Here is what happened in N3 the past week:

• 914 new wallet addresses were added. [ndapp.org]

  • 📉 down 6.35% week over week

• 3,856 average daily transactions. [ndapp.org]

  • 📉 down 30% week over week

• 847 average daily active addresses [onegate]

  • 📉 down 14% week over week

$NEO and $GAS both had positive gains. $NEO had a weekly gain of 6.8%, and $GAS a gain of 10.3%.

$NEO is up 69% year over year 😏 NICE.

Neo Global Development released a general monthly report for January 2024.

ITEM Systems announced plans to partner with the urban art project management service She Wolf by Giulia to place an NFI-embedded plaque on the “Sea of Hope” mural in Santos, Brazil. The mural celebrates 150 years of Italian immigration in Brazil and highlights the union between Santos and Genoa. Learn more about the mural here.

Someone thinks they know the definitive answer to why $NEO pumped two weeks ago. Bitcoin Sistemi believes the announcement that Neo and Web3Labs are joining the Web3.0 Global Acceleration program was the cause of the pump [announcement].

Does Neo Need Stablecoins?

Towards the end of last year, the phrase “stablecoins are crypto’s killer app” became an idiom in the blockchain dialogue.

This likely started after Nic Carter of Castle Sky Ventures used the same term at the Token 2049 conference in Singapore. At the conference, he presented “Regime Change in Stablecoins” [pdf]. Mr. Carter shared the all-important statistic that birthed the “killer app” narrative in that presentation. Stablecoins represent between 70 and 80 percent of all settlement activity on-chain. At the same time, stablecoins represent only 10% of the total market cap of crypto [note: at the time of his presentation, the top two stablecoins had a market cap of $120B; today, that figure is $132.4B]. Mr. Carter asserted that the large percentage of on-chain settlements taking place via stablecoins points to some key utility with stablecoins that differs from the speculative exchange activity of the crypto markets. It shows that stablecoins have utility and volumes that are not necessarily correlated with the market cycles in crypto.

“Stablecoins have gone from nothing to being a major financial settlement network of consequence in a short period. They are a global financial backend that powers many neo-bank activities, fintech, remittance activity, and global payment processors”. They are especially helpful for countries without enough US dollars, high inflation, weak currency, or have limited access to banks.

The Growth of Stablecoins Continues

As of writing, the market cap of the top five stablecoins is $142.31 B. (USDT, USDC, DAI, FDUSD, TUSD. Source: Messari). Over the past thirty days, the market caps for these stablecoins have cumulatively grown over $8B. The demand for stablecoin use grows daily.

The top two stablecoins by market capitalization, Tether (USDT) and Circle (USDC) have both seen double-digit increases in supply year to date [USDT +11.22%, USDC +24.09% - Messari].

To give you an idea of how stablecoins impact on-chain activity, look at the graph below. It shows the daily active addresses for seven stablecoins (Binance USD, Dai, EURC, Paypal USD, USDC, USDT, and USDE) on nine popular chains (Arbitrum, Avalance C-Chain, Base, BNB Chain, Ethereum, Optimism, Polygon POS, Solana, and Tron).

The lion’s share of the activity belongs to Tether (USDT) at 80% of all daily active stablecoin addresses. Year to date the number of transfers has grown nearly 60% compared to the same period last year. Transfer volume has grown 126% for the same period comparison.

The year-to-date (YTD) transfer volume by chain has been impressive. The average YTD change for the nine chains mentioned above is 196%. Only Solana had a sub-140 % YTD change in transfer volume. However, Solana had the most significant transfer volume YTD at $31.4B.

In addition to transaction volume, what stands out is the average number of daily addresses YTD. The lowest average is that of Optimism at 28,000 daily active addresses. Compared to Neo, Optimism is four times larger by market cap, but the daily active addresses just for stablecoins are thirty-three times greater.

OK NERD, ENOUGH OF THE NUMBERS. If you’ve read this far, I get it. Stick around because we’re going to stick the triple lindy.

Neo Needs A Top Stablecoin

Neo lacks transaction volume and users. The daily active addresses barely crack 1,000, and the total number of N3 addresses is still below 100K more than two years after launch.

How does this compare to similar chains?

There are 176 smart contract platforms. Neo is one of the 35 smart contract platforms with a circulating market cap greater than $1B. Neo ranks 28 of 35 with a market cap of $1.25B. Neo ranks 24 of 35 for the YTD real volume of $3.14B.

Of the top 35 smart contract platforms, 30% have USDT, and 33% have USDC. Half of them have a native stablecoin.

Neo has a native stablecoin in FUSD that is available on Flamingo Finance. FUSD is a decentralized, over-collateralized USD stablecoin. FUSD has a market cap of $3.13M. The price is currently $0.98. This native stablecoin option has neither been a draw for new users to Neo nor a compelling stablecoin use case for existing Neo users.

Would adding USDT or USDC solve Neo's low transaction volume and user issue? ABSOLUTELY. 

How can I be sure that adding USDT or USDC will lead to higher transaction volume and daily active addresses?

We can get an excellent idea of what would happen on Neo by looking at what happened on EOS when that chain added an EVM and USDT support for that EVM last year.

EOS is a good chain for guidance since it is generally within one or two ranking positions of NEO in the top 35 smart contract platforms. EOS finished last year with a similar market cap to Neo. The EOS daily active addresses in Q4 were 27,000.

If You Build It, They Will Come

EOS launched EOS EVM on April 13, 2023. After relatively low activity on the EOS EVM, there was a spike in mid-December due to Inscriptions minted through EOSS. Something else also happened in Q4 that spurred activity: adding USDT to the EOS EVM. EOS EVM’s DeFi total value locked (TVL) grew almost 3,000% quarter over quarter (QoQ) to $2.2 million. The growth was also driven by the integration of USDT into the EOS Trustless Bridge on October 16, 2023.

EOS’s stablecoin market cap increased 21% QoQ to $76M in Q4 2023. (Source: DefiLlama) Neo’s stablecoin market cap at the moment is $3.86M.

“Wen Neo X?”

Neo is currently in the process of developing its own EVM sidechain, NEO X [link]. Adding a bridge between this sidechain and the N3 mainnet will provide a similar opportunity to what is present on EOS and EOS EVM via the EOS Trustless Bridge. The integration of USDT into the EOS Trustless Bridge spurred growth in the EOS EVM.

We Don’t Need to Wait for an EVM sidechain

An EVM side chain opens the door to USDT. However, there is another stablecoin option. Circle offers the possibility of a bridged USDC and, more importantly, the possibility of native USDC.

Could a Neo community-led effort to add native USDC succeed? This is a discussion that should take place. It may be over a year before Neo adds NEO X and another six months after launch before USDT support becomes available. That said, Neo has been slow to implement in the past.

Adding USDC to Neo would have an immediate impact on the $NEO token price. Any news of a stablecoin is welcome news. This week, the market reacted to CELO adding a stablecoin [link]. Within minutes, the asset price jumped by 40%.

So What Next?

Stablecoins are, without a doubt, “crypto’s killer app.” The vast majority of on-chain transactions occur via stablecoins, and the mass adoption of Web3 is happening via stablecoins.

By not having one of the top stablecoins available on Neo, the blockchain is missing out on use cases and the developers and users that seek those out. The Neo community should begin a dialogue on introducing top stablecoins on Neo.

Referring back to the EOS example, a community-led effort driven by the non-profit EOS Network Foundation took over ownership of the project to prevent decay of the protocol codebase and the EOS ecosystem. The grassroots effort has driven several technical upgrades, including an IBC implementation, an EVM solution, and a new consensus mechanism.

I’m not suggesting that the Neo community take responsibility for various ecosystem upgrades, especially since Neo Global Development is actively working on an EVM side chain. Still, the community could take the initiative of pooling funds and hiring developers to do the groundwork of adding stablecoins to Neo.

This initiative should specifically target USDC and possibly First Digital USD (FDUSD - this Hong Kong-based stablecoin is less than a year old and has already reached a $3.24B market cap. In the past month, its market cap has grown $469M - a signal of the strong demand for the stablecoin). With Neo’s new HK office and presence in that market, adding FDUSD makes sense. Additionally, the Hong Kong Central Bank is providing a regulatory sandbox for stablecoin issuers to develop stablecoins. [link]

Neo does need stablecoins. Thankfully, as a community, we’re an extremely stable genius 👀. Let’s start the dialogue and make stablecoins on Neo a reality.

Want to read more about stablecoins? Check out these 🧠 resources:

• The Relentless Rise of Stablecoins

• Primary and Secondary Markets for Stablecoins, FEDS notes

• Can Stablecoins Be Stable?

• https://coinmetrics.io/tag/stablecoins/

• Tether’s Ascent: Breaking Down the Dominant Stablecoin’s Growth 

I want to educate as many people as possible about the Neo blockchain and the compelling use cases for the underlying tech. I am not a dev nor an expert. But I am curious and willing to find answers to what I don’t know. Along the journey of discovery, I will share my findings. As a subscriber to this newsletter, you're also on this journey of discovery with me. Together, we can help spread the word about Neo. You can also help me do this by sharing this newsletter.

THANK YOU FLAMINGO FINANCE!

Last week, I introduced the newsletter (Wake Up Neo. . . ) and wrote about my plan to set up the Flamingo Joe Public Wallet. I planned to self-fund through sales revenue from the Flamingo Joe Store and my own money.

The team at Flamingo Finance reached out to me because they wanted to contribute to the Public Wallet with a donation. The team donated 1000 $FLM and 15 $GAS. I can’t thank them enough for such an awesome gesture.

None of the assets in the wallet have been invested yet. I’m in the process of creating a Flamingo Joe Public Wallet page. The wallet will be an educational tool to show (1) how to invest on Neo and (2) different investment methods.

In the meantime, in the interest of full transparency, you can see the Public Wallet address and current holdings below.

If you would like to support the Public Wallet then please consider making a purchase from the Flamingo Joe Store. Learn more below:

Thank you for reading. See you next week.