for Success

You should be aiming to do this analysis as soon as you are confident about your startup idea and co-founder selections, or at the very latest, before raising external financing.
Many startup founders prefer to focus on building a great business first and then figure out the housekeeping over time. However, it could be even more time and money wasted later if you don’t get it right at the start. For example, we all know about Facebook’s co-founders’ nasty fight, and Zipcar’s co-founders’ not being properly rewarded for their hard work (of the $500 million acquisition of Zipcar, one co-founder only had 1.3%equity after multiple rounds of dilution, and the other had less than 4%).
Looking at some examples from founders of famous companies, there is a wide disparity of ownership percentages held at the time of IPO. This shows that there is no set course to take and that personal fortunes are not entirely correlated to the company’s.
chart showing the percentage of shares held by founders at the time of their company's ipo
In conclusion, like tax and death, these financial considerations don’t go away. It’s better to learn how to deal with them up front or get professionals to help you do this. This will empower you to focus on actually building a great business, from “lean startup” product development to acquiring customers.


What is founder equity?

Founder equity is the ownership that is held by the team that started the company. The original capital to start the company will come from founders’ own funds or ‘sweat equity’ that they put into getting the idea off the ground.

Wednesday, 14 February 2018

Major Content Marketing Trends For 2018
Resultado de imagem para Content Marketing Trend
Content marketing is well on its way to continuing its momentum. Every year opens and the progression of content marketing is still constant. The investment will seem to be on the rise and the effectiveness of this practice more important than ever. This is why we have concocted an article that gives pride of place to the trends we have estimated the most interesting for the year 2018. An overview.
From creation to diffusion, technological innovations are forcing brands to rethink their content marketing strategy to adapt to consumers’ new buying habits.
But then with a multitude of different platforms available to you in 2018, how to communicate the right message at different stages of the funnel? What formats of content and innovations to focus on to raise awareness, engage and retain? How to boost traffic and implement a content strategy that leads to conversions and sales?
As 2018 begins, this study shows that brands are increasingly taking content marketing seriously, increasing their investments in the field. In the same way, content and preferences evolve over time. We have compiled, below, the major trends for 2018.

The Growth of Augmented Reality

Beyond the buzz of VR, always expensive, too immersive and constraining, augmented reality presents a real opportunity in terms of applications for marketing. We can already see various uses here and there (Ikea app for example) and with the improvement of the technology, the user experience should also improve. And with companies like Apple pushing augmented reality, there is no doubt that technology will continue to grow.

Content Marketing Will Continue To Take Shares of Traditional Advertising

Initially, content marketing was the exact opposite of advertising. The cream of the cream content reached heights through its quality. Conversely, advertising was based mainly on the amounts paid. Nowadays, lines tend to cross – sponsored content, for example, halfway between content creation and paid advertising – and it’s important to keep in mind a desire to attract customers and prospects in the future. Offering quality content rather than trying to sell at any price (and at all advertising prices).

Hyper-Personalization of the Content

Earlier scenario was that the leading brands no longer just produce an article, audio or video, but merchants can now produce thousands of content for the same campaign.
You must be thinking the reason behind this massive increase. It’s simply the Hyper-customization of content by merchants to better meet the needs of their many customer segments.
In this regard, video channels like YouTube has recently unveiled new tools to create personalized ads, video clips, etc., which allows brands to broadcast thousands of videos in a single campaign. The video a consumer looks and search is determined by a wide variety of factors, including, behavior, statistics, downloaded apps, and even where they are (physically, using Google data).
With all these numeric data points, tradesperson now access the data and information they need to deliver the exact quality content for the consumer. For example, a buyer looking for a consumer goods store could see a video about purchasing skills if he had just wanted to use his money wisely.

Content Accessible To Everyone

This is a relatively recent trend. Brands are beginning to pay attention to populations with disabilities (blind, deaf, etc.). We are still in the early stages but it is positive that some brands are now integrating these populations into their marketing strategies. An approach also facilitated by technological developments and social networks (Facebook, Twitter, etc.) facilitating, for example, adding a written description of an image for people who cannot see it.

LinkedIn 2.0

Whether for large brands or small businesses, LinkedIn is the platform of the moment. The end of the year 2017 has shown, LinkedIn seems to have found a second wind and finally comes to Facebook B2B. At present, it is a platform that should not be overlooked in terms of presence, visibility, and promotion. And with the contribution of video, LinkedIn is already at the top of the 2018 trend.

Facebook Is Looking For Itself, Instagram Dominates

Admittedly, in recent times, Facebook seems to be looking for a course. Between changes in the “news feed” and willingness to give preference to relations/friends rather than brands. In the meantime, Facebook is also full-fledged Instagram, taking advantage of photo and video trends (while relying on the FB network). The marks are there, the hearings are there. The year looks good for Instagram.

Snapchat Still Behind

Snapchat seems to be fighting to try to keep its head out of the water right now. The tool has had good hours but does not really see any growth. Despite recent updates – and the ability, from now on, to share beyond the network (a potential to use filters, always quality, to create a post) – the application is now more of the gadget than the marketing tool.

Influence Marketing In the Continuity

The statistics are in favor of influence marketing. With this, the number of “specialized” agencies continues to grow, current influencers structure their approach and have combined experience and we see, now, to increase the power of micro-influencers. The difference, beyond the prestige, will be on the ability of these influencers to develop relevant price models and, above all, provide statistics and demonstrate a return on investment. With a little more maturity, so-called influencers should be more easily identifiable by brands and leave room for “real” influencers.

The mobile will continue to take market share

The trend is in “mobile-first”. The experiments (contents) are created, in priority, to be seen on mobile (smartphone or tablet). It is now a virtual necessity (beyond having a site that is also optimized for mobile). More than half of the population consumes mobile content, and in the United States, an average of 3 hours per day is spent on their mobile.

The beautiful days of storytelling

Storytelling is the art of telling a story. Beyond the buzzword is the story of marketing well done? Instead of a piece of content without logic, storytelling involves creating a narration, staging a brand, a product, and advancing the story. Today we see all kinds of content created and published without a clear link to a brand or a product. With a little more maturity, storytelling – and marketing of quality content – will have to replace these poor content.

Data and statistics

Marketers are gaining experience, tools are improving and it is now crucial to provide quantified results. The way the best marketers stand out – beyond successful campaigns – is their ability to use statistics and data. Not only to make informed decisions and avoid wasting time and money but also to justify their results.

The growth of content recycling

Content recycling? In this case, it is about re-using existing content (and creating interaction) on other networks. Sharing is not enough. Sharing content that is relevant to each network and significantly differentiated is the key. If a blog article works pretty well, you can use key phrases on Twitter for example. The article presents figures or statistics? Create a visual with these and share on Instagram or Twitter. Etc. This is a winning strategy, not only because it relies on the use of quality content that has already found an audience but also because it saves time for marketers. Recycling content is easier than creating a new one.

Editing the content schedule

Instead of creating content on the base:
Audience> Message> Channels (a message for the audience delivered identically on all channels)
we hopefully see more of:
Audience> Channels> Message (the same message but adapted in its form and tone to the channels)
Finally, as the year rolls on, it’s important to remember that content marketing is not a sprint but a marathon. The efforts bear fruit over time.

Lunching into Cryptocurrency? (Infographic)
Virtual currency is becoming increasingly important. Organizations are starting to understand the value of this relatively new form of currency and are investing in it rapidly. The currency is estimated to be worth as much as nine billion dollars today. While there are still some that are perplexed by what cryptocurrency is and why it’s important, most people understand that it is significant implications for society.

The phenomenon of cryptocurrency began with the invention of cryptocurrency. Since then, many other digital currencies have emerged on the market. More businesses than ever are accepting it as a legitimate form of currency. Companies are strategically thinking about how digital currency will affect their business down the road.

Cryptocurrencies like bitcoin are important because they are revolutionizing monetary transactions around the world. Bitcoin is permissionless and irreversible, so many people see the system as an attack on the traditional control that banks and governments have over the finances of their citizens.  

Despite its rise in popularity, many people still struggle to understand the complexities of digital currency. To understand where cryptocurrency is headed, it’s important to understand the fundamentals of the system. Fundera created a guide that breaks down the complexities of cryptocurrencies and outlines the essentials of how the system works. Read on for everything that you need to know about cryptocurrency.

Tuesday, 13 February 2018

NEO and Blockchains Across China
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NEO’s Vision

The developers of NEO are looking to spread blockchains across all of China. Their company, Onchain, has developed a Distributed Networks Architecture (DNA) to allow for the easy implementation and development of standardized blockchains. They want every interested field to easily be able to migrate their data and assets onto a private or public blockchain. The founder, Dr. Da Hongfei said“We want to be the place people go to when they want to do serious and reliable transactions.” Onchain and NEO are not only succeeding in their vision, but they are set up to thrive within the regulations of the Chinese government.

Cryptocurrencies in China

On the surface, it seems as if cryptocurrencies and China don’t always get along. “Two things are infinite: the universe and the number of times China can ban Bitcoin, and I’m not sure about the former.
There is a 50,000 USD yearly cap on moving money out of China without special permission. People found a loophole in this system by buying cryptocurrency and easily moving funds and accessing them anywhere in the world. The Chinese government tried to close this loophole through the banning of online exchanges. The government was also worried about the levels of speculation, thinking back to their recent stock market crash.
After China banned exchanges and ICOs, interest in cryptocurrency didn’t simply roll over and die. People moved to a p2p model, making local transactions, often referred to as the “over the counter market.” Here’s a look at the change in volume on localbitcoins around the time of the bannings. 
Localbitcoin Volume

Buying Coins in China Today

People would also organize trades on WeChat, the most popular chatting service in China. This was especially convenient at first since users could use WeChat Pay to send each other fiat currency. Government monitoring of WeChat led to increased popularity of the encrypted chatting service Telegram. China then banned Telegram. It’s unclear if the new p2p models are legal in China, but there has been no direct intervention as of yet. Realistically, it’s not feasible to stop all cryptocurrency trading.
Residents of China can also hop on the train into Hong Kong to obtain cryptocurrency. Over 100,000 Chinese tourists travel to Hong Kong every dayThey can buy coins from any of the large exchanges or use one of the many BTC ATMs It’s no wonder why the Hong Kong BTC ATMs frequently have large lines.
All of this regulation may sound like discouraging news for NEO and cryptocurrency but Hongfei sees it differently. He said, “It’s time for regulators to step in.”

Onchain and NEO in China

The Chinese government has a history of protecting local companies willing to cooperate with regulations. Playing by China’s rules has proved fruitful for several tech companies. You won’t find Google, Facebook, Twitter, WhatsApp, Uber, or Amazon in China. Instead, you see the success of Baidu, RenRen, Weibo, WeChat, Didi, and Alibaba. WeChat, for example, has over 1 billion accounts registered. NEO and Onchain are positioning themselves to be the next big names on this list of tech giants.
While not exactly friendly to Bitcoin, the Chinese government does actually support the development of blockchains. The Ministry of Industry and Information Technology (MIIT) of the People’s Republic of China, with the help of Onchain and other companies, explored several areas where blockchains can increase efficiency and prevent fraud. The government believes supply chains, assets, finance, welfare, and identity management can all potentially benefit from the use of Blockchain Technology. The government has even experimented with the idea of its own national cryptocurrency. It’s obvious that Hongfei anticipated the future demands and requirements of the Chinese government as these are all areas that Onchain is hoping to tackle with its custom and flexible Distributed Networks Architecture.
The MIIT also proposed that there should be greater standardization across blockchains. Hongfei said“Our vision is to make Onchain a truly universal Blockchain framework. Utilizing different plug-in modules, our framework could be applied for a public chain, a consortium chain or even a private chain. Our cross-chain adaptor module, currently under development, creates interoperability among these different chains.” 

Onchain Technology

This is your last chance. After this, there is no turning back. You take the blue pill – the story ends, you wake up in your bed and believe in whatever altcoin you want to believe. You take the red pill – you stay in China and I show you how deep the blockchain goes.
NEO was designed from a technology standpoint to be able to comply with regulations and work within the system. Bitcoin was designed with decentralization as a focus. While there are advantages to decentralization, it can lead to disagreements on the direction of the coin and slow implementation of new ideas. Decentralization is not the immediate goal of Onchain and NEO. Hongfei believes the centralization is worth it, in the beginning, allowing them to implement changes quickly.
NEO pre-mined 50% of their tokens to pay developers and help promote the growth of the coin. Dr. Hongfei compares NEO to eastern Asian countries, saying it will be “more authoritative in the beginning, but eventually be democratic.” He believes NEO will be “eventually fully decentralized… like Bitcoin.”

NEO Mining

The NEO blockchain confirms transactions in a relatively centralized, but unique way. Rather than using proof of work or proof of stake, NEO uses Delegated Byzantine Fault Tolerance also known asdBFT. In this system, holders of NEO elect nodes to confirm transactions.
To become a node, you must have a computer reach certain technical requirements, stake 1000 GAS coins, and then become elected by NEO holders. All 12 active nodes currently provide free transactions. The NEO holders are certainly more likely to vote for people that promise free transactions. Once you are elected as a node, you might be randomly selected to confirm the transactions on the blockchain. If over 66% of the other nodes agree with your ledger, the block is confirmed. If less than 66% agree, another node is selected to propose transactions that should go on the block. This process continues until a consensus is reached. NEO holders would most likely vote out nodes consistently failing to propose correct transactions.

No Forks

The Delegated Byzantine Fault Tolerance makes it clear which transactions are confirmed on the blockchain at all times. In The Matrix, we learned there is no spoon, but they forgot to mention there are no forks either. Unlike Bitcoin or Ethereum, which often fork until reaching a consensus, the NEO blockchain cannot fork. The lack of forks is essential to Onchain’s goal of digitizing assets such as stocks, bonds, and digital identities. If companies want to digitize regularly traded assets, it must be clear who is the owner of the assets at all times. 
Neo Spoon

Chinese Partnerships

Onchain is working hard to spread their blockchain technology to private and government institutions. Here is a slide from a recent presentation by Hongfei.
Onchain Partnerships

Identity Chain – Integrity System Based on Blockchain

This project was “initiated by Guizhou Far East Integrity Management Company” and is based on the Distributed Networks Architecture. Onchain is helping build a blockchain to keep track of and manage identification. 

Security Company – Enterprise Level Digital Asset Platform

Onchain is applying the blockchain in financial institutions. It’s already working on a chain for Everbright Securities, a large securities brokerage in China.

Legal Chain – Digital Evidence Storage Alliance

Onchain helped develop a blockchain for the digital storage of enterprise emails as evidence. No one can delete or tamper evidence once it’s in the blockchain.


Onchain developed an email repository system for Alibaba to allow users to store important data or emails. This has several applications, including saving emails for the use of judicial proceedings.
The following diagram outlines many of the different uses for the Distributed NetworkArchitecturee.
Onchain DNA

Future of Onchain and NEO

Onchain would like to continue building partnerships in China, eventually moving fiat and identities onto blockchains. They are starting a new blockchain called Ontology focusing specifically on identities. Hongfei would like to attach data to ID’s, such as universities and working experience. Authorization on ID’s would be the ability to authorize people to view your information, such as your finances when applying for a loan. 
Ontology Identity Management
These next diagrams show how Ontology would achieve the goal of truly spreading blockchains across China.
Ontology diagrams
These digital identities also tie into Onchain’s and NEO’s desire to be compliant. China cannot effectively monitor these platforms if they don’t know who is using it.
All of these public and private blockchains created by Onchain, including Ontology, will eventually be able to connect to NEO. The Ontology token sale will accept NEO tokens. “NEO will be the primary digital assets service provider for clearing and settlement on Ontology.” Ontology wants to become the government compliant connection between businesses and NEO.

Ontology and NEO

While some worry that Ontology will compete with NEO, it seems that the developers have every intention to create synergy between the two. When the Ontology network wants to hold an ICO, they will be able to through the NEO platform. Currently, an ICO would cost you 50,000 USD worth of GAS. This means we will see more serious and less frequent ICO’s on the NEO platform. This runs in sharp contrast to a recent joke Ethereum ICO called the Useless Ethereum Token (UET), which promised to steal your money and give you a worthless token in returnThe creator begged people not to buy it and insisted he would just take their money and buy expensive electronics with it. Of course, people still spent over 300,000 USD on UET.
NEO seems to have such a bright future that it has even caught the attention of Litecoin founder Charlie Lee.

Charlie Lee [LTC]
There's a guy trying to catch up to us. We've been dropping 🐢 and 🍌, but he's been dodging them using bullet time. That's just unfair! 😂


Onchain is clearly executing on their ambitious plan to create an entire ecosystem of standardized and connected blockchains in China, all of which will be able to connect to the already successful NEO ecosystem.
We could say the future of NEO is reminiscent of a conversation from The Matrix movie.
Neo asked, “What are you trying to tell me? That I can dodge Chinese regulation?”
Morpheus replied, “No NEO, I’m trying to tell you that when you’re ready, you won’t have to.”
Hong Fei Neo
This article by Paul Andrew was originally published at”: