What is EOS?

What is EOS?

Luka
Luka EOS

Undoubtedly, one of the most anticipated projects of 2018 is EOS, which was, upon the arrival of its whitepaper, marketed as the Ethereum (ETH) killer. That being said, anyone even moderately involved in blockchain and cryptocurrencies has to be familiar with what EOS is.

Therefore, what you are about to read is a comprehensive guide to the ecosystem of EOS and the technology behind the platform.

 
The founders of EOS talk about how they got started

The Theory

EOS claims to be a decentralized operating system which can, through the power of its blockchain system, support industrial-scale decentralized applications.

EOS decentralized
CTO Dan Larimer and his Block.one development team declare that they can make transactions on the EOS blockchain feeless and that their technology is able to scale up to millions of transactions per second (TPS).

We are going to explain what EOS is doing to provide such a service to its users.

EOS looks to provide up to a million feeless transactions per second

Ethereum's Competitor

Through the use of smart contracts, EOS wants to provide the ultimate platform for decentralized applications development.

EOS vs Ethereum
When we mention smart contracts, one immediately thinks about Ethereum. But, by providing more transaction speed, EOS looks to create a platform more suitable for business development.

By fusing the smart contract capability of Ethereum with the high throughput of Larimer's earlier developed platform, “BitShares”, EOS is creating the ultimate DApp creating tool.

EOS - a fusion of Ethereum's smart contracts and BitShares' speed

What is Under the Hood?

To ensure the security of its blockchain, EOS is using a so-called Delegated Proof-of-Stake (DPoS) consensus algorithm.

DPoS is a consensus reaching mechanism where, like in the modern democracy, all network's participants (token holders) elect a small number of those who will represent their best interests, and earn rewards for doing so.

Block Producers’ rewards present a 50% share of the inflation of EOS token, while the rate of inflation is decided by the community, and can go as high as 5% per year.

Those representatives on the EOS blockchain are called Block Producers, and at any moment there are only 21 of them.

Blocks on the EOS blockchain are produced in 21 rounds.

EOS Proof of Stake
At the start of each round, token holders vote for Block Producers.

To ensure that a block gets produced every 3 seconds, EOS shuffles Block Producers using a pseudorandom number derived from the block time, and every Block Producer has an obligation to produce at least one block every 24 hours.

If he fails to do so, he loses the ability to qualify for the voting.

Even though some critics claim that DPoS lacks decentralization, by concentrating power in Block Producers, EOS is providing more security and scalability to the blockchain.

Every EOS token holder has the right to vote for a Block Producer

The Problems With the Voting System

Even though the voting system resembles the one we have in modern democracies, one problem seems to be persistent - low participation, caused by the lack of incentivization for voters.

EOS voting system
Looking at the EOS Network Monitor, we can quickly understand that leading block producers usually don't get more than 3% of total votes. That puts those who control a substantially larger sum of EOS (e.g. centralized cryptocurrency exchanges) into position to, by voting for themselves, have a secured place among Block Producers.

Holders of large sums of EOS can elect themselves to be Block Producers

Feeless or Free Transactions?

Holding a certain number of tokens is what EOS is asking from its network's participants if they want to conduct feeless transactions.

In that system, the number of those transactions is proportional to the number of tokens held by the user. Those who hold more EOS are entitled to more feeless transactions. In other words, transactions are free as long as you previously invested to buy EOS tokens.

Therefore, although those transactions are feeless, they are not free.

Furthermore, that rule leaves token holders at the mercy of the market's high volatility, which can cause losses due to the sudden devaluation of the token.

Transactions on the EOS blockchain can be feeless but not free

The Constitution

EOS ecosystem is governed according to the strict set of rules called the Constitution.

The EOS constitution is the cornerstone of the EOS project, and, according to the development team, functions as a “multi-party contract entered into by the Members by virtue of their use of this blockchain.”

EOS constitution
When first written by Dan Larimer, the Constitution encountered a lot of criticism, so it had to be rewritten.

Currently, the Constitution consists of 18 articles which regulate the following:

  • Article I - No Initiation of Violence
  • Article II - No Perjury
  • Article III - Rights
  • Article IV - No Vote Buying
  • Article V - No Fiduciary
  • Article VI - Restitution
  • Article VII - Open Source
  • Article VIII - Language
  • Article IX - Dispute Resolution
  • Article X - Choice of Law
  • Article XI - Amending
  • Article XII - Publishing
  • Article XIII - Informed Consent
  • Article XIV - Severability
  • Article XV - Termination of Agreement
  • Article XVI - Developer Liability
  • Article XVII - Consideration
  • Article XVIII - Acceptance

EOS blockchain is ruled in accordance with its constitution

EOS is Special

Ever since the plans for it were published, the EOS project has been different than other projects.

EOS ICO
Its one-of-a-kind ICO began on June 26th, 2017, and lasted for more than a year. During that crowdfunding campaign, Block.one raised a record-breaking total of $4 billion, which is still the largest sum ever raised by a blockchain startup.

EOS is a huge project, but those funds give Block.one more than enough to deliver what they have so ambitiously promised.

Nevertheless, competing with Ethereum isn't an easy task.

Since EOS is still in the early stages of its development, by the time it will be a fully functional platform, Ethereum may fix all the problems with scalability that are plaguing its network, and confirm its pole position where smart contract deployment platforms are concerned.

Anyhow, there is a long and treacherous road in front of EOS to become the market leader, but Block.one employs some of the most brilliant, and already proven minds in the blockchain industry.

We can only wait and see where their struggle for the superiority will take the EOS project.