Hey everyone, welcome to this What Is EOS guide!
Let me guess… You’ve heard the buzz around the EOS blockchain and now you want to find out more? Or you’ve taken a look at other guides but still don’t seem to understand it?
Well, don’t worry, we have you covered! Today I am going to explain everything you need to know about EOS in the simplest way possible. So, not only will this guide be knowledgeable for advanced crypto lovers, but also the beginners too!
This guide will cover everything from how the project started to how the technology works, I might even use some real-world examples (if you’re lucky!). By the end of reading this “What is EOS” guide, you should be an expert in it!
By the way, did you know that EOS is actually pronounced “E-OS”!?
Anyway, let’s not waste any more time, instead, let’s go and find out the answer to “What is EOS”!
Table of Contents
What is EOS – The Story
EOS is one of the newest blockchain projects to enter the cryptocurrency market. Its goal is to build a network capable of processing millions of transactions per second. Its ICO (initial coin offering) has been very interesting for a couple of reasons.
Note: An ICO is a way for new cryptocurrency projects to raise money. Instead of receiving fiat currency, an ICO raises funds through a popular cryptocurrency such as Bitcoin or Ethereum!
Firstly, the EOS ICO started on June 26th, 2017 and will run until June 1st, 2018. That’s a total of 350 days, making it the longest ICO of all time! The EOS team did this to make sure everybody got a chance to get involved and purchase some EOS.
Secondly, although the ICO is still going, it has already raised the equivalent to over $1 billion, making it one of the most successful ICO’s of all time! Once completed, the ICO will release 700 million tokens, which is 70% of the total supply.
EOS have some really experienced team members, including Daniel Larimer, who was also a co-founder at both BitShares and Steem. Larimer’s cryptocurrency projects are now worth billions of dollars!
The company behind the EOS software is called Block.One, who are also involved in lots of different blockchain and business projects.
So now that you know the story behind EOS, let’s move on to the next part of my “What is EOS guide”!
What is EOS?
Before I explain what the project actually is, it is important to remember that EOS haven’t finished building their product yet. At this stage, everything is just theoretical. So, let’s hope they are able to stick to their word and produce what they say they will.
The aim of EOS is to build a decentralized blockchain that can process fast and free transactions. It will also allow smart contracts to be built on top of it, which will allow developers to release dApps. Not only this, but EOS want to build a platform that functions like an operating system, which will make it really easy to use!
DApps are the future of the internet. There has already been over a thousand of them created on other blockchains!
An example of a dApp that could be used on EOS blockchain is a decentralized version of Facebook, where nobody controls the network, and no one can get access to your personal information! For a complete guide on what a dApp is and how they work, click here!
Note: If something is decentralized, it means that no single person or entity has control of it.
Another aim of EOS is to be able to process millions of transactions per second. This would solve a big problem, as other blockchains can recognize smart contracts, none of them can perform that quickly! For example, even though Ethereum is the most popular smart contract blockchain, it can only handle 15 transactions per second!
Why is this such a major issue? Well, to give you a few examples:
- More than 52,000 Facebook likes happen per second and every single one of those likes is a separate transaction that you don’t ever see.
- Then you have the financial industry which needs to process more than 100,000 transactions per second.
So, you can clearly see the need for millions of transactions per second, making EOS perfect for these types of industries!
Another solution that EOS is looking to solve is the issue of usability. For example, both Steem and BitShares can process around 100,000 transactions per second and use smart contract technology. However, it is really difficult for developers to insert basic functions such as account recovery and task scheduling.
By using an operating system protocol, EOS will have all of these core functions built in, allowing developers to do what they do best.
So, now that you know what the EOS team are trying to achieve, the next part of this “What is EOS” guide will take a closer look at how the technology works!
How will EOS work?
EOS (like many other smart contract blockchains) is often referred to as the “Ethereum Killer”. What this means is that it can do everything that Ethereum can, but so much better! So, I thought it would be a good idea to compare the two…
Firstly, as we have already established, both Ethereum and EOS are capable of hosting dApps, which are supported by smart contracts. However, the key difference is the amount that each network can process at any given time.
This is called “Scalability” which is one of the most important things to consider when analyzing the potential of a blockchain.
Ethereum is still only able to process about 15 transactions every second, which is far too little for it to achieve global adoption. However, although it hasn’t been built yet, EOS are hoping to increase this number to over a million!
Well, going back to Ethereum, the reason it is unable to process lots of transactions is because of the way it manages data — each block can only store a certain amount of information. To understand this, think about an empty shipping container that can only store 1000 boxes. Because of its size, it can’t store any more than its maximum capacity!
Not only can each container (or block) carry only 15 transactions, it also takes a while for it to reach its destination!
The technology supporting this data process is called Proof-of-Work (PoW), which is known to be really slow, expensive and bad for the environment!
Note: Proof-of-Work is a type of consensus model. There are better consensus models out there, such as Proof-of-Stake and Delegated-Proof-of-Stake, which is used by EOS!
The Ethereum team are trying lots of different things to solve this issue — such as sharding or off-chain transactions. However, they are yet to implement a solution!
As mentioned, instead of using PoW like Ethereum, the EOS blockchain will use a new consensus model called Delegated-Proof-of-Stake (DPoS). This could fix the current problems that Ethereum are trying to solve!
Trying to explain DPoS can be a difficult task if you don’t have any previous knowledge of blockchain technology. But don’t worry, that doesn’t mean you have to miss out! Here’s DPoS explained in the simplest way possible:
- Imagine that 200 people are needed to help verify each transaction on the blockchain. These people are called “Witnesses”
- As the blockchain is decentralized, EOS investors (rather than a central party) get to vote for who they think should be a Witness!
- However, the strength of your vote is based on how many EOS coins you have. This is called a “stake”. The more coins you stake, the more power your vote has.
- The task of all 200 Witnesses is to keep the network secure. They get paid for doing this.
- There are lots of backup Witnesses available who wait for their turn to help secure the blockchain, so that they can make money too.
- If a witness is not doing their job correctly, or they are not securing the network as they should be, they can be voted to be kicked off the network. Which gives the backup Witnesses a chance.
Basically, this creates a more efficient system, allowing cheap, fast and environmentally friendly transactions. In fact, each transaction only takes 3 seconds to process!
Ethereum, however, needs every individual computer (node) that is connected to the network to come to an agreement before a transaction is confirmed. Which is why it can take a while to reach its destination.
Note: A node (or computer) helps to operate a blockchain network. Anyone can become a node by contributing their computing power and connecting to the network!
Another good addition to the EOS blockchain is that it will be possible to freeze transactions! But why is this important?
Well, have you ever heard of the famous DAO hack? Basically, somebody stole $50 million worth of Ethereum coins back in 2016, which meant that the blockchain had to be forked. If the Ethereum blockchain had DPoS technology like EOS will, then the attack could have been stopped.
Note: A fork is when a new blockchain uses the original code from an older blockchain but makes changes to improve it.
So, now that you know how the technology works, the next part of my “What is EOS” guide will explain what the EOS crypto will be used for.
What Is EOS Coin Used For?
Like most blockchains, EOS has its own native cryptocurrency, simply called EOS. It has a couple of different purposes, which I will now talk about further.
When you use the Ethereum blockchain, you have to pay transaction fees. This is called GAS, and as more and more people use the network, it becomes more and more expensive.
This makes it unusable on a global scale because it wouldn’t be worthwhile sending small amounts. Remember the example of Facebook likes earlier in the “What is EOS” section? Well, if a Facebook dApp was running on the Ethereum blockchain, every time somebody clicked the “Like” button, it would cost them money!
This is because of how Ethereum was built. When people need to use the network, they rent Ethereum’s Virtual Machine, which requires a transaction fee.
The EOS model is different though: instead of “renting” computing power, EOS coin holders have ownership of the network.
For example, if you owned a 1% stake in EOS coins, you would essentially own 1% of the network, meaning you would own 1% of the required computing power to process the transaction. This is what makes transactions free!
The EOS coin operates in the same way as any other cryptocurrency — you can send, hold or receive funds between wallets. This makes it an excellent payments system as you can transfer money to anyone in the world for free, in just a few seconds.
So, now that you know what the coin is used for, the next part of my “What is EOS” guide is going to show you how the technology can sometimes be abused.
How Can EOS Be Abused?
One of the most unique features of cryptocurrency is that it allows people to send and receive transactions anonymously. This is just like paying for cash in the real world. You wouldn’t expect to show identification when you got on the bus or paid for a loaf of bread, would you?
However, this also means that some people can use cryptocurrencies to commit crimes anonymously. Crimes that involve the buying and selling of illegal drugs, weapons and stolen credit cards (to name a few). Bitcoin was also once used to pay for private assassinations too.
EOS does not exclude itself from this anonymous feature.
Also, most blockchain databases (such as Ethereum’s) are public. This means that everyone with an internet connection can view all the transactions that take place on a blockchain, as well as view the account balance of all wallets.
However, according to the EOS founder Daniel Larimer, although it will not be possible to hide the address of the sender or receiver, it will be possible to hide the total balance of a user’s wallet.
This could potentially appeal to those hoping to commit tax evasion offenses as it would allow a person to hide their wealth in the same way an anonymous shell company does. However, the benefit of this is that it adds extra security for wealthy cryptocurrency holders.
An important thing to remember is that all technologies have the potential to be abused, but it is only a small minority that attempts to do it.
What is EOS? – Conclusion
So, that’s the end of my “What is EOS” guide! If you have read this from start to finish, you should now have a good idea of what EOS is trying to achieve, why the project was founded, how the technology works and why the EOS token is so important.
Although the EOS ICO doesn’t officially end until June 1st, 2018, it has already become a top 10 cryptocurrency! Personally, I put this down to the solid and experienced team that are working on the EOS project.
So, what do you like the most about EOS? I think it has the potential to become one of the most important blockchains of the future, with fast, free and scalable transactions.
However, it is important to remember that until it has been built, it is just an idea. But who knows, maybe EOS could be the real Ethereum killer!
What do you think? Do you believe it will reach its target of millions of transactions per second? Let me know in the comment below!