EOS

What is EOS (EOS)?

EOS, an acronym for Electro-Optical System, is a blockchain platform that allows developers to build decentralized applications (dApps). If that sounds like a common refrain, that’s because it is—EOS was once billed as an Ethereum-killer, but it hasn’t managed to even get close.

EOS’s simple goal of wanting to make it easy for developers to embrace blockchain technology is to be commended, as is the mission of making EOS easier to use than rivals. However, the blockchain industry seems to have moved on, prioritizing interoperability rather than eliminating competition.

While EOS does attempt to provide developers as well as users with greater security, better speed, and fewer barriers to entry, it has run into many challenges in the years since its launch.

Perhaps accepting the plight of EOS, with its token down over 90% from all-time highs, would be easier in different circumstances. However, at its inception, EOS was all about marketing and bold, brash promises about efficiency, scalability, and replacing Ethereum as the dominant dApp blockchain.

When Was EOS Launched?

Amidst roadshows, press-conferences, and industry-shaking marketing campaigns, EOS carried out a year-long ICO that raised over $4 billion even without the participation of US retail investors.

10% of the 1.02 billion EOS tokens at genesis went to the founders of the project, and the remaining 90% went to investors. While this distribution can be considered far more equitable than many others in the industry, the same investors contributed to EOS’s problems.

These investors, which included PayPal co-founder and Hedge Fund managers Alan Howard and Louis Bacon, saw significant gains as EOS reached a market cap of $17 billion in 2018.

However, one year later, the US Securities and Exchange Commission slapped EOS with a $24 million fine for not registering the ICO. This fine, like many others levied by the SEC, came nowhere near hurting the platform financially, given how much they had raised in the ICO.

However, token holders then sued the founders of EOS, claiming that the ICO was fraudulent and that the company had infringed on securities laws, which artificially inflated prices.

Worse, a forensic investigation by Integra FEC suggested that trading of EOS during the ICO by “suspicious accounts” directly manipulated EOS’s offering price upward and created a false impression of the value of the token. This has led many to suggest that EOS was simply an elaborate “pump and dump” scheme.

The EOS blockchain itself went to mainnet in June 2018 under Block.one, but in late 2021 the EOS community has started taking control back.

Who are the Founders of EOS?

EOS was founded by the CTO of software company Block.one, Dan Larimer. Larimer, founder of other successful blockchain projects including Steemit and Bitshares, is credited with the invention of the BitShares delegated proof-of-stake algorithm that EOS uses.

Bitshares, in fact, was the joint creation of Larimer and Charles Hoskinson, better known for founding Cardano and playing a part in Ethereum’s creation.

EOS was Colorado-born Larimer’s pet project while at Block.one. In fact, Larimer is considered one of cryptocurrency’s OG personalities, having even interacted on forums with the legendary Bitcoin creator Satoshi Nakamoto.

Amusingly, though, Satoshi’s sign-off to a discussion with Larimer on Bitcoin’s transaction speed read: “If you don’t believe me or don’t get it, I don’t have time to try to convince you, sorry.”

Much to the chagrin of the EOS community, Larimer left Block.one in 2020 after working on EOS for three years.

Larimer’s relatively short stints at all of his cryptocurrency projects have attracted widespread criticism. Consultant Tone Veys went so far as to suggest that all of his projects have allowed insiders to create lots of tokens for themselves and then print more tokens in perpetuity.

Brendan Blumer, meanwhile, is Block.one’s CEO and is credited as a co-founder of the company alongside Tether’s Brock Pierce.

How Does EOS Work?

Developed by Block.one, EOS.IO is an open-source software used on the EOS blockchain, and the EOS cryptocurrency token is used as a payment system on the network.

EOS allows developers to build blockchain-based applications similar to how they would build web-based applications. EOS provides benefits like secure access and authentication, permissions, data hosting, usage management, and communication between dApps and the worldwide web.

EOS.io functions as the software platform for users that uses the EOS blockchain in the background for the scaling of the apps deployed to EOS.IO.

The platform is modular, with different functions being performed by different parts of the system in parallel. Developers are empowered with a toolkit for interface development, a declarative permission scheme, and self-describing interfaces and database schemas.

Following the EOS community’s decision to cease payments to Block.one over claims that it is no longer acting in the network’s interest, the way EOS works has started to change. As per a series of blue papers released by the EOS Foundation, also called the ENF, EOS is pivoting to a stance of interoperability by adding Ethereum Virtual Machine compatibility via Trust EVM. Trust EVM allows developers to use Solidity-based smart contracts on EOS and, as per ENF head Yves La Rose, EOS now intends to be an Ethereum enabler as its premier layer 2 solution.

What Makes EOS Unique?

Four years after its launch, EOS is unique because of its potential. The marketing hype that took it to the uppermost echelons of the cryptocurrency market cannot be discounted, and the technology still has the potential to hit the 100,000 TPS that it promises.

However, EOS hasn’t seen anywhere near that sort of demand in terms of actual use. In fact, a 2020 Imperial College of London study found that 95% of EOS transactions held zero financial value. Unsurprisingly, these conclusions were refuted by Dan Larimer.

EOS is certainly unique for being a trailblazer in the area of DPoS consensus. Not to mention, Dan Larimer, while a polarizing figure, is widely recognized for his contributions to the technology behind blockchain.

Finally, EOS is an example of the power of community in crypto. With token holders organizing and ridding the project of its founders, and even halting the multi-million dollar payment schedule due to them, EOS is very much a gripping tale that is as yet only half told.

How is the EOS Network Secured?

The EOS network is secured by the Delegated proof-of-stake (DPoS) consensus mechanism that Dan Larimer invented for Bitshares.

In this system, token holders vote for block producers who perform the key role of validation on the blockchain, or, put simply, create new blocks to add to the blockchain. It also allows voting on other matters, such as protocol updates and upgrades.

This DPoS system allows EOS to eliminate consolidation, where smaller node operators are pushed out by those with greater resources.

What is the Use of EOS?

The main use of the EOS cryptocurrency is for staking. As a proof-of-stake cryptocurrency, the EOS token is central to its security and governance.

The EOS token is also needed to access the EOS network and EOS.IO, the operating software for dApps on the EOS blockchain.

Who Controls EOS?

EOS is controlled by its holders in a structure that resembles a decentralized autonomous organization (DAO).

The delegated proof-of-stake protocol that defines its consensus also provides effective governance, as token holders have to elect validators on the network.

Uniquely to EOS, the 21 elected validators, known as block producers (BPs), stake their investment in network infrastructure and resources. This is different to normal proof-of-stake validators, who would simply lock their tokens into the protocol.

In addition to these block producers, EOS has also established an authority called the EOS Core Arbitration Forum (ECAF), which is responsible for conflict resolution.

Unfortunately, this structure failed its test right after the launch in June 2018. Days following the blockchain’s mainnet launch, EOS block producers froze 34 accounts suspected of holding stolen coins.

While this would be a reasonable action, BPs did not offer this explanation at the time and had taken the initiative to freeze the accounts without notifying the ECAF. Soon after the launch, this controversy was a big blow to any claims of EOS being a decentralized network.

This was underlined by the fact that becoming a BP required immense levels of investment. Since BPs would stake their investments in the form of network infrastructure like data centers, most BPs were large institutions.

The knowledge that the network was being controlled by large institutional players was a red flag for many smaller node operators.

How Much EOS Is In Circulation?

EOS has an inflation rate of 5%, a portion of which goes to incentivizing validators for their performance and maintaining their standards.

At genesis, there were 1.02 billion EOS tokens, 90% of which were sold at its ICO and 10% went to Block.one. However, Block.one’s EOS tokens were vested, unlocking them gradually over a ten-year period.

This has allowed the ENF to halt payments several years early, having deemed Block.one not acting in the network’s interest.

As of July 2022, there are just over 995 million EOS tokens in circulation.

How Do You Buy EOS?

Given its hype during the ICO and around its launch, EOS isn’t a difficult token to acquire, unless you live in the US.

Most major international cryptocurrency exchanges allow trading of EOS, paired mainly with top stablecoins like USDT, although it can be traded against fiat.

Is It Possible to Buy EOS Instantly?

While EOS is a fast network that promises huge throughput, you won’t actually be engaging the blockchain when you buy it, unless you’re doing so peer-to-peer.

On a centralized cryptocurrency exchange, most of which are custodial, you can deposit funds, get verified, and then trade any cryptocurrency instantly.

How Do You Store EOS?

EOS can be stored on an exchange account, but this won’t allow you to delegate, stake, or participate in governance at all. In fact, it’s likely that the exchange will be using your tokens to strengthen their own vote and stake in the platform.

To avoid this, you can store EOS in a non-custodial wallet. A cold wallet like a Ledger or Trezor hardware wallet will keep your wallet key offline and safe from any hacks or other forms of attack.

A hot wallet that works with an internet connection is also an option. You can choose between common wallets like the Atomic or Exodus wallet or go for native EOS wallets like the GreyMass EOS Voter wallet, the Scatter EOS-wallet, or the Guarda EOS wallet.

EOS Energy Consumption

As a blockchain that uses a variation of proof-of-stake for consensus, EOS doesn’t consume a very significant amount of energy in the grand scheme of things.

Even the biggest consumers among the PoS chains generally only consume as much energy as a few average households every year.

Is EOS a Good Investment?

EOS is at a turning point in its storied and, at times, controversial existence. Having been viewed as a failure, a pump-and-dump, and even a meme by the community, there is a significant opportunity for revival thanks to the ENF takeover.

If EOS can find a niche in the developing blockchain world and establish a firm use case among the many projects of its ilk, it may yet be a good investment.