Maybe you missed it. I almost did — in fact despite carefully tracking ICOs this summer I almost let this sleeping giant slip through my fingers.
Unlike some of my other posts, I can’t even tell you that it was my research that helped me uncover this find. Rather, I just happened to be awake at the right moment when a Kraken blog post landed in my inbox.
Kraken isn’t my normal stomping ground for trades, but I follow their updates quite carefully.
Unlike many exchanges Kraken has been selective in which trade pairs they add to the exchange — and as someone who was previously a director at a crypto exchange and had to make these decisions, I know how hard it can be to make the right picks. But, Kraken has always done a great job in including mostly winners (although I’m still skeptical about Melon). So when I saw they added an asset I hadn’t heard of I realized there was something I missed.
What is EOS?
EOS is the latest project by experienced blockchain entrepreneur Dan Larimer.
Dan was the creator of BitShares, STEEM (+ The SteemIt platform) and BitUSD three projects with a combined market cap of $886M and he is now the CTO of the company block.one who is building the EOS platform.
So what exactly is EOS? In their own words EOS “is software that introduces a blockchain architecture designed to enable vertical and horizontal scaling of decentralized applications.”
What does that mean?
Right now, there are hundreds of major companies, banks and governments looking to build enterprise level applications on the blockchain, and leverage the smart-contract technology of Ether.
The problem is, as we’ve seen with the rise of ICOs this season, these technologies don’t scale well. The goal is to change that by creating a system designed for enterprise level adoption, that allows large corporations to build DAPPS (Decentralized Applications).
Can’t Bitcoin and Ethereum handle enterprise DAPPS?
Short answer: No.
Longer answer: Not yet and not on the current infrastructure.
On June 11th 2017, the Ethereum network was hammered with traffic and pumping out 5.2 transactions a second. Which seems like a huge success! However, taking into consideration that on June 20th during the status ICO the Ethereum network was bumping out 5.04 transactions per second and that some users were waiting hours for Ether to send, it turns out that in the grand scheme of things the network can handle a pretty small volume.
While for cryptocurrency 5.2 transactions per second is a huge milestone, it fails in comparison to the number of transactions that someone would need to host an enterprise level solution on the blockchain.
In Dan’s EOS presentation at Consensus 2017 he highlighted the number of transactions per second of a few consumer services.
Before we even get to being able to run stable financial markets on the blockchain, we’d have to break through barriers to even be able to support the transaction volume of social networks.
Facebook alone pumps out 52,000 likes per second. Not posts, not messages, JUST likes.
That means in order for Facebook to run just one component of their system on blockchain technology would require a platform like Ethereum to be 10,000x more efficient than it currently is.
Isn’t this just a node/miner problem? Can’t we solve this with more Engineers?
The speed of the network isn’t simply a function of miners, nodes or hashing power. It comes back to the fundamental way in which a blockchain functions.
The over simplified version is that on a current blockchain information is processed in a sequential fashion in the order of each block, and without implementations of modified structures like the Falcon Network the sending of this information doesn’t start until the full block is complete.
Even modified implementations have their limits. Take for example, the Kik’s upcoming implementation of “Kin” — despite being a $1bn unicorn startup with significant engineering resources, Kik announced that Kin would need to implement “a hybrid on-chain and off-chain solution” to keep up with the transaction volume.
A few years ago in the early planning stages of Kin, Kik launched an experiment called “Kik Points” allowing users to earn a traditional currency in the app. They monitored the number of transactions they were seeing and compared it to the Bitcoin blockchain:
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At their high-point they were seeing 7x the number of transactions that the Bitcoin network was, and Kik has only continued to grow over the past 3.5 years.
So, What is the Solution?
That brings us back to EOS. EOS has the goal of creating essentially a developer friendly operating system that allows both private and public blockchains to, among other things, process information in parallel across multiple cores rather than restricting it as a single thread.
EOS also introduces a few other concepts to make blockchains more accessible to the enterprise client:
- Separation of read and write actions for sake of speed.
- The ability to communicate asynchronously between public and private blockchains.
- The ability to manage user accounts with different permission levels.
- Account names instead of long addresses.
- The ability to fix bugs and role back changes with super-majority consensus instead of needing a hard-fork.
These features rely on a change of infrastructure referred to as “Delegated Proof of Stake” in which multiple “witness nodes” are nominated by the network as representatives who help to make certain high-level decisions more quickly without polling the entire network.
Some cryptocurrency hardknocks argue that this ultimately makes a blockchain ‘less decentralized’ and while that’s true it’s important to realize that companies like VISA and IBM who are spending hundreds of millions of dollars on this technology were never going to adopt a fully public blockchain anyway. They are looking for ways to leverage blockchain technology internally to drive down costs while interacting with external blockchain networks.
So is EOS the future?
At this point it is hard to tell. EOS is only in the infancy stages of development and their initial coin offering (ICO) is scheduled to continue until July 3rd 2018.
If the team can deliver the EOS project, it should be the biggest leap forward in blockchain technology since Ethereum, and it may be a platform that actually has the required components to result in mass adoption of the blockchain in mainstream enterprise.
There are still huge risks on how it plays out, if the team can deliver, and if the feature set EOS provides will make it most accessible and cost effective to build out on the blockchain — however, it is no small undertaking to create such a system and it may face significant push back from those who deeply embrace the decentralized ideology of tradition blockchain ledgers.
Personally, I’m bullish given the team’s track record, and based on the rapid growth EOS’ token has seen on exchanges I’m not the only one. EOS began trading at $0.68 against the USD and is currently sitting at about $3.5 giving the currently circulating currency a market cap of $560,000,000 USD.
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*Disclaimer: Nothing in this post should be considered financial or investing advice, nor a solicitation of any asset, currency or service listed above. ICOs and cryptocurrencies may represent regulated offerings in your jurisdiction and you should consult with an attorney familiar with your local laws.
Disclosure: This blog post initially appeared on my Medium blog in July of 2017 and was republished to TokenBeat on December 3rd 2017. At the time of re-posting this I do not hold any position in EOS, despite the tokens recent strong performance I am less bullish, albeit still hopeful, about the platform as an investment than I was in July. I feel that the technology itself may still be a great success, but that there may be over investment in the token. This is one case where I hope I’m wrong and I intend to continue to watch EOS very carefully.