The vision of cryptocurrencies one day replacing fiat currencies relies heavily on the promise of decentralized finance (DeFi) as the cornerstone of this financial transformation. For DeFi platforms to achieve mass adoption, they must be capable of unlimited scalability, a feat only possible with a robust blockchain infrastructure.
What Is EOSIO?
EOSIO is a smart contract and foundational layer platform, similar in many ways to Ethereum (ETH). Developers can build smart contracts and decentralized applications (DApps) on the EOS blockchain.
Launched in 2017, EOSIO claimed to solve Ethereum’s long-standing scalability issues. It was designed to address a range of challenges faced by existing smart contract platforms. Users can create and execute smart contracts and DApps on EOSIO. Thanks to its Delegated Proof-of-Stake (DPoS) consensus mechanism, the network offers near-limitless scalability and completely fee-free transactions.
Who Created EOSIO?
EOSIO was created by Block.one, a company based in the Cayman Islands, founded by Brendan Blumer (CEO) and well-known cryptocurrency entrepreneur Dan Larimer. The company has offices in Hong Kong, Washington D.C., the Cayman Islands, London, and Germany, among other locations. The EOS token was officially launched in June 2017.
How Does EOSIO Work?
EOSIO’s technical foundation is one of the most intriguing aspects of its blockchain. It aims to resolve issues present in other blockchain projects. To fully grasp its inner workings, it’s essential to understand its underlying DPoS consensus mechanism.
EOSIO is often mistakenly referred to as an "Ethereum clone." However, this isn’t entirely accurate. The project's creators addressed existing challenges with innovative solutions, setting EOSIO apart in the crypto space. It supports parallel processing and boasts a theoretical throughput of one million transactions per second (TPS). Moreover, EOSIO is highly secure: it can easily identify and remove problematic or manipulated nodes when necessary.
Decentralization and Scalability
With its unique ecosystem, EOSIO positions itself as a decentralized operating system. It offers flexible configuration options, making it suitable for various institutional and corporate needs. The governance token of the EOSIO network is EOS, and holders can actively participate in decisions regarding the platform’s future development.
EOSIO’s standout feature is its unconditional scalability. The network claims a capacity of over one million TPS, at least in theory. In comparison, payment networks like VisaNet or PayPal typically handle around 1,700 TPS, while Bitcoin maxes out at about 7 TPS. EOSIO’s impressive throughput potential stems largely from its DPoS protocol.
Delegated Proof-of-Stake (DPoS)
DPoS is one of the many reliable consensus algorithms, conceived by entrepreneur and software developer Dan Larimer. Larimer recognized that Bitcoin’s Proof-of-Work (PoW) consensus mechanism consumed excessive energy. He also identified risks in the growing centralization of mining pools. As an advocate of Proof-of-Stake (PoS), Larimer saw certain shortcomings in existing consensus algorithms and developed DPoS as a solution.
Larimer created a system involving witnesses, voters, and delegates. Each user in the EOSIO network gains voting power proportional to their token holdings and uses this power to elect witnesses. These witnesses are responsible for maintaining network order, ensuring consensus, and validating transactions.
How It Operates
Voting power is determined by the number of tokens a user holds—more tokens mean greater influence. Voters elect a total of 100 witnesses, all of whom receive rewards for their work. However, only the top 20 witnesses receive a fixed income. This means only 20 nodes worldwide are responsible for confirming transactions.
Any user holding EOS tokens can vote to elect these 20 nodes. Voters are also compensated for their participation. The limitation to 20 nodes is intended to foster competition. Critics argue that a network with only 20 nodes isn’t fully decentralized, but DPoS supporters contend that the electoral process is inherently democratic.
If a witness acts fraudulently or unreliably, they can be removed from their position. Third-party delegates monitor network elections and can submit new proposals or rules. These proposals are then presented to the community for a vote. Delegates also oversee the witnesses and can intervene in cases of fraudulent behavior.
What Is EOS?
EOS is the native token of the EOSIO network. It isn’t a traditional blockchain currency but rather operates conceptually similar to an operating system.
What Is the EOS Token Used For?
As mentioned earlier, transactions on EOSIO are completely free. How is this possible? On blockchains like Ethereum, users must pay gas fees for transactions. This means that as network usage grows, so do the costs, often leading to scalability issues. EOSIO, however, operates differently.
EOSIO uses an ownership model. Under this model, holders of EOS tokens are entitled to use network resources in proportion to their token holdings without paying individual transaction fees. For example, if you hold X amount of EOS tokens, you can conduct (X * n) transactions. Additionally, EOS holders enjoy network privileges and can participate in governance decisions, as described earlier. Like other cryptocurrencies, EOS tokens can be traded on major crypto exchanges.
Why Does EOS Have Value?
Users who provide computing power to the EOS network are rewarded with EOS tokens. Developers must hold EOS tokens to access network resources. Instead of paying for computing power, they only need to hold a certain amount of EOS tokens to use a corresponding share of network resources. For instance, if you hold 1% of the total EOS supply, you can use 1% of the network’s total computing power. Like other cryptocurrencies, EOS tokens can be sent from one wallet to another.
What Makes EOS Unique?
EOSIO has always held a unique position in the cryptocurrency space due to its conceptual direction. It is neither a payment network like Bitcoin nor a blockchain platform like Ethereum; it most closely resembles a powerful operating system. For companies looking to securely and efficiently store applications on a blockchain, EOSIO is an ideal choice. The EOS token also plays a special role within the broader crypto ecosystem.
Key Advantages of EOSIO
In terms of operational mechanics, EOSIO is undoubtedly unique. Its closest comparison is Ethereum. Developers can create blockchain applications using EOSIO as the foundational layer. The DPoS consensus is the cornerstone of all its technical features. But how effective is this algorithm in practice? Why is EOS considered efficient, reliable, and secure? Below, we explore these questions.
No Transaction Fees
One standout feature of the EOS network is the absence of transaction fees. Unlike other blockchain projects, EOS isn’t generated through mining. Validators are compensated annually for their work. The EOS token has an inflation rate of 5%, with 1% allocated to validators.
Flexibility
Delegates also contribute significantly to the flexibility of the EOSIO blockchain. For example, during the infamous 2016 DAO hack on the Ethereum blockchain, a hard fork was executed to create Ethereum Classic.
EOS avoids such scenarios through its elected delegates. Delegates ensure project progress and monitor network conditions. If a decentralized application manipulates the network or contains vulnerabilities, delegates can immediately freeze the DApp and mitigate potential damage. An attacker would need to control more than half of the delegates to compromise the system—a near-impossible feat.
Authorization Management and Updates
EOS positions itself as a network for organizations and companies. For instance, companies can develop applications on the EOSIO blockchain for employee use. EOSIO itself can be viewed as an operating system, complete with sophisticated authorization management features. DApp operators and developers have numerous design options for development and management. Applications are upgradeable and can be updated at any time.
Limitless Scalability
By avoiding the PoW algorithm, EOSIO delivers exceptional performance. Technically, EOSIO processes transactions in parallel through horizontal and vertical scaling. "Scaling out" involves adding more computers to the network to expand the resource pool. "Scaling up" refers to adding computing power to specific parts of the blockchain operating system or particular DApps.
Training Programs
Whether you're interested in learning about blockchain or building your own, EOSIO offers a variety of training and certification courses in English and Spanish. Best of all, these courses were free until December 31, 2022. Take advantage of this opportunity to learn blockchain basics and join the next global revolution!
EOSIO vs. Ethereum
Ethereum and EOSIO share the same goal: fostering the development of decentralized applications. However, their structures, marketing, and support mechanisms differ significantly. Which performs better, and who will emerge victorious in the market competition?
Although Ethereum remains highly popular, some view EOSIO as an upgraded version of Ethereum or "Ethereum with a new engine." This is because EOS aims to address Ethereum’s current challenges in scalability, usability, and functionality using cutting-edge blockchain technology.
Key differences between Ethereum and EOSIO include the following.
Consensus Protocol
While Ethereum is transitioning to a Proof-of-Stake (PoS) consensus protocol, EOS uses Delegated Proof-of-Stake (DPoS). The latter not only handles more transactions but also allows programmers to freeze the network if an application malfunctions, enabling developers to fix issues without affecting other accounts on the network.
The EOSIO team claims that DPoS networks can achieve an average of 10,000 TPS upon launch. However, it’s worth noting that Ethereum is also exploring scalability solutions and is expected to release Ethereum 2.0 (also known as Serenity or ETH 2.0).
Programming Languages
Another significant difference lies in the programming languages supported by each platform. Ethereum users can only write applications in Solidity. In contrast, any programming language that can be compiled in Web Assembly (Wasm) can be used on EOSIO. Most users opt for C++ due to its broader support. EOSIO is more attractive to developers since they don’t need to learn a new language.
According to the EOSIO whitepaper, its most appealing feature is horizontal scalability. This means that, unlike Ethereum, the EOSIO blockchain can process transactions while simultaneously executing smart contracts.
What Is the Current Circulating Supply of EOS Tokens?
EOS has no maximum supply cap. As of the latest data, the circulating supply of EOS tokens is approximately 10 billion, with a total supply of around 105 billion. The current market capitalization of EOSIO is about $1.4 billion, with each EOS token priced at $1.37.
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Frequently Asked Questions
What is the primary use case for EOS?
EOS is primarily used as a utility token within the EOSIO ecosystem. It grants holders access to network resources, voting rights in governance decisions, and the ability to participate in staking or delegation processes. Its fee-free model makes it attractive for developers building DApps.
How does EOS achieve free transactions?
EOS uses an ownership model where users allocate network resources based on the proportion of EOS tokens they hold. Instead of paying per transaction, users stake tokens to gain bandwidth, storage, and computing power. This eliminates the need for gas fees.
Is EOS more scalable than Ethereum?
Yes, in theory. EOSIO claims a capacity of over one million TPS due to its DPoS consensus and parallel processing capabilities. Ethereum, while transitioning to PoS, currently handles a fraction of that throughput. However, Ethereum’s upcoming upgrades aim to close this gap.
Can EOS be mined?
No, EOS cannot be mined. It uses a DPoS mechanism where block producers are elected by token holders. New tokens are generated through a fixed annual inflation rate, which is used to reward block producers and fund ecosystem development.
What are the risks of investing in EOS?
Like all cryptocurrencies, EOS carries market volatility risks. Additionally, its governance model has been criticized for centralization due to the limited number of block producers. Regulatory changes and competition from other smart contract platforms could also impact its long-term value.
How can I store EOS tokens securely?
EOS tokens can be stored in compatible cryptocurrency wallets, including hardware wallets like Ledger and Trezor, or software wallets such as Anchor and TokenPocket. Always ensure you use reputable wallets and enable security features like two-factor authentication.