4Rev Coin Analysis: EOS

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The Basics

EOS is an emerging consensus blockchain operating system based on smart contracts that seeks to provide an easier route for developers to build commercial-scale DAPPs (what is a decentralized application?). The platform was developed by block.one, led by Dan Larimer, the developer behind BitShares and Steem. The original decentralized platform that is well-known is Ethereum, the second largest cryptocurrency and home to thousands of other coins that built on top of the existing neutral blockchain. EOS was created to solve some of the problems that Ethereum has run into, namely facilitating the fair creation of these DAPPs across all levels of business sizes.

Larimer and block.one have chosen to build more common rules and functionalities right into the blockchain so that the creation of a new DAPP is easier, given developers won’t have to start from scratch. The essential features that differentiate EOS from Ethereum are provided databases, account permissions, scheduling, authentication, and internet-application communication to app developers. Basically, developers won’t have to worry about the cryptography implementations or communication with the decentralized computer (i.e. blockchain). Furthermore, EOS will use parallelization to make possible blockchain scalability to potentially millions of transactions per second.

After last July’s ICO, EOS has a coin that is vital to the decentralized platform’s functionality and the company has targeted 1 billion coins as the total supply, although there is the potential for (depending on community votes) up to 5% inflation per year.

The Problem(s)

As previously stated, EOS was a reactionary creation to some perceived problems with Ethereum, the original decentralized blockchain platform leveraging smart contracts. In this section, I’ll detail those problems so that we can properly discuss the intended solutions. Expressly, Ethereum’s problems come down to these categories: scalability, fair and fast DAPP building, consensus processes, rental economics, and security against denial of service attacks.

Scalability

Ethereum’s scalability has come into question as it can only accomplish 25 or so transactions per second in even optimal conditions, the average is closer to 10. The retort from Ethereum on this that transaction volume has been sacrificed for security protocols that help keep users’ information safe but in order for thousands of projects to operate on the same blockchain, it will imperative to transact quickly.

DAPP Building

We touched on this briefly before but to reiterate, each and every DAPP built on the Ethereum network will need to start relatively from scratch. It has been hypothesized that this type of network would be much more efficient if more common functionalities were built into the platform, rendering the need to reuse code unnecessary.

Consensus Mechanism

This is perhaps one of the most fundamental and meaningful differences between EOS and Ethereum, how the work to achieve consensus is undertaken. While Ethereum uses a hybrid Proof-of-Work/Proof-of-Stake model, EOS uses Graphene technology to power a Delegated Proof-of-Stake (DPOS) consensus mechanism. The problem with Ethereum’s model is that it makes fixing broken applications near impossible without affecting the larger ecosystem of projects running on the network. This just occurred with the DAO failure and definitely conjured the most negative press the platform has seen.

Rental Economics

Ethereum’s economics are best described as a rental model. In essence, fees are exchanged for every calculation, storage operation, and bandwidth utilization. Furthermore, the required fees fluctuate and can spike prohibitively high as miners preferentially select transactions with the largest fees.

While EOS will allocate bandwidth to users based on the number of coins they own, Ethereum’s bandwidth goes to whoever has the greatest computing power or ability to pay fees, meaning that smaller companies and startups that cannot afford this will not be able to compete in this ecosystem against the giants. This means that new projects are harder and more expensive to start, and incumbents will most likely dominate for years to come.

Security Against DoS Attacks

A denial of service attack occurs when users spam large transactions to effectively block out all smaller, valid transactions. Ethereum is vulnerable to this type of attack because miners on their network are known to prioritize higher volume transactions as they will receive greater reward. Also, the low transaction speed that also lends its hand to lack of scalability can be used against Ethereum to make this type of attack less expensive, as they attacker wouldn’t have to transact an exuberant amount to overcome the 10-20 transaction/second average.

The Solution: Fundamentals Comparison EOS vs. Ethereum

EOS has been built, developed, and marketed as the dawn of a new era in smart contract platforms, solving the problems of the old and ushering in the latest and greatest technology. In this section we’ll take a look at how the solutions to the problems listed above will manifest themselves in the EOS platform.

Scalability

Ethereum’s scalability problem will be solved in the EOS platform by being built on the faster Graphene technology as well as allowing for parallelization, solving multiple transactions at once. At full capacity this will allow for EOS to process potentially millions of transactions per second.

DAPP Building

If a network for DAPPs is to be successful, it has to facilitate the transactions of all of the built DAPPs as well as allow for easy creation of new DAPPs. As Ethereum’s network grows and gains popularity, it has become harder for all of these DAPPs to share the platform’s bandwidth. Additionally, it was Ethereum’s goal to maintain a neutral platform that doesn’t have pre-built features, allowing each developer to create their own protocols. However, this also makes each development a longer, more tedious process, where work has to be re-done that was already accomplished on various other DAPPs. EOS, on the other hand, provides common functionalities to make for faster and more consistent DAPP building. Some included features are, generalized role-based permissions, a web toolkit for interface development, self-describing interfaces, self-describing database schemes, and a declarative permission scheme. With these inclusions, account creation and management become easier and security is improved by declarative permissions and account recovery.

Consensus Mechanism

EOS’s DPOS method allows the network to “freeze” a broken DAPP so that it may be fixed without impacting the entire platform of DAPPs. Additionally, the DPOS model won’t allow for the creation of competing chains in the case of a hard fork, something that happened with Ethereum’s model. Yet another benefit of EOS is the revolutionary constitution that is attached to each block. The constitution establishes a common jurisdiction for dispute resolution as well as self-funded community benefit applications that are selected through a voting process.

Ownership Economics

EOS goes like this, own the coin, own the bandwidth. If you own 1% of the total supply of coins, you can use 1% of the network’s bandwidth. Entry costs to work is the amount of coins you buy, you can always pull out your investment by selling the coins, or conversely, buy more power with the purchase of more coins.

Security Against DoS Attacks

DoS attacks are frankly easier when less volume is required to buy out for the intended effect to occur. On EOS, the volume needed to truly execute this type of attack would cost a fortune, rendering the whole idea fairly worthless as a means of stealing. Additionally, since stake in the network bandwidth, storage, and computing power requires the proportional amount of coins, spammers can only consume the proportion of the network that their EOS tokens entitle them too.

Technical Analysis

When all else fails, sometimes all we have left as investors and traders is a technical analysis. In the case of EOS, there’s so much more to the project than the price of the coin but it’s important to take it into account even if only a metric for adoption, which will be a huge factor in the project’s success.

EOS had their ICO last July and after a number of months in the $1 range, the coin followed the general price explosion across all cryptos in Decemeber and into the new year, topping out at $18.71 in mid-January. Since then, the coin has been trending down in the 2018 bear market. With that being said, the last few weeks have been promising for the price action. Since March 16thwhen the price was $5.09, the coin has risen nearly 35% to a month high of $7.34. The main struggle for EOS in technical terms will be to beat the falling channel resistance that has formed over the last few months.

To end on a good note, the trading volume has grown substantially in March, reflecting the more widespread adoption of the coin as development on the platform continues.

Does Any of this Matter?

Cryptocurrencies are here to stay but to think that all of them will be around even until the end of 2018 is na?ve. When researching a coin, it can be almost too easy to get excited and think it’s the next Bitcoin, mainly because most content published on a certain coin is positive because its supporters are the ones writing about it. For EOS I would like to first state that a quick exit in 2018 is highly unlikely, but the test will come in the future as crypto adoption begins on a commercial scale and companies want to create DAPPs. Once Ethereum cannot handle the demand by itself, competitors will have a chance to secure market capitalization.

My prediction is that EOS has a mediocre 2018 on a technical basis but as long as adoption continues and more importantly, development, the future for the platform is extremely bright and now is a better time than any to get in.

By Robert Burns

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