EOS- The Centralized Ethereum Alternative
- Tanishq Wadhwani
- Aug 11, 2021
- 12 min read
Twitter: EOSIO offers you the flexibility, security, reliability, with an open-source community you need to build your ideas on blockchain.
EOSIO is a highly performant open-source blockchain platform, built to support and operate safe, compliant, and predictable digital infrastructures. It's fast, flexible, and forward-driven.
EOS is an acronym for Electro-Optical System. EOS is the native cryptocurrency for the EOS.IO blockchain platform with smart contract capabilities. The company Block.one created EOS.IO in September 2017 and it now has over 100 dapps with thousands of daily active users. It enables decentralized apps, or dapps, to be created by software developers. The platform is more scalable than many other blockchain networks, with the ability to process one million transactions per second without any fees. Its dapp development capability makes EOS similar to Ethereum with the notable distinction that transaction confirmations are done through a different type of consensus system. Block producers are chosen by the EOS ecosystem through a voting mechanism known as delegated-proof-of-stake (DPoS). In order to vote, users must stake tokens for three days without selling them, putting them at risk of losing money should the price of the token drop during that time. There is no maximum supply limit of EOS tokens. The delegated proof-of-stake model uses inflation, capped at 5% annually, to fund transactions and pay block users.
It is a blockchain-based, decentralized platform used to develop, host, and run business applications, or dApps. It launched In June 2018 after an initial coin offering that raised $4.1 billion in crypto for Block.one, the company that developed the open-source software called EOS.IO that is used on the platform. EOS cryptocurrency tokens are used as a payment system on the network. EOS supports secure access and authentication, permissioning, data hosting, usage management, and communication between the DApps and the Internet. EOS.IO is the system architecture. The EOS token is the network's cryptocurrency. Its main competitor is the better-established Ethereum platform.
EOS coin is a decentralized system infrastructure based on blockchain that empowers hosting, development and deployment of commercial decentralized applications (dApps) on its platform. Unlike other blockchain-based networks such as Ethereum, EOS prioritizes crucial drawbacks of blockchain and tries to solve the challenges of scalability, scale, and flexibility. EOS does not work on the mining concept. Instead, only block producers produce blocks and are rewarded the newly created EOS tokens for every block produced.
What Is EOS?
EOS is a platform that’s designed to allow developers to build decentralized apps (otherwise known as DApps for short.)
The project’s goal is relatively simple: to make it as straightforward as possible for programmers to embrace blockchain technology — and ensure that the network is easier to use than rivals. As a result, tools and a range of educational resources are provided to support developers who want to build functional apps quickly.
Other priorities include delivering greater levels of scalability than other blockchains, some of which can only handle less than a dozen transactions per second.
EOS also aims to improve the experience for users and businesses. While the project tries to deliver greater security and less friction for consumers, it also vies to unlock flexibility and compliance for enterprises.
The blockchain launched back in June 2018.
Understanding EOS
EOS supports core functionality that allows businesses and individuals to create blockchain-based applications in a way that is similar to web-based applications. EOS provides secure access and authentication, permissions, data hosting, usage management, and communication between dApps and the Internet.
EOS is supported by a web toolkit store that aims at hassle-free app development.
How it works
EOS claims to be able to support thousands of dapps without experiencing any negative network effects like high fees or slow confirmation times, thanks to innovations like parallel processing. This may be appealing for commercial developers and financial institutions looking to adopt blockchain technologies for large-scale use cases.
The network’s native token, EOS, is used to power transactions and applications on the blockchain, and can be staked for a reward in a consensus model called Delegated Proof of Stake (DPoS.)
The Basics of EOS.IO and EOS Tokens
The EOS ecosystem is composed of two key elements: the EOS.IO software and EOS tokens:
EOS.IO is akin to the operating system of a computer. It manages and controls the EOS blockchain network. The software uses blockchain architecture for vertical and horizontal scaling of DApps.
The EOS token is the cryptocurrency of the EOS network.
A developer needs only to hold EOS coins, rather than spending them, to use network resources and to build and run DApps. Token holders who are not running any apps can allocate or rent their bandwidth to other participants who need it.
Currently owned by the block.one company, EOS was launched by Dan Larimer, who is also the founder and creator of established platforms including Bitshares and Steem.
How EOS Is Different
EOS is seen as a direct competitor to Ethereum, with ambitions to be bigger, better, and faster. Especially faster: while Ethereum reportedly can handle 15 transactions per second, EOS is aiming for millions of transactions per second. Note that this is a goal, not a reality.
With the size of the DApps ecosystem increasing every day on the blockchain networks, the limited availability of resources is a major issue. EOS.IO attempts to address these problems by offering more scalability, flexibility, and usability through its unique mechanism.
Characteristics of EOS.IO
EOS.IO claims to be able to support thousands of commercial-scale DApps without hitting performance bottlenecks through its use of parallel execution and asynchronous communication methodology across the network.
The efficiency is further boosted by separate modules that are involved in the working of DApps. For example, the authentication process is performed separately from the execution process.
EOS has key usability features—including a web toolkit for interface development, self-describing interfaces, self-describing database schemas, and a declarative permission scheme. All of these make the developer’s job of creating and maintaining the apps easier.
The EOS Vision
EOS has big plans. It will be a software that will act as a decentralized operating system. Developers can then build applications on the EOS software. It will be highly scalable, flexible, and usable. The most notable feature that everyone is getting excited about is horizontal scalability — what this means is the EOS blockchain will be able to allow parallel execution of smart contracts and simultaneous processing of transactions. This could be a real game changer.
EOS will incorporate the delegated proof-of-stake (DPoS) consensus protocol, created by founder Dan Larimer himself. This system is less centralized, uses far less energy, and is incredibly fast — as in, up to millions-of-transactions-per-second fast. Furthermore, there will be no user fees on the EOS blockchain. This would also set them apart from the competition and could help them gain more widespread adoption of their platform.
EOS also wants to put a blockchain constitution in place to secure user rights and enable dispute resolution. As explained in their technical whitepaper: "The EOS.IO software is designed from experience with proven concepts and best practices, and represents fundamental advancements in blockchain technology. The software is part of a holistic blueprint for a globally scalable blockchain society in which decentralized applications can be easily deployed and governed."
Tokens that are issued on top of the EOS platform includes Everipedia, HorusPay, Meet One, and more.
The Economy of EOS
The EOS setup does not use the now-familiar mining concept used by Bitcoin. Rather, block producers generate the required number of blocks and are rewarded by the creation of new EOS tokens for each block they produce.
Block producers can publish a desired figure for payment, and the number of tokens they create is calculated based on the median value of the expected pay published by all block producers.
As block producers obviously desire higher pay, this feature can easily be misused. To counter this, a mechanism caps producer awards tokens so that the total annual hike in token supply will not exceed 5%. Token-holders, who vote on the matter, have the authority to vote out block producers who demand more.
This mechanism functions in a way that is complementary to EOS storage as all token holders pay for file storage on the EOS network through a portion of annual inflation. As long as they are storing a file on the network, their EOS tokens will be held up and will lose value at the rate of inflation.
The more storage required, the more blocks will be demanded from the block creators, who can demand more value for their work through higher pay inflation, which the token holders approve. If storage demand decreases, inflation will be lower, reducing the loss of value from stored EOS tokens.
EOS faces criticism concerning its centralized block producers. The system is reportedly supporting large token holders, or whales, in China.
EOS in the News
In September 2019, one of the small companies instrumental in the initial development EOS stepped away saying that it was focusing on other blockchain and EOS.IO software implementation. According to Coindesk, the real reason was that the support of EOS whales—those with large token holdings—was needed to make money, and those whales were supporting block producers in China. This did not bold well for EOS.
Governance Issues
EOS faces skepticism in other ways. Shortly after its launch, block producers froze seven accounts that held stolen tokens, but EOS had no legitimized authority to do so. This move illustrates another controversy surrounding EOS, which is that it lacks an effective governance process.
In June 2019, Brock Pierce, an early member of the Block.one team, made news when he suggested that EOS is now governed by a “Chinese oligarchy.” Although it is true that a majority of the block producers are based in China, the concern has more to do with the risks that centralization poses. The main complaints about the current block producers are that they don’t prioritize building new DApps that will attract other users to the blockchain.
Regarding governance, EOS has since settled on a system in place to run a vote across all EOS holders, but EOS New York said that it is “simply a way of gauging the interest of holders.”
Bullish Global
In May 2021, the EOS price climbed 50% after the news that Block.one had created a subsidiary called Bullish Global. (The price fell just as sharply toward the end of the month.) Bullish Global intends to create a new blockchain-based cryptocurrency exchange. Prominent investors in Bullish Global are Peter Thiel, Mike Novogratz, Alan Howard, Christian Angermayer, Louis Bacon, Richard Li, and the institutions Nomura and Galaxy Digital.
Who Are the Founders of EOS?
The EOS platform was developed by the company Block.one, and its white paper was authored by Daniel Larimer and Brendan Blumer.
Both men continue to be members of Block.one’s executive team, with Blumer serving as CEO and Daniel Larimer as CTO.
Blumer is a serial entrepreneur, and one of his earliest ventures involved selling virtual assets for video games. He went on to co-found Okay.com, a digitally focused real estate agency in Hong Kong.
Larimer is a software programmer who has also started a series of crypto ventures. They include the crypto trading platform BitShares and the Steem blockchain.
The pair met in 2016 and formed Block.one the following year.
What Makes EOS Unique?
To an extent, you could argue that EOS aims to create familiarity for its users. Whereas EOS.IO is probably best compared to an operating system like Windows or iOS, EOS is the cryptocurrency that drives the network.
According to the company, it has the capacity to accommodate the demands of hundreds, if not thousands, of DApps — even if they were being used by substantial numbers of people. Parallel execution, as well as a modular approach, are said to drive this efficiency.
In a unique twist, token holders have the ability to vote for block producers — as well as other matters such as protocol upgrades.
Unfortunately, some of the most distinguishing features of EOS are those that certain critics dislike the least. There are those that argue that extensive Block.one’s involvement with this project means it’s rather centralized — and some argue this is the opposite of what blockchains and cryptocurrencies were meant to achieve.
How Many EOS Coins Are There in Circulation?
There are 936 million EOS coins in circulation at the time of writing, and a total supply of 1.02 billion tokens.
Block.one held an initial coin offering for EOS back in June 2017 and it lasted for a year — that’s substantially longer than many of the ICOs seen at the time.
A total of $4.02 billion was raised in the process, and investors from the U.S. were unable to take part. Looking at the breakdown of how tokens were distributed, 10% were allocated to the founders, while 90% were distributed among investors.
It is worth noting that Block.one won’t receive this allocation straightaway — instead, it’ll happen over a 10-year period.
How Is the EOS Network Secured?
EOS uses a delegated proof-of-stake consensus mechanism. This concept was conceived by Larimer, and aims to solve some of the flaws that are seen in PoW and PoS systems.
As briefly explained earlier, those who own EOS tokens are able to vote for representatives who will be responsible for validating transactions. One of the advantages is that this helps eliminate consolidation, where smaller miners are pushed out by those who have greater levels of computing power and resources.
Why Buy EOS?
EOS has always been one of the most hype over ICO and now a smart contract platform. When it was announced by founder Dan Larimer in New York City in May 2017, a giant jumbotron advertisement could be seen glowing over Times Square. In the first 5 days of their ICO token sale, EOS raised an unprecedented $185 million in ETH — all without having any kind of product or service yet.
EOS claims to be “the most powerful infrastructure for decentralized applications.” Basically, EOS is (or, rather, will be) a blockchain technology much like Ethereum. They plan to create their own blockchain with a long list of impressive features. Some are even calling EOS the “Ethereum killer.” But along with all the hype and excitement about EOS, there’s also a large amount of skepticism coming from the crypto community.
EOS/ EOS.IO is a blockchain platform to develop industrial-scale decentralized applications. It has a robust underlying infrastructure to support this process.
The primary aim of EOS is to provide a user-friendly and business-friendly tool for building dApps while overcoming the challenges of traditional blockchain platforms like Ethereum.
Scalability is one of the most significant drawbacks of holding back blockchain technology from becoming mainstream.
For example, the rate of transactions currently possible with Ethereum is extremely low. Furthermore, users have to pay the Gas fees to use any of the dApps built on the platform. This is highly ineffective as users won’t be willing to use a system requiring them to pay a transaction fee at every step.
To make its applications free for users, EOS employs vertical and horizontal scaling (done by block producers). Furthermore, it provides a secure and scalable platform to run thousands of transactions every second. It is a fully functional and secure blockchain platform for delivering web services such as:-
EOS smart contracts
Cloud storage dApps
User authentication, etc.
The developers and promoters of EOS have specifically called out this platform’s most significant selling points:
Complete removal of transaction fees.
Ability to conduct millions of transactions per second.
At present, EOS or EOSIO is one of the most widely used blockchain platform in the world. All the decentralized applications built on the blockchain offer services with real-world utility and benefits. EOS is leading in terms of the development of gaming and gambling applications/software and a wide range of other applications for purposes such as ride-hailing, music sharing, fitness tracking, digital payment and more.
EOS dApps have quickly emerged as the safer, faster and more affordable alternatives to traditional blockchain apps. Based on the current trends, EOS has emerged as a true champion of blockchain technology and can provide immense benefits for a wide range of business needs in the times to come.
The dAPPs market size is growing each day. Hence, one main challenge is the limited availability of resources on the network. Issues of network constraints are faced because of increasing false transactions, spamming apps, limited computing power, slow execution speeds, etc.
Dubbed as the “Ethereum Killer”, EOS can process 100,000 transactions per second. EOS’s unique mechanism is trying to solve these issues by providing more usability, flexibility and scalability. EOS cryptocurrency is known for bolstering usability without any performance issues using parallel execution and asynchronous communication technique across the network.
The flexibility offered by EOS is facilitated through its various features. Its ownership structure is such that empowers users to use it freely. Hence, users have to pay less transaction costs as developers can use resources as and when needed, unlike the mainstream pay-per-transaction model. Moreover, developers can anticipate hosting costs.
Its flexibility, scalability and user-friendly attributes are attracting a lot of investors. It gained a lot of attention during its initial release. However, the EOS team is constantly working to deliver more innovativeness on the platform.
In a fast-paced world, the concept of faster blockchain offered by EOS is something that is luring a lot of people.
How does EOS compare to Ethereum?
EOS.IO is a blockchain protocol based on the cryptocurrency EOS. The smart contract platform claims to eliminate transaction fees and also conduct millions of transactions per second.
Ethereum is the second most popular cryptocurrency in the world, just behind Bitcoin. In 2017 it increased its value by more than 10,000% and reached an all-time high of $130 billion in market capitalization. Not only this, but hundreds of cryptocurrency tokens have been built on top of the Ethereum blockchain and it is also home to over a thousand dApps.
When it comes to EOS, although it is still in its early days, it has performed exceptionally well. As I mentioned earlier in my EOS vs Ethereum guide, the project raised more than $2.5 billion during its one-year ICO.
During the ICO, investors were buying, selling and trading the EOS coin, pushing EOS to a market cap of more than $17 billion. This is very impressive for a project that is yet to release its final product.
However, EOS is yet to achieve anything like what Ethereum has achieved. With that being said though, if EOS can achieve their goals, then it will be a significantly better blockchain than Ethereum.
If EOS can achieve instant, free and millions of EOS transactions per second, it will be very difficult for Ethereum to match that level of performance. However, if Ethereum can implement ‘Proof of Stake’, ‘Sharding’ and ‘Plasma’ successfully, I think it will be tough for Ethereum alternatives to pass Ethereum.
But just like EOS, there is no guarantee that they will be able to achieve this. Let this be a reminder that the cryptocurrency market is a difficult industry to predict, and it is also one of the fastest-changing industries in the world!
The Bottom Line
EOS.IO is a blockchain protocol based on the cryptocurrency EOS. EOS is a cryptocurrency designed to support large-scale applications. There are no fees to send or receive EOS. Instead, the protocol rewards the entities that run the network periodically with new EOS, effectively substituting inflation for transaction fees.
EOS was created to be easy for developers and end-users to adopt, with a specific focus on the pain points faced by developers of blockchain applications today – particularly those of speed, scalability, and flexibility in program design.
The smart contract platform claims to eliminate transaction fees and also conduct millions of transactions per second. There seems to be some potential for EOS as a blockchain-based network, but it is still in a nascent stage. Some doubt the bold claims of transaction speeds of 100,000 per second, and the requirement that users must hold EOS tokens to complete a transaction may detract from EOS's appeal. As with all cryptocurrency blockchains, this space will continue to fascinate and mesmerize many investors over the next few years.
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