EOS launched its blockchain over the weekend marking a new chapter for the Delegated Proof of Stake (DPoS) protocol that also powers social media site Steemit and the Bitshares exchange.
Created by Dan Larimer in 2014 to address what he saw as the inefficiencies in PoW and PoS through a core function, shareholder voting, that implements “a layer of technological democracy to offset the negative effects of centralization”.
What is delegated proof of stake?
Very simply, every token holder has a proportional voting right to choose who the block producers are (or witnesses in DPoS vernacular). The productivity and behaviour of witnesses is held to account by the shareholders (token holders), so if they don’t meet block targets or act in a way that harms the network they are voted out of the job, which can happen several times in a single day.
Of course, there is a monetary incentive for the witnesses to perform dutifully in the form of a salary, which voters set, and through the networking effect of EOS - the more people who use the coin the more their salary is worth. Also each witness - block producer - is accorded the same power and responsibility regardless of their size.
The witness voting process on BitShares exchange.
In addition to exponentially increased transaction speeds from Bitcoin’s proof-of-work (PoW) or Ethereum’s proof-of-stake (PoS) to around 100,000 per second, DPoS avoids the centralization of power from big players pooling together either their resources of money or hashing power - as happens with bitcoin mining pools. Another core difference between this protocol and PoW and PoS is that not just anyone with enough computing power can join the network as a block producer, you must be voted in - much like in real world voting processes.
DPoS also eliminates the need to wait until a certain number of untrusted nodes have verified a transaction before it can be confirmed.
How does DPoS compare to real shareholder voting?
Tesla may provide a real-world antithesis to the autonomous company that Larimer is trying to achieve with DPoS.
On Tuesday shareholder activists proposed to break up the power of Tesla’s board and its CEO come-chairman, Elon Musk, citing the need for an independent chairman at its annual shareholders meeting. A shareholder group representing pension funds also urged shareholders to vote against all three of its directors: Antonio Gracias, head of Valor Management, 21st Century Fox CEO James Murdoch, and Musk’s brother Kimbal Musk arguing that issues including continuously missed production targets and vague promises showed the board has been insufficient in governing Musk and the company.
It was a bold statement but in the face of a charismatic CEO/chairman who is the company’s largest shareholder with 21 percent of the stock (his brother is third largest) and who has a cult-like loyalty from customers, the protests had very little chance of success. So the status quo at Tesla continues.
When the average uncontested director at companies in the S&P 500 stock index gets elected with 97 percent of votes cast in their favor, and only one director fails to get a majority vote each year, it is no wonder retail investor turnout is so low at corporate elections. At just 27 percent in 2013, it appears retail voters are apathetic when faced with the voting power of large shareholders.
In contrast, the decentralized company of DPoS uses the process of approval voting to ensure that even someone with 50 percent of the active voting power is unable to select even a single producer on their own.
Code over conflation
Despite his erratic public behaviour and being concurrent CEO of three other companies (from high-speed rail tunnel boring to intergalactic exploration and many other vested interests) Musk has been allowed to rule Tesla like a personal fiefdom through a combination of blind faith, nepotism and his major shareholding.
Unlike the concrete parameters of code, Musk’s litany of missed targets and grandiose promises of the future - “we are going to build the biggest building (Gigafactory) in the world” - are allowed to snowball without any consequence.
Larimer, on the other hand, has delivered four complete blockchain projects in four years, with Steemit now an exemplar of the technology functioning in real life. BitShares is self-funded, self-sustaining, self-regulated and continues to be developed by a decentralized group of developers directly hired by the blockchain through stakeholder election. Today, the BitShares shareholders collectively control a funding pool of $290m worth of BTS.
BitShares and Steem are entirely operated without any central authority or servers - Steem proving social media doesn’t actually need a Mark Zuckerberg.
With the tokenization of companies and securities the inevitable future of legacy stockmarkets could there also be potential for a change to the shareholder voting system? Musk has built his empire on the power of automation - why not him next?
Steem Dollars Spike 340% As Prices Reach $36 On HitBTC
The lesser-known altcoins have been making big moves as of late. Hacked recently reported on a wild 87% gain for BitTube, whose TUBE coin ranks no. 402 in market capitalization.
Focusing our attention on the top-100 cryptocurrencies, three names stand out: Loopring, Elastos and Ontology. Each coin has outpaced the broader market’s 3% return over the past 24 hours.
Though its far too early to tell if any of these cryptocurrencies are sleeping giants, an evaluation of price trends and marketing hype suggests they are worth a second look.
Loopring
Loopring is building a decentralized exchange based on open-source protocol. Though hardly unique from a crypto-market perspective, the protocol will allow users to trade from their private wallets while accessing liquidity from around the world.
The protocol is aiming to develop a truly ‘trustless’ trading platform that mirrors the underlying blockchain on which it is built. Because it is a protocol and not a singular exchange, the code can be leveraged by other decentralized applications. The project also seeks to unify various pools of liquidity. In theory, this will allow for better exchange rates.
LRC tokens are the mechanism by which Loopring will generate fees for its services. The token will also reward miners, exchanges and other users for matching trades.
The LRC token has gained nearly 9% over the past 24 hours to trade near $0.56. It has a total value of $313.7 million, placing it at no. 57 by total market cap. The coin is predominately traded on OKEx, IDAX and Binance.
Elastos
Elastos has generated significant buzz in the investment community as it continues to build out its new Smart Web infrastructure. Dubbed as the “internet of the future,” Elastos is developing a platform where decentralized applications can flourish without the internet. The Elastos internet will be powered by blockchain technology and will enable users to digitize their assets as well as copyright them.
The project is being funded by Foxconn Group and other industry players, who have invested over 200 million RMB ($31.2 million U.S.).
ELA tokens are the native currency of the Elastos platform. Only 33 million will ever be issued, with circulation increasing every year. The cryptocurrency will be merge-mined with bitcoin, in which case consensus is reached simultaneously on both chains.
The value of ELA rose 9% on Wednesday to $43.86 a unit. At current values, the token is capitalized at $221.4 million, enough for 68th on the coin-ranking list. Daily trading volumes are around $15 million, with Huobi and BCEX being the sole markets for ELA.
Ontology
The Ontology project seeks to resolve the challenge of scalability currently plaguing the blockchain community. It plans to do so by launching a “high-performance public blockchain” that will enable companies to scale to enterprise-grade levels.
Ontology has surged in the crypto-market rankings as the debate over scalabiltiy continues to preoccupy investors. A successful airdrop of ONT tokens, combined with the release of testnet Polaris, have helped propel prices higher in the second quarter.
With an anticipated mainnet release scheduled this year, Ontology could be poised for a promising second half of 2018.
ONT is current valued at $8.05 a unit, having gained more than 8% over the past 24 hours. The billion-dollar cryptocurrency is ranked 20th by market cap with a total value of $1.2 billion. Daily trading volumes are in the nine-figures, with more than $117 million turned over on Wednesday.
In terms of markets, ONT is the most widely available cryptocurrency on this list. Binance and OKEx generate the bulk of trading activity for ONT tokens, with the likes of Huobi, Upbit and Kucoin also providing access.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.
Is EOS The Most Promising Cryptocurrency In Development?
EOS is a project who has drawn much attention to itself lately. In part because of the recent sudden increase in the value of its native token and its Weiss rating.
In this article, we will analyze the potential of the EOS project and its probable future. It is my personal opinion that this cryptocurrency is a serious contender for the title of “Most promising DAPP/smart contracts platform”.
What is EOS?
EOS is a project belonging to the same category as Ethereum (platform for DAPP and smart contracts) but substantially different. In fact, EOS seems to have two main objectives that it seeks to achieve through its development: Scalability and ease of use.
Scalability
Scalability is the term used to refer to the number of transactions a blockchain is able to handle in a given period of time. A blockchain that can handle a large transaction load per second without any problems is called “scalable”. EOS faces this challenge mainly through two implementations: DPOS and interoperability between blockchains (achieved with the Dawn 3.0 upgrade).
DPOS
DPOS, Distributed Proof Of Stake, is the consensus algorithm of EOS (Steemit and BitShares use the same algorithm, after all, they had the same technical director, Dan Larimer). This algorithm sacrifices a certain amount of decentralization for a big advantage in terms of scalability. In fact, in the worst-case scenario, it is estimated that a single native EOS blockchain will reach 1000 transactions per second. But, in reality, it is to be expected that these will initially be around 3000 and then increase as the protocol is updated. For comparison, Ethereum handles about 20 per second, Bitcoin mind about 7.
The price of this is that only the 21 so-called block producers can validate the blocks, which substantially reduces decentralization. This is not the most resilient or incensurable blockchain, but it is the most suitable for mainstream use on a large scale. In fact, unlike what many believe, EOS will not “kill” Ethereum. Of course, as I previously suggested, it will probably get a good slice of its market. But Ethereum will continue to have its own niche. In particular, ETH will thrive where immutability, security, and decentralization are of utmost importance.
The blocks on the EOS network are also generated every half second. This means that transactions will always be confirmed within a few seconds if not just one. On the Ethereum network, an average transaction on press time takes about a minute and a half to be confirmed with one block added to the blockchain every 10-19 seconds based on network congestion. The Bitcoin blockchain instead takes on average just under an hour and a half to confirm a transaction with a block added every 10 minutes.
EOS seems a very good long-term investment
Inter Blockchain Communication
The other, even more noteworthy, way in which EOS seeks to increase its scalability is communication between blockchains. This allows, according to the reports, two or more blockchains to communicate (and collaborate to manage a greater load than single chain could). Particularly noteworthy is the statement that this standard is as secure as are interactions between smart contracts on a single chain.
This means that a transaction on one chain becomes automatically available on another. The only disadvantage is that this becomes visible only after this transaction has been confirmed on the other chain (that should happen in under 3 seconds). This feature of EOS is the basis of the statement that EOS can handle unlimited transactions per second.
Ease of use
Another not to be underestimated feature of EOS is how much attention has been dedicated to making it easy to use. The system includes features such as humanly comprehensible addresses, password recovery systems or the lack of transaction fees (which allows you to interact with DAPPs without owning tokens). These, together with its speed, make it possible to interact with the blockchain without even knowing that what you are using is not just a normal website.
To understand what is described, just look at steemit. This social/blogging platform, although it has some peculiar features, doesn’t seem to have a blockchain and some tokens at its base at all. This is the kind of DAPPs that are going to be hosted on EOS.
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Airdrops for EOS hodlers
Airdrop has become now a typical buzzword that we hear in the blockchain industry with the intention of attracting attention. This term simply refers to the free distribution of tokens. Often this is done in order to draw attention to the project, for example by giving tokens to those who have participated in other ICOs, so that they look for the project from which they derive. Other times just to trigger network effects. But in the EOS ecosystem, Airdrops have a different motivation, which is why I have said in the past that this may be the best investment in the long term.
“What’s the reason?” is the question that spontaneously arises in the mind of any person with common sense. This is because everyone knows that you should never expect anything for free. The answer to this question brings us to our attention something that is actually even better news.
Block.one has raised several billion dollars so far through the EOS ICO. These funds are intended to finance projects for which there will never be an ICO. In fact, more funds have already been announced for this purpose, including the USD 100 million joint venture between Block.one and the German Fintech incubator FinLab AG.
Projects financed by these funds, collected during the ICO, do not, therefore, need to finance themselves by selling their tokens. Their tokens are then distributed free of charge (hence as an airdrop) to all holders of EOS tokens. This means that investing in EOS is investing in a whole ecosystem in a much more direct way than investing in other similar projects (e.g. NEO or ETH). An analogy would be to buy ETH and consequently, in the coming months, receiving also the tokens of all the major projects realized on the platform for free.
Some Numbers
The EOS page on Coinmarketcap indicates that, with a total market capitalization of 10,590,855,420 dollars, this token is the fifth cryptocurrency by market cap. In fact, the latter has recently surpassed Litecoin (LTC) which has a market capital of 6,596,457,497 dollars (therefore now just over half that of EOS) at the time of printing. As far as price is concerned, EOS has grown by more than 1800% in less than a year (since July 2017) and then sustained a drop. (The graph renders the image previous to the drop in price.)
The features described above, once tested by real software have attracted a large number of investors. In fact, initially, the product has been subject to countless criticisms due to its ICO, which lasted nearly a year and will end in just a couple of days. But those who believed in the project when most accused it of being a scam enjoyed a low-price entry and substantial gains.
Analysis
It should be considered that the value of the EOS token at this time is purely speculative. In fact, until the EOS network is launched in three days, the token is completely useless. Ten billion dollars is a very high estimate for a platform still in development. We can, therefore, draw two logical conclusions:
The price of the token at this time is mostly linked to the enthusiasm due to the upcoming launch.
Consequently, a price correction is underway.
It is a Bubble, But that’s Not an Issue
EOS seems a very good long-term investment. That said, like any investment in this space, it is subject to high risk. The reason for this is that the sector is immersed in a huge speculative bubble. It is not by chance that this is often compared with the dot-com bubble that burst at the beginning of the millennium.
Indeed, just like at the beginning of the millennium it is to be expected that the vast majority of companies in the sector will fail. But that bubble was also a primordial soup in which companies such as Google and Amazon developed, the stocks of which at the time were worth only a fraction of what they are valued nowadays. In the same way, this time too, we can expect that the revolutionary technology such as blockchain, just like the Internet did, will lead to the birth of companies of similar relevance. My opinion is that EOS may be one of them.
Thanks to Read With Patient.
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