An investor’s guide to cryptocurrencies: EOS

Industry

One of the newer cryptocurrencies to arrive on the market is EOS, launched with a big splash in June 2018 and described as “a utility token that provides both bandwidth and storage on the blockchain, in proportion to total stake (owning one per cent of EOS tokens allows for usage of up to one per cent of the total available bandwidth)”.

Unlike more established cryptocurrencies like Bitcoin, EOS isn’t generated by mining and doesn’t use Bitcoin’s proof-of-work (PoW) protocol. Instead, EOS uses what’s called a delegated proof-of-stake, or DPoS. This, as CoinDesk explains it, is a kind-of mashup of Bitcoin’s PoW and Ethereum’s PoS that “asks users to vote on ‘witnesses’ to confirm blocks. 21 nodes produce the blocks and parties pre-selected by EOS control the nodes”.

There are several advantages to this system, according to the 2017 whitepaper by Ian Grigg, a former partner with Block.one, the company behind EOS. DPoS, Grigg wrote, “avoids the tax of mining, releasing that substantial value back to stakeholders”. Designed to support the development of decentralised applications, or dApps, it also provides a faster user experience, he said.

“An EOS blockchain is intended for high-performance messaging with business logic,” Grigg wrote. “Popular use cases will include supply chain, resource management, user-messaging such as social media, asset issuance and trading, accounting for remittances, and gaming.”

As a would-be investor, here’s what else you need to know about EOS:

Transactions are pretty speedy
Due to the DPoS model, EOS transactions are not only fee-free, but they’re fast too. According to Block.one, the latest version of its blockchain software, released 24 January, supports maximum speeds of “3996 transactions per second – among the fastest on any public blockchain”. It’s also designed for low-latency block confirmation of 0.5 seconds, Block.one says. Ahead of its token distribution, the company noted in 2017 that EOS would be able to support “millions of transactions per second”. However, in an August interview, former Block.one technology VP David Moss described that claim as “a lot of hyperbole”. He added: “I think what we’re really looking at is, there are some physical limitations, like the speed of light, how fast can you transmit to each of the different Block producers around the world? That runs at about 400 to 500 milliseconds.”

EOS has risen quickly
As of early February 2019, EOS is ranked fourth in the cryptocurrency market, according to CoinMarketCap. Block.one’s 341-day-long token offering, which wrapped up in the summer of 2018, raised $4 billion – “the largest crowdfunding event involving the sale of a new cryptocurrency”. Like every other cryptocurrency, however, its market cap has fluctuated wildly, from a high of over $17bn last April to its current level of just over $2bn. Block.one’s investors include Christian Angermayer, Lansdowne Investment, Mike Novogratz, Louis Bacon, Alan Howard and Peter Thiel.

There have been some issues
EOS and Block.one have from the beginning raised eyebrows occasionally. There were problems in the first week or so after EOS was released, when seven accounts had to be locked and a number of transactions were halted to prevent hacking and other problems. Critics also point to chief technology officer Dan Larimer’s reputation as a “commitment-phobe” (his past ventures include BitShares and Steemit), and to the recent departure of a number of Block.one’s early employees to launch a new blockchain project aimed at improving on EOS. Block.one has also paid out a lot of bug bounties – more than $500,000 in 2018, “accounting for more than 60 per cent of all bug bounty rewards awarded by blockchain companies”, according to The Next Web. EOS, along with the crypto and blockchain world in general, was also skewered by comedian/commentator John Oliver last year on his show “Last Week Tonight”.

Its dApps ecosystem is growing
State of the Dapps added EOS to its platform last fall, noting that it wants to “see how this can develop over time”. DappRadar also lists a large number of EOS dApps in addition to those using Ethereum or Tron. EOS dApps have seen especially significant growth since last fall, “crushing” their competitors, according to AmbCrypto. Among the most popular application categories using EOS are games, gambling, social and finance.

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