EOS is by far the largest Initial Coin Offering (ICO) in the history of cryptocurrencies. Having raised more than $3.5 billion, it promises to become an extremely fast and scalable blockchain protocol with zero transaction fees. Many believe it has the potential of becoming a standard for decentralized applications that require fast, secure and free interactions between their users.
If Bitcoin is digital gold and Ethereum is digital oil, EOS has been likened to digital real estate. The limited supply and everlasting nature of the tokens make it a prime target for investors who feel strongly about a decentralized future. However, this coin is still in the very early stages so should be approached with extreme caution and only as small part of a well-diversified portfolio.
- Crypto-asset type: Utility Token
- Initial supply (June 1st, 2018): 1,000,000,000 EOS
- Circulating supply (to date): 950,000,000 EOS
- Market Capitalization: $14.2 bn
- Token Economics: Inflationary Asset - Block producers are compensated for creating blocks with new tokens (The annual rate of inflation by new coins will be 5% but can be changed if agreed by network participants).
- Protocol: Delegated Proof of Stake.
The EOS blockchain, and the EOSIO software, is a project by a private company known as block.one that is still under development. The CTO and main mind behind the project is Dan Larimer, who is also the creator of Bitshares and Steemit, two of the most successful blockchain platforms to date. The company started the EOS Initial Coin Offering (ICO) in June 2017. So far, the project has raised more than $3.5 billion making it by far the most successful ICO to date.
Initially, EOS tokens were stored on the Ethereum blockchain. On June 1st 2018, the EOS main net was released and the tokens were swapped onto their own blockchain. EOS is currently the 5th largest cryptocurrency in terms of market capitalization, proving the great expectations of the cryptocurrency community for this blockchain.
The two main faces behind EOS are Brendan Blumer and Dan Larimer. Brendan Blumer is a technology entrepreneur based in Hong Kong, and the founder and CEO of block.one. He created Gamecliff, a service for selling in-game items, at the age of 14, and has since been involved with several technological projects before focusing on cryptocurrencies.
Dan Larimer is arguably one of the most respected minds in the “crypto world”. He is the creator of the DPoS protocol, and two previous successful blockchain projects, Bitshares and Steem, the two blockchain projects with a larger user activity (source). Now, he acts as the CTO of block.one and the main technical mind behind EOS.
There are many industries where smart contracts and decentralized applications can have a disruptive effect, improving the efficiency and security of the market and eliminating the need of a centralized thirdparty. EOS in particular will be especially useful for applications where scalability and fast transactions are key, and more important than having a truly decentralized system. Examples of potential applications are:
- Internet services: the blockchainbased versions of existing Internet applications would indeed require a fast, secure network with free transactions. Great examples would be social media and messaging apps. Having a man like Dan Larimer at the head will make this use case particularly plausible given his track record. These concepts would be practically impossible in a network like Ethereum where all transactions have an associated fee.
- Peer-to-peer services, like Uber, AirBNB or eBay, could be replicated on the blockchain without an intermediary and the associated fees, and with a truly secure network. These services are becoming more and more important, and there is a huge amount of potential applications.
These use cases would be particularly suitable for a blockchain like EOS, but any application or project that could run on Ethereum or other networks could also be developed on EOS. Examples could include decentralized exchanges, financial services applications or supply chain solutions.
The goal of EOS is to provide a blockchain platform with capabilities for smart contracts and decentralized applications. EOS will act as a decentralized operating system, similar to Ethereum or NEO, where dApps can be developed and used by the community. The project aims to create a much more scalable and flexible network than its competitors, with zero network fees and extremely fast transactions.
Ethereum’s network, who currently employs a Proof-of-Work consensus protocol similar to that of Bitcoin, has proven to be slow especially during extended periods of maximum use. EOS aims to reach a capacity of millions of transactions per second, which should be enough for simultaneous and global-scale use of multiple viral dApps. For that purpose, EOS will use a state of the art Delegated Proof-of-Stake (DPoS) protocol.
In the DPoS protocol, as opposed to traditional Proof-of-Stake solutions, the token holders indeed delegate the capability of producing new blocks in the blockchain to a few nodes controlled by known, trustworthy entities. This allows the system to be extremely fast, producing a new block every 0.5 second. At first sight, this might appear to be a less decentralized network than Ethereum or Bitcoin due to the small number of block-producing nodes. However, in practice PoW networks are oligopolized by huge mining pools that can control more than 25% of the block production, something that would indeed not happen with EOS.
On a separate note, and unlike Ethereum, which requires developers to use a specific programming language called Solidity, EOS permits dApp and smart contract development with widely used languages like C, C++ or Rust, which will make it easier for developers to deploy their projects on the network.
On both Ethereum and Bitcoin, validator nodes are compensated with coins for validating new blocks. These coins are both created with each new block (inflation) and collected from users of the network (fees). On EOS, users will simply have to own tokens to be able to use an equivalent fraction of the network resources. For example, an EOS user that holds 10% of the supply would be guaranteed 10% of the total network resources.
EOS also aims to be a much more userfriendly network than existing blockchains with usernames and accounts more similar to what the average user is used to having in traditional online services, as opposed to Ethereum’s or Bitcoin’s long hexadecimal addresses. Decentralized apps will also run natively on a simple web browser without the need of any specialized software, further bridging the gap between blockchain and non-technical users. The idea is to use the blockchain like the engine of a car. The average person doesn’t need to know how it works in order to drive the vehicle.
EOS ICO & Token Distribution
The funding process of EOS, briefly described above, has indeed been one of the most interesting aspects of the project, and a unique approach in terms of how to finance an ambitious project in its first stages of development.
The one year-long ICO that started in June 2017 is divided into one-day contribution windows that work as a sort of auction. The token (an ERC-20 token on the Ethereum network) can in the meantime be traded on several exchanges. The first period was a special one where 200 million tokens were issued raising a total of $172 million. All 349 subsequent periods have distributed 2 million EOS at varying USD rates. It should be noted that all contributions are made in Ether.
As of May 10th, there are 21 contribution windows pending (roughly three weeks) and 950 million EOS have been distributed of the total 1 billion. Of this, a 10% is reserved for block.one. With these reserves and the huge amount of capital raised during the distribution, block.one has an unparalleled treasury available for investments in the EOS ecosystem.
There are some dApps in development for the network. Some of the most interesting ones are:
- Insights Network is a data exchange system, where users can manage and monetize the data they generate daily.
- Bywire is a news aggregation system with decentralized and trustless information.
- Chintai is a token leasing platform, where token holders can lend their tokens to developers or other users for a certain interest.
- Iryo is a decentralized healthcare system where medical records are stored safely and owned by each individual without the need of a centralized stakeholder.
- Everipedia is a decentralized version of Wikipedia that has the backing of Jimmy Wales, one of the co-founders of Wikipedia.
In addition, EOS will support the Bancor protocol, a new standard for the creation of a new generation of cryptoassets known as “smart tokens”. Bancor uses the concept of “connectors” to make any two tokens readily exchangeable to each other with immediate liquidity, without the need of a traditional exchange where buyers and sellers are matched.
Token Valuation Analysis
The special token metrics of the EOS network (zero transaction fees) makes the construction of a valuation system particularly difficult. In the case of decentralized computing networks like EOS or Ethereum, the value comes in principle from the computing cost of the network. However, in practice they will also be used as a store of value by many people, in a manner similar to Bitcoin. We also anticipate that there may be a large secondary market for developers who would like to rent EOS coins for a new project before deciding to purchase them. In that sense, it is important to consider the inflation rate of EOS, which is decided democratically by the token holders with a maximum annual value of 5%.
The actual utility value of the network is however very hard to predict, without knowing yet the total available resources and the average use by the network users.
If a great number of dApps are released on the platform and prove to be successful, they will hold a significant amount of tokens to be able to access the network resources. These tokens will effectively be locked, so the value of the network should indeed go up over time.
Besides, the actual value of EOS can be much higher than the utility value, not only because of its potential use as a store of value, but also because of the expectations of some users on the future use and capabilities of the network.
Source: eToro Market Research