Calling itself the most powerful infrastructure for decentralized applications, EOS is a blockchain-based, decentralized system that enables the development, hosting, and execution of commercial-scale decentralized applications (dApps) on its platform.
No official full form exists for EOS, and the creators have decided not to formally define it themselves. EOS supports all of the required core functionality to allow businesses and individuals to create blockchain-based applications in a way similar to the web-based applications, like providing secure access and authentication, permissioning, data hosting, usage management, and communication between the dApps and the Internet.
It is also supported by a web-toolkit for interface development, making it a complete offering for hassle-free app development. It essentially works in a way similar to Google’s Play Store and Apple’s App Store.
EOS.IO and EOS Tokens
The EOS ecosystem comprises two key elements: the EOS.IO and the EOS tokens.
To draw a parallel, EOS.IO is akin to the operating system of a computer – it manages and controls the EOS blockchain network. EOS.IO uses blockchain architecture that is built to enable vertical and horizontal scaling of decentralized applications. The EOS token is the cryptocurrency of the EOS network.
A developer simply needs to hold EOS coins, instead of spending them, to be eligible to use network resources and to build and run dApps. A token holder who is not running any apps can also allocate or rent his bandwidth to other participants who may need it.
Currently owned by the block.one organization, EOS was launched by Dan Larimer, who is also the founder and creator of established platforms like Bitshares and Steem.
How Is EOS Different?
While there are already a number of blockchain-based networks like Ethereum, which facilitates decentralized applications, EOS focuses on critical pain-points of blockchain and attempts to solve the problem of speed, scalability, and flexibility that often become a bottleneck for such blockchain-based systems. (For more, see An Introduction to Ethereum Classic.)
With the size of the dApps ecosystem increasing with every passing day on a particular blockchain network, it often suffers due to limited availability of resources on the network. They include problems like the network getting constrained by a large number of false transactions and similar requests, spamming apps, slow speed of execution, and limited computing power available across the network.
EOS.IO attempts to address these problems by offering more scalability, flexibility, and usability through its unique mechanism.
It claims to be able to support thousands of commercial-scale dApps without hitting performance bottlenecks through the use of parallel execution and asynchronous communication methodology across the network. The efficiency is further boosted by separating the various modules involved in the working of dApps. For example, the authentication process is performed separately than the execution process.
EOS.IO offers flexibility in the development and maintenance of dApps through various features. Its ownership structure promotes free usage by the user, and eliminates transaction charges as developers are allowed to utilize resources in proportion to their stake instead of the standard pay-per-transaction model. This also makes it easier for app developers to predict hosting costs, and allows them to create effective monetization strategies.
EOS.IO uses delegated proof-of-stake and a role-based permissions concept, which allows flexibility to make instant high-level decisions, like rollback, freezing and bug fixing of broken apps, through a majority accord among designated stakeholders.
It comes with key usability features – web toolkit for interface development, self-describing interfaces, self-describing database schemas, and declarative permission scheme – that make the developer’s job easy for creating and maintaining the apps.
The Democratic Inflation-based Economy of EOS
The EOS setup does not have any mining concept. Rather, there are only block producers who generate the required number of blocks and get rewarded by the creation of new EOS tokens for each new block they produce. Block producers have the flexibility to publish a desired figure for their expected pay, and the number of tokens that get created is calculated on the basis of the median value of the expected pay published by all block producers.
As block producers would obviously desire higher pay, this feature can easily be misused. To contain this issue, there is a mechanism to cap producer awards such that the total annual hike in token supply will not exceed 5%. Token holders, who are voters on such matters, have the authority to vote out block producers who demand more inflation, as deemed necessary.
This mechanism acts complementary to EOS storage, as all token holders will pay for the storage of files 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 is required, the more blocks will be demanded from the block creators who can demand more value for their work through higher pay inflation which can be approved by token holders. In case of decreased storage demand, inflation will be lower, thereby leading to smaller degradation in loss of value of EOS tokens held up.
Unique Year-Long Token Distribution
EOS took a novel approach with a one year long ICO period. As per EOSCollective.org, EOS token distribution was carried out as follows with an aim to spread tokens far and wide throughout the whole ecosystem at realistic market prices without giving undue advantage to a select few during a short ICO period:
- 200 million (20%) of tokens were initially distributed during a five day period from June 26, 2016 to July 1, 2017.
- 700 million (70%) of tokens are currently being distributed on an ongoing basis of 2 million per day for 350 days.
- 100 million (10%) are being held in escrow for block.one to keep their incentives in line with that of the EOS community. Block.one's tokens will vest over a 10-year period at 10 million tokens a year.
EOS tokens can be kept in multiple wallets that include Ethereum Wallet, MyEtherWallet, and MetaMask, and can be traded on exchanges like Bitfinex and YoBit.
The Bottom Line
The potential of EOS seems to be huge as it aims to address the problems linked with standard blockchain-based networks. However, it is still a conceptual initiative which may or may not bear expected fruits.
The bold claim of processing 100,000 transactions per second is still questionable by many stalwarts of the blockchain world. The requirement to hold EOS tokens to be eligible to send transactions exposes the participant to volatility. A lot will be worth observing in the near future as the EOS ecosystem takes shape.
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