Everything you need to know about the “Ethereum killer”

 
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If you search for the biggest completed ICOs to this date, the EOS will stand as the undisputed number 1. Created by the Block.one start-up, the platform raised around $4.1b during its year-long ICO. The initial 5-day crowd sale helped Block.one raise $185m, which was then followed by a year-long sale, contributing to a total of $4.1b. The amount raised is higher than the accumulated amount raised by the following 9 platforms on the list of the biggest ICOs to this date, according to the Bitcoin Market Journal. The EOS went live on June 14, 2018.

The team behind the platform is led by Brendan Blumer, Block.one’s CEO. He has been engaged with the blockchain world since 2016, the same time he met Daniel Larimer, current Chief Technical Officer (CTO) of EOS. Brendan and Daniel are regarded as the backbone of the EOS project while Ian Grigg and Brock Pierce hold a partner status.

What is EOS?

The EOS is looking to build a decentralized operating system with the aim of creating efficient operations targeting decentralized applications. If the project is successful, existing platforms such as Ethereum could be seriously undermined and eventually replaced. In the best case scenario, a widespread adoption of cryptocurrency technology would be in the cards. Amongst other factors, the opportunity to change how the cryptocurrency ecosystem works is one of the main reasons EOS has managed to raise billions during its long-awaited ICO.

The EOS project gained worldwide attention when information about the platform’s ability to process around 6,000 transactions per second came to the fore. Moreover, the EOS founders claim they plan to completely remove any transaction fees. These two factors provide an excellent foundation for the building of a highly efficient operating system for decentralized applications. So, what is the plan behind these claims and how realistic is it?

Main features

Unlike other platforms, which rely on the conventional Proof-of-Work (PoW), used by BitCoin, or Proof-of-Stake (PoS), EOS is based on the Delegated Proof-of-Stake (DPoS). The vision of DPoS is to essentially create a more efficient and upgraded PoS. Unlike the PoS, DPoS has no minimum threshold requirement of stakeholder token in order to participate. Hence, any stakeholder has the ability to cast a vote in the election process in order to choose the block procedures (witnesses). By applying this method, the power always rests with the stakeholders.

The biggest comparative advantage that DPoS has is its ability to eliminate The POW model’s need to use excessive energy. As a result, blockchains are able to reach a consensus in a more efficient and faster manner than the PoW or PoS chains, finally contributing to the more scalable network. In addition to the DPoS, EOS is built in such a manner that execution of the smart contract code is completely handled by changing the group of the 21 Block Producers (BPs). Instead of a large network, these 21 BPs have to interact only with each other, making output  far greater. The testing conducted by Decentralize Today showed that EOS is on the way to support over a million transactions per second on machines with over CPU cores.

So, how are the BPs chosen? First of all, the incentives are enormous. Block Producers will earn block reward in the form of EOS tokens. Secondly, anyone can run for a BP. Unofficially, there are eight conditions for becoming a BP:

  1. Public presence (Website + social media account)
  2. ID on STEEMIT (Links to key ID information needed)
  3. Tech Specs (Estimate of technical speculations)
  4. Scaling Plan (Scaling plan for hardware)
  5. Community benefit
  6. Telegram+Testnet (list of node names)
  7. Roadmap (values, finance, transparency)
  8. Dividend position

Ideally, the candidates would be spread worldwide, however, the initial data shows that the majority come from Asia and North America. The BPs are selected randomly from a pool of candidates, which can be seen here. Anyone who owns, and is registered as the EOS token holder, is eligible to vote. Votes are cast individually, although proxy voting is also allowed. Each member chooses 30 BPs in their vote. Votes are calculated by the amount staked behind them and those with the most votes will become BPs.

EOS had pledged to remove any transaction fees, therefore the costs of using the platform are non-existent. Each and every new account receives the stake that allows them minimum access of bandwidth in order to use the platform effectively. However, only limited access to bandwidth is provided, and in order to gain larger access, users would have to purchase more stake. EOS Tokens guarantees its owners access to EOS.io network. In a nutshell, once you get your tokens, the price movement does not affect your access to the network.

In addition to that, the developers working on EOS must secure sufficient amounts of RAM (storage on the blockchain), CPU (measures average consumption of resources in microseconds), and NET (measures average consumption in bytes), hence, the transaction fees are non-existent. However, the costs of creating a working environment for EOS to be fully utilized are much higher than previously anticipated. This may also prove to be a problem for users as some of the dApps may choose to share costs back with the users.

Competition with Ethereum

Ethereum was founded in 2014 with the aim of enabling developers to build and later deploy decentralized applications. Currently, it is the second most valued blockchain project, behind BitCoin. In a nutshell, Ethereum allows developers to work simply, easily and fast. The combination of these factors represents one of the main reasons many ICOs were launched on the Ethereum platform. Moreover, Ethereum holds an advantage over EOS as they were the first to enter the market, and therefore many ICOs and startup projects have been based on Ethereum.

Ethereum is mostly criticized for its high transaction costs, lack of scalability and needed time to finalize a transaction. This is the key; almost everything that Ethereum has been criticized for has made EOS popular. For example, Ethereum uses the PoW model compared to EOS’ DPoS. As explained above, DPoS are able to reach consensus in a more efficient and timely manner than the PoW or PoS chains.

On the other hand, the most common criticism EOS has received is that it is too centralized. While the existence of only 21 BPs makes the network more efficient, many critics are not supportive of this kind of approach in which only a  small amount of actors concentrate great power. More or less, EOS has sacrificed a certain level of decentralization in order to get more on the output side.

Challenges

As promising as EOS actually is, there are many challenges and obstacles down the road. Although the platform has managed to raise billions during its year-long ICO, reports about the lack of an available mechanism for the team to allocate the funds have emerged. The team has set up a savings account, which is now reportedly worth around $45 million, as the account is supplied with funds from the inflation pool.

The EOS went live back in June and the launch was marked with chaos. The conference call involving around 200 developers working on the EOS platform ended up in a heated debate, according to WSJ. The tense call, coupled with other issues that emerged during the launching phase, caused the token to lose around 20% of its value in June. The management team was the target of widespread criticism due to how they handled the project’s launch.

The platform has been targeted several times by hackers already. In May 2018, a scam targeting EOS tokens was discovered. Recently, around $240,000-worth of tokens has been stolen after a security breach occurred on one of its decentralized applications. Only a couple of days later, hackers managed to get a hold of $58,000-worth of tokens. While the sums may not be large, the security breaches show that the platform must invest more time and resources to better protect its products.

Verdict

Two days ago, EOS 1.3.0 was launched. The upgrade aims to enhance the network and make it easier for full nodes to sync. The company announced their commitment to releasing updates on a monthly basis. It is absolutely clear that  EOS is only to get better, however, the question marks over the current state of the platform still exist. On paper, the EOS platforms look promising as their attempt to disrupt the Ethereum network is legit. It is important to remind ourselves that the EOS platform was built on top of Ethereum’s blockchain, the same platform they plan on beating. Although Ethereum has a first-mover advantage and the market cap, one five times bigger than of the EOS, the concept developed by the latter may seriously undermine the former. However, the success of EOS is fully dependent on their ability to put their idea into practices and do so successfully.