What is EOS? EOS Coin
EOS is a smart contract blockchain platform in competition with other protocols like Tezos and Ethereum. The EOS project is most famous for its $4 billion ICO which is the largest ICO of all time. Given that ICOs have fallen out of favor, EOS could be the most lucrative ICO to ever happen in crypto history.
In this article, we’ll look at some of EOS’s technical specifications, what the protocol does well, and what kind of projects are building on top of EOS.
The EOS Blockchain
One of the key advantages of EOS is that it can scale to thousands of transactions per second. Although there are a lot of different claims about how fast EOS really is, real-world usage tests indicate that EOS can currently clear about 4,000 transactions per second (TPS). With future upgrades and developments to the protocol, that number could easily go higher.
These fast transaction speeds have made EOS attractive to developers who want to build on a platform that can scale right now. Although Ethereum is rapidly implementing scaling solutions, the truth is that ETH might not be able to achieve the same speed as EOS until late in 2021 or 2022. Some companies, like VentureBeat, have cited scaling as a reason for developing on EOS instead of Ethereum.
Another one of EOS’s features is that users don’t have to pay transaction fees when they use a smart contract. For example, there’s no transaction fee for making a trade on a decentralized exchange. Instead, EOS developers must purchase “computer power” on the EOS network so that their smart contracts get executed.
Some of the resources that a smart contract developer must purchase include,
- State storage
This is an interesting way to set up a blockchain and EOS’s unique architecture may ultimately prove to be more user friendly. For example, on Ethereum there is a consistent problem with GAS (the fee that users spend to execute a transaction). Sometimes users don’t understand how GAS works and the consequences can be extreme.
Users can also underestimate how much GAS is required (it’s easy to do) and a transaction gets stuck for hours. When the cryptocurrency community talks about UX problems that make the mass adoption of crypto less likely, GAS is one of those problems.
That’s why EOS is so different: users don’t have to worry about paying for smart contract transactions. Of course, there is no free lunch and those fees may be extracted in other ways—for example, higher trading costs on a decentralized exchange.
Consensus and Governance
The EOS protocol uses a Delegated Proof of Stake (DPOS) consensus mechanism. There are 21 block producers, who all hold significant EOS balances, and these block producers verify the blocks that get recorded to the blockchain.
EOS users can choose to delegate some of their EOS tokens to a block producer. In exchange, the user can earn a portion of the block reward. In other words, staking. EOS users stake their balance with a block producer, hence the “delegated” part of the DPOS consensus mechanism. As of publication, the staking reward is 1.82%.
Having just 21 block producers is what allows EOS to clear thousands of transactions per second. It’s much faster for a small number of validators to reach a consensus than for thousands of validators to agree on block production. In fact, this is why it took years to create a staking mechanism on Ethereum. The technology to allow decentralized staking had to be created from the ground up.
In addition to staking, EOS users can also use their tokens to vote on governance decisions or vote to change the EOS constitution. For example, users can vote to freeze an account, I.e. a hacker who exploits a vulnerability to steal EOS could have their account frozen.
While a governance system is a unique idea that could solve some real-world problems, there is also some evidence that most of the governing power ends up accumulating in the hands of the largest EOS holders. To this point, Binance has put together an excellent research piece, describing how the EOS governance system works and what some of its flaws may be.
The EOS Coin
In terms of what’s being built on top of EOS, so far it looks like there is a combination of gambling protocols mixed in with a few DeFi applications. All of the top Dapps built on top of EOS are listed on DappRadar.com.
The most popular Dapp, measured by value locked, is Joule. Joule is a Dapp that lets users track and bet on the popularity of public figures like Donald Trump or Jeff Bezos. Users are encouraged to get their friends to use the platform via a referral service.
The second-largest Dapp is DeFiBox, an all-in-one DeFi protocol with services like lending and asset swaps. However, with less than $10 million in value locked, DeFiBox represents hardly a fraction of the $2.5 billion that’s currently locked up in Ethereum’s largest DeFi protocols: MakerDAO.
One of EOS’s major advantages is that it scales. A developer can build a Dapp on top of EOS without worrying about network congestion and delayed transactions. The other major advantage EOS has is a huge war chest. Thanks to their record-setting ICO, the EOS team can outspend just about any other cryptocurrency project.
Talent acquisition, marketing, incentivizing user growth… It’s all on the table for EOS. If EOS can use their budget wisely and grow their platform, they could remain a major Ethereum competitor for years to come.
This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.