What Is EOS and Why Should You Care?
Written by Vincent Grenier, CFO and Co-founder of EOS Nation
Cryptocurrencies are revolutionary because they allow people to transact peer-to-peer without the need for a trusted centralized third party. Bitcoin was the first, but it is far from being the last. It unleashed blockchain technology, a mix of cryptography and timestamp database technology that has the potential to change how we secure and access data and its value in the future. Public blockchains supported by a robust consensus algorithm assure data immutability, transparency, traceability, and security.
Bitcoin’s immutability, simplicity, and scarcity make it ideal for its claimed use case of being “digital gold”. It is designed and perceived as a digital store of value, an edge against the current financial system, and inflationary fiat currencies. However, there are many use cases for blockchain technology that have yet to see the light of day, let’s dive deeper into one of them.
So, what is EOS?
EOS possesses all of the inherent qualities of cryptocurrencies while also providing the additional benefits of being a smart contract platform. It provides further utility, faster, for less. The overall costs to operate on the EOS Mainnet (thereafter referred to as EOS and powered by the EOS token) are exceptionally low. EOS is a scalable smart contract platform with high utility and supply integrity built on a permissionless decentralized blockchain network. It is a secure decentralized trustless operating system on which anyone can deploy applications.
EOS is built on EOSIO blockchain technology, the most innovative and performant blockchain technology currently available for developers. EOS is the blockchain platform to build your decentralized application. Here are a few reasons why:
High Performance and Low cost: Personally, I wouldn’t use any application that has perceivable lag every time I clicked and tried to interact with it. Imagine if those interactions would also bear significant costs! People want instant feeless transactions. If the technology doesn’t provide that, the technology won’t be adopted by the masses, it is as simple as that. Latency matters. EOS block time is 0.5 second which makes it the fastest blockchain technology ready for mass adoption. Transaction costs on EOS are so cheap that dApps can pay for them and provide their users with the frictionless experience they desire. EOS also uses readable account names and is developer and consumer-friendly. Smart contract development on EOS is done in C++, a battle-tested robust coding language that has a lot of code libraries available for developers. There are also a lot of training courses and documentation available for the community to start learning and developing. EOS also has a built-in permission system that allows you to assign additional keys or custodians to an account or smart contract to increase its security. EOS is flexible and upgradable via an on-chain governance system operated by 21 elected block producers. This last point is of high importance because smart contract platforms need to continue innovating to be competitive by providing the best experience at the lowest cost for businesses and applications. Many networks can take years to upgrade, but this is not the case for EOS since the base layer code is inside an upgradeable smart contract.
“Pace of innovation is all that matters in the long run,” – Elon Musk
The EOS public blockchain is well-positioned for long-term mass adoption. The technology stack is backed by Block.one who has a massive war chest to support the development of its blockchain technology. Over the coming years, Block.one, as well as other businesses and community initiatives, will continue to deploy applications on EOS that will help bridge the legacy financial system and bring mass adoption of the EOS public blockchain.
I could go on and on about EOS’ superior characteristics, but I will instead answer some important questions:
“Square and Paypal solve the problem of how I buy coffee with Bitcoin, so why would I need EOS?”
The intent of blockchain and the dream initiated with Bitcoin is to remove the intermediaries in our society and their associated fees. The goal is to be able to transact peer-to-peer with less friction and less cost. EOS provides the payment infrastructure between two parties and removes the third-party fee that is usually around 2%. This fee can seem small, but for a business that has a net margin of 15%, 2% more is 13% more profit for the business each year! So yes, people and businesses want EOS!
“The Bitcoin network does not need EOS to succeed.”
Bitcoin doesn’t need help to succeed as a store of value, but EOS allows users to transact digital assets such as Bitcoin in a way that respects the user experience requirements of 2021 and beyond. EOS also allows its users to use these assets in Decentralised Finance (DeFi) and other smart contracts to leverage the assets, use them as collateral for loans, provide them as liquidity in pools, and many other opportunities that will provide yield or increase the utility of the given assets.
“Ethereum has all the network effect, so why should I build on EOS?”
Ethereum has been around since 2014 and has been the platform of choice to build blockchain prototypes on. It allowed businesses to experiment with blockchain technology and confirmed the thesis that blockchain is an awesome technology that works and has potential. But Ethereum has limitations. It has reached its maximum network capacity. As the network continues to have high transaction demand without adding to its maximum throughput, transaction fees (currently between 5$-100$) will continue to skyrocket.
Ethereum’s foundations are old and clunky and so hard to upgrade that the Ethereum community decided to create a new blockchain (Ethereum 2.0). It will need years of testing, retrofitting, upgrading and maintenance to assure its stability and security for big businesses to use it. Until then, most dApps that run on Ethereum cannot be profitable at scale and will not survive unless they use more centralized 2nd layer solutions or switch to a blockchain network such as EOS, that allows them to lower their operating expenses and provide the frictionless experience users desire. It is possible right now on EOS.
“Can I mine EOS?”
In EOS, the miners are the token holders, and the block producers (BPs) are the “mining pools”. BPs don’t collect transaction fees to prevent misalignment of incentives; the token holders do. The majority of token holders can also beat out the 1% annual inflation of EOS by staking in a mining pool. Here is a quote from Block.One that explains the upcoming EOS PowerUp Model very well:
"Imagine if token-holders on proof-of-work networks were the recipients of fees generated by transactional activity on-chain, instead of miners. That’s essentially what’s happening here. Depending on your usage level and the total amount of tokens deposited, the fees you collect may offset the fees you pay to power up your account. And all of this happens within the context of ensuring greater availability of system resources."
“Since anyone can spin up EOSIO public blockchains, why is EOS the Mainnet?”
There are multiple reasons why EOS is different from other EOSIO public chains. The first reason is that EOS is much more secure than any other POS/DPOS blockchain. DPOS and POS blockchains are secured and governed via token staking hence it is particularly important to have a high market cap but also a high minimum market cap throughout its existence. This assures an alignment of incentives with all token holders and removes the possibility for someone to acquire a high stake in the network for a low cost and become a majority power in a decentralized network.
Creating a public blockchain with the properties of EOS is not as easy to reproduce as we could think, in the same sense as creating a new replacement to bitcoin has shown futile. We see the benefits of Block.one’s work to ensure compliance and to prevent EOS from being deemed a security. The methodical approach is becoming more apparent and valuable day by day.
Understand this: There is no other EOS.
“How do I value a cryptocurrency, and which one will be worth the most in 10 years?”
Public blockchain protocols supported by a cryptocurrency are digital ecosystems of trust used by a community of users. The value of a cryptocurrency network is relatively proportional to Metcalfe’s law (# of users)2. The maximum number of users a network can support is proportional to its scalability and performance. Smart contract platform currencies also provide additional utility. Hence, its value is not only dependant on its user base, but also on the services it provides to its users. If smart contract platforms are set to disrupt many industries and middlemen, they will also attract a portion of the value they disrupt from our legacy system. Additional value will also come from applications currently not possible with the legacy technologies. For these reasons, it is apparent to me that smart contract platforms that can attract a lot of users and build a lot of services will eventually have the highest market capitalization.
The EOS foundations are set. They are very solid and can accommodate the largest community. If you do some digging, you will see that there are awesome dApps on EOS and many more are being built. For example, Programmable Finance (ProFi) and lowering the cost of compliance for businesses are use cases the community is excited about. Mass adoption is on the way. Nothing will stop EOS! EOS will only grow from where it stands. EOS is set to be one of the most valuable currencies in the world!
EOS tokens are ownership and governance rights to the EOS public blockchain ecosystem, the Estate Operating System of tomorrow (yes, that’s what I think EOS means!). The value of the EOS ecosystem will be proportional to what it disrupts. This is just the beginning! The next industrial revolution and the democratization of software are just starting. The future is us! The future is EOS! Let’s build and disrupt!
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