EOS Crypto Coin : A Scalable Blockchain Platform

What is EOS Coin?

Ethereum brought the innovation of smart-contracts, however, it currently cannot provide them at scale.

EOS aims to allow for thousands-times more transactions per second enabling large-scale applications to be brought to the blockchain.

EOS developers envision apps like Facebook, prediction markets, and exchanges being run on the EOS blockchain.

What is EOS All About?

What Problem Does it Solve?

Ethereum was the first platform to bring smart-contracts to the blockchain, but it also has a clear problem. Currently, Ethereum can only process about 15 transactions per second (TPS). To be able to support an app like Facebook, which processes over 52,000 likes per second, Ethereum would need the TPS to increase significantly. Now many would argue that Ethereum was never meant for such applications, but instead for financial apps. But it should be noted that Visa processes over 20,000 transactions per second, which is roughly 1,300x what Ethereum is currently capable of. Other financial platforms like exchanges and prediction markets need to be able to handle upwards of 100,000 transactions/second. To handle multiple large-scale applications, the proper platform would need to be able to handle at least one million transactions per second and likely many multiples of that. Of course, the Ethereum developers are working on solutions to scaling, but it is unclear whether that will be enough and when they will be done.

How Does it Solve the Problem ?

The innovation EOS uses to process what it claims will be millions of transactions per second, is Delegated Proof of Stake (DPoS). This is a newer method of consensus and alternative to Proof of Work. In DPoS there is no mining and there are no miners; instead in EOS’ version of DPoS, there are 21 delegates. These delegates are continuously updated as they are voted on by all EOS stakeholders. Blocks are produced in rounds of 21 where the 21 delegates voted on for that round will each produce a block in a random order every 3 seconds (~21 blocks per minute). If a delegate is behaving poorly they’ll simply be voted out in the next round. On top of this EOS will use parallelization to scale. What does this mean?

Ethereum can currently only run one operation at a time. This is because for Ethereum every single node must execute the same transactions. Utilizing parallelization, EOS can run multiple operations at the same time. The clear problem EOS is solving is scalability, but is it giving something else up in return? Yes, more on that later.

Why do they need a token?

This is where things get a little weird. The developers at block.one, who are creating EOS are not going to be the ones running the software. Instead, upon completion, they will simply release it and let the community decide what they want to do with it. This means there will be no centralized entity controlling the development of the software. Although if the community wanted that it could happen. This also means that the value of EOS tokens is sort of unclear. The official EOS website elaborates:

The EOS Tokens do not have any rights, uses, purpose, attributes, functionalities or features, express or implied, including, without limitation, any uses, purpose, attributes, functionalities or features on the EOS Platform.

Essentially, the current erc20 tokens have no actual value other than a stake in ownership of tokens on the eventual EOS platform. That may sound a little scary, but it’s fair to assume that the community will come to an agreed upon consensus. Eventually, you can imagine that the token will be used to pay for services on the platform.

Coin Distribution

EOS is yet another token with incredibly poor distribution. The top 11 addresses make up just over 53 percent of the token supply. However, this is changing by the day. In a highly unique fashion, the EOS token distribution is an ongoing event of 341 days, which began on June 26, 2017. This is in an effort to make the distribution fair. 70% of the total amount of EOS Tokens to be distributed are being split evenly into 350 consecutive 23 hour periods. This ensures that no one can swoop in at the beginning and buy tokens at the cheapest price. Everyone gets a fair shot.

EOS is in a highly competitive and highly funded bucket of crypto-projects. This includes the likes of Ethereum, Blockstack, NEO, Lisk, Cardano, QTUM, Ethereum Classic, ICON and many others. Those are just some of the top names. Now, each of these projects is doing something slightly different and it is possible that more than one can come out highly adopted. For example, since I believe EOS to be more centralized than Ethereum (more on that below), it may make sense for Ethereum to be used for financial applications and EOS for applications like Facebook.

Is it Decentralized?

Creator of Ethereum Vitalik Buterin was asked about EOS at Ethereum Shenzen Keynote. He made a few remarks about centralization issues:

The problem is that if you have 100 nodes the system is much more centralized. You can denial of service them. Because you have to vote for them, the nodes that win are going to be the nodes that everyone knows. So it is much easier to attack the people running the nodes. ISPs can shut them down, companies can shut them down, governments can shut it down fairly easily. That particular path to scalability does come at a fairly high cost and that cost is that if you try to achieve scalability by having larger nodes then the number of nodes becomes much smaller is that that makes the system more centralized.

I completely agree with this line of reasoning. The lead developer of EOS Dan Larimer combats this with a classic logical fallacy in a post addressing these comments. Rather than explain why Vitalik is wrong he attacked Ethereum’s centralization issues, which I also happen to agree with. But, he was unable to refute the argument and so I do believe this is a serious issue.
Team

A company called block.one is building the EOS software. Previously mentioned Dan Larimer is the CTO of block.one. Larimer has been the leading force behind multiple successful blockchain projects including Bitshares (decentralized exchange) and Steemit (decentralized social network). CEO Brendan Blumer has created a handful of companies including II5 (some sort of tech company) and okay.com (a real estate company). Brendan has no clear experience in blockchain technology. Other than that it is unclear who the rest of the team is. There have been 71 unique contributors to the EOS GitHub. Roughly 15 of which I’d call major contributors and 4 of those haven’t contributed in a while (may have left the project).

Another concern I have with EOS is it’s unclear who the development team will be once it’s released. Larimer has made it pretty clear that he is going to leave the project once he feels like its done. The team at block.one will also be done developing it officially releases. Now not all of the developers on the project are exclusive to block.one, surely some of them will stick around. Having that said, the two lead developers who have written over 50% of the project are on the block.one team and will be leaving.

Partnerships

The biggest partnership that EOS currently has is with Bitfinex. Bitfinex recently announced the first high-performance decentralized exchange to be built on EOS.IO technology. The timeline for this is unclear, but once it materializes it will certainly create a large number of transactions on the EOS network. EOS has also recently announced collaborations with another cryptocurrency Bancor, which is a decentralized liquidity network that functions across various blockchains. This partnership aims to bring low-cost liquidity to the EOS network.

Additionally, back in October CEO Blumer announced that block.one would be putting 1 billion USD from the token sale towards a program that funds projects on EOS.

Price Analysis

Like many coins, EOS hit an all-time-high in early January (~18 USD) and crashed down to local lows around 6 USD. It has now stabilized around 9 USD.

Adoption Timeline and Upcoming Events

EOS is expected to be released in June, which is also when the token sale finally ends. Perhaps this should be a little concerning considering how much money was raised that this project is less than a year old. All eyes will be on EOS in June.

Final Thoughts

Once EOS is released it will inevitably have many developers building applications on its platform. This is especially true given the 1 billion dollars in funding potentially going to those developers. The issues with EOS will likely not be seen until any of the applications reach massive scale. However, the problems could come right away since no one even knows who’s going to be running the software. I would not be surprised if one of the first major decentralized apps comes on the EOS blockchain, as it seems to be the first platform that will be able to support high usage apps at scale. Having that said I don’t believe that EOS will be a long-term solution.