A Beginners Guide to the EOS Blockchain 0/3
A Beginners Guide to EOS Blockchain
What is EOS?
EOS is a decentralized operating system which is designed to enable the development and of decentralized applications in commercial scale by providing them all the essential support and features.
It is comparatively similar to the ethereum blockchain for the creation and deployment of decentralized applications but EOS promises a more scalable blockchain with usability for large-scale businesses.
The EOS’s asynchronous communication and parallel processing makes it possible for the network to scale millions of transactions per second, while its ownership model eliminates the need for transaction fees and allows for quick and easy deployment of decentralized applications. These features make EOS a tough competitor to pre-existing platform, Ethereum.
The Team behind the EOS project
The EOS project is developed by the block.one team, headed by Brendan Blumer as CEO. Daniel Larimer, known for creating BitShares and Steem and inventing the delegated-proof-of-stake (DPOS) consensus algorithm, is CTO. Brock Pierce, creator of the first ICO token, Mastercoin, is a partner. Ian Grigg is the financial cryptographer and also a partner.
Block.one is one of the early adopters of the blockchain technology and has been instrumental in devising a cornerstone for faster and secure transactions and aims to work on improving the EOS performance and scalability, and also develop and deploy its own end-user application in the near future.
“Block.one’s goal is to bring blockchain to businesses through our platform which offers unprecedented levels of scalability” says Daniel Larimer, CTO Block.one.
Larimer believes that through Block.one’s EOS.IO, the firm would be able to make it easier and scalable for organizations to leverage the blockchain technology and reap business value.
How does EOS work?
The EOS software is designed to empower developers to build blockchain applications that resemble existing web-based applications, using architecture similar to website frameworks.
The software enables vertical and horizontal scaling of decentralized applications that is achieved through an operating system, which allows developers to build blockchain applications on top of it, mitigating the chances of coding errors.
The network eliminates transactional fees by allowing developers to create smart contracts and dApps using computational power and resources proportional to their stake. This means that for users to create smart contracts and dApps on the EOS software, they must own and stake a certain amount of EOS tokens for the network to process the transaction. The tokens are never spent they are just a proof of ownership which makes it possible for developers to create free applications.
Furthermore, since EOS token holders will be able to rent/delegate their share of resources to other developers, the ownership model ties the value of EOS tokens to the supply and demand of bandwidth and storage.
What is DPoS?
Unlike bitcoin and ethereum which uses the proof-of-work (PoW) method that requires miners to validate transactions on the network, the EOS software adopts a delegated proof-of-stake system (DPoS) whereby multiple witness-nodes are nominated by the network as representatives to make certain high-level decisions more quickly, without polling the entire network. This enables the system to fix bugs and rollback changes with supermajority consensus, rather than requiring a hard-fork.
In the DPoS Consensus algorithm, miners are replaced with producers that act as the block validators and functions in a similar way as witnesses in steem. Under this algorithm, producers are selected by a continuous approval voting system based upon their stakes. Any user can participate in block production and will be given an opportunity to produce blocks in proportion to the number of votes they receive from token holders.
In the EOS protocol, blocks are produced in rounds of 126 (6 blocks each, times 21 producers). At the start of each round 21 block producers are chosen by preference of votes cast by token holders. The selected producers are scheduled to create blocks in every three second intervals. This is done to ensure the smooth operation of the network and a producer who misses a block and has not produced any block within a 24 hour period is voted out by stakeholders.
Block reward is based on a negotiated amount between the block validators and the stakeholders up to a maximum of 5% of the market capitalization per year. Under normal conditions a DPOS blockchain does not experience any forks because, rather than compete, the block producers cooperate to produce blocks. In the event there is a fork, consensus will automatically switch to the longest chain.
What is TAPOS?
The transaction as proof of stake (TAPOS) is a feature of the EOS software which requires that every transaction includes part of the hash of the recent block header. This hash serves two purposes:
- prevents a replay of a transaction on forks that do not include the referenced block
- Signals the network that a particular user and their stake are on a specific fork.
This mitigates chain forging as the counterfeit would not be able to migrate transactions from the legitimate chain.
Features of EOS
Scalability: EOS promises a blockchain network that is capable of processing thousands of application simultaneously. EOS can achieve millions of processing per second, while bitcoin is currently 7 pens and Ethereum is 30-40 pens/sec.
Flexibility: The network is very flexible in the sense that it can easily upgrade, downgrade, and fix bugs in the system.
Zero Fees: The platform enables users to develop and deploy applications for free. This will attract more ordinary users.
Transparency: EOS utilizes an Ethereum smart contract which ensures a trustless environment and improves transparency.
Usability: developers will have access to various technical features which enables the easy deployment of applications in the network.
Low Latency: The DPOS consensus algorithm reduces latency by its block production structure and governance. This maximizes network performance and ensures reliability and good user experience.
Governance: The community is bonded by a constitution which everyone agrees upon; this is connected to block production.
Self Sufficiency: The EOS ownership model allows for 5% inflation per year. This makes the network independent and ensures growth and development.
The EOS Token
EOS tokens are ERC-20 compatible tokens distributed on the Ethereum blockchain that is aimed at providing vertical and horizontal scaling of decentralized applications. The token distribution began in June 2017 and will run for 341 days till July 2018. The total EOS token supply is 1 billion (700 million tokens will be distributed and the remaining 100 million tokens will be held by Block.one).
The 1 year ICO span will enable the mass adoption of EOS and provide the necessary fund for developing the EOS blockchain. During this time, EOS tokens are being traded on major exchanges and therefore the price is determined by the market.
The EOS token is not intended to be used for investing or as a store of value, and while they may be tradable it was solely created for the development of the EOS blockchain.
Right now, it’s a speculative token. Maybe investors will be able to redeem it for the actual usable token on the EOS blockchain one day, it is uncertain.
How to Get EOS tokens
You can get the EOS token by joining the ICO which is currently ongoing. It is also listed on major exchanges and as such, the price is determined by market demand.
Some exchanges including Binance, Kraken and Bitfinex allow users to buy EOS with fiat currencies like USD and GBP. It can also be exchanged for other cryptocurrencies like bitcoin, ethereum, litecoin etc.
Below are some of the major exchanges where you can trade EOS;
EOS tokens can be stored and accessed from an etherium supported wallet like MyEtherWallet or the Ledger Nano S hardware wallet. (You can see our guide on cryptocurrency wallets here).
Is EOS worth investing?
EOS.IO Software empowers developers to build applications that are tailored for their ultimate end-users. The company aims to build an open-source decentralized operating system that has the potential to scale millions of transactions per second, eliminates user fees and allows for quick and easy deployment of decentralized applications.
The EOS token is taken as a cryptocurrency in ICO which was created for the better development of the system. It has gained a fairly widespread adoption and also increased substantially.
Upon its few months of existence, EOS has been able to climb up the table to sit among the top 10 cryptocurrencies with a market capitalization of over $8 billion.
Block.one, the company behind EOS, does not intend to have the token used for investing or as a store of value but primarily for making transactions faster and cheaper for all stakeholders.
Once the token distribution is over, the EOS blockchain will no longer have any connection to the Ethereum network; however, it is unclear when the EOS blockchain will launch.
EOS brings a lot to the table with its exciting new features like the asynchronous communication and parallel processing that provides scalability. These features make the network a tough competitor to pre-existing blockchains like bitcoin and ethereum.
While EOS claims to be more efficient than previous blockchains, critics have been quick to point out its flaws.
The EOS consensus algorithm, the delegated proof of stake (DPOS), is built upon the voting mechanism. This model has proved unreliable in the past with low participation and near-zero motivating force.
Also, this ownership model gives undue advantage to investors with higher stakes in the system. This tends to make the network more centralized as most decisions are being made by a particular group while minor investors are given lesser opportunities to participate.
However, EOS has a constitution which protects the system from censorship. In this rule, bad actors are voted out of the system and lose all of their stakes.
For their part, the EOS has been doing pretty well. With its yearlong ICO, the network has gained a fairly widespread adoption and the result been one of the highest funded token sales to date and a substantial growth for the network.
However, these tokens currently have no purpose and cannot be traded as a currency. Right now, it’s a speculative token and until the EOS blockchain is launched (which is still unclear) it only gives investors the right to execute tasks on the network.
I hope you found this course useful and interesting. Give us a feedback and let us know what you think of the EOS network, would it succeed or fail?