EOS crypto: what it is, how it works and what are the main features
Crypto

EOS crypto: what it is, how it works and what are the main features

By Matteo Gatti - 8 Sep 2019

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EOS crypto was founded in mid-2017 with the aim of offering services such as databases, authentication and simplification of dApp development. As such, the project is not about a simple digital currency for value transfer, such as bitcoin, but it goes much further.

The development is led by the well-known engineer and visionary Dan Larimer, former founder of Bitshares and co-founder of Steemit.

First of all, it should be noted that EOS is the name of the cryptocurrency while Eos.io is the name of the platform released as open-source software by the private company block.one.

EOS, the beginnings

Initially, the EOS blockchain did not exist: it was an ERC20 token and therefore it relied on the Ethereum blockchain. Once their mainnet was launched, the tokens were converted by the users through a specific procedure.

This was possible thanks to the EOS21 Protocol solution, a first of its kind open-source protocol that allowed a seamless cross-chain shift of the ERC20 tokens from Ethereum to EOS.

Typically, migrating ERC20 tokens from Ethereum to EOS is possible by making a snapshot of the old tokens on the Ethereum blockchain. This method has already been used in the past for various airdrops and also for the transition of the EOS ERC20 tokens to the proprietary solution.

Using the snapshot, those who organise the airdrops can send tokens to the various wallets of the users present on the blockchain of Ethereum, EOS or other platforms, even selecting the recipients according to a series of requirements, such as a certain balance, the requirement of having carried out at least one transaction, and so on.

However, after the migration, it is necessary to freeze the tokens on the Ethereum blockchain, precisely as happened with the swap from ETH to EOS. This pause/expiry option for tokens must be included in the smart contract.

With the EOS21 protocol, shEOS has created a better solution, which is also intended for ERC20 contracts that do not have an integrated pause/expiry function.

This allows these tokens to be migrated to another blockchain. This option, called “teleportation” by the team, allows the creation of a token on the destination blockchain while freezing the token on the old chain.

The peculiarities of the EOS blockchain

EOS wants to put together on a single platform all the best existing features concerning the development of smart contracts. It offers a blockchain-architecture that allows the development of decentralised applications (dApps). In April, the EOS blockchain exceeded one million accounts.

The EOS blockchain is capable of providing decentralised applications with vertical and horizontal scaling at minimum latency. One of the key features of this innovative cryptocurrency is a security function that can block transactions in the event of theft.

Scalable, flexible and usable are three features that are also highlighted on the homepage of the EOS website. Scalability is the number of transactions that the platform can support and it is an aspect that the development team is trying to improve constantly.

Flexibility includes the ability to block a transaction in the event of an error. For example, if the recipient’s address were wrong, the digital money sent would not be lost, but thanks to the reversibility it would return to the sender, who will be able to carry out the transaction again without any problems.

Usability is the possibility for everyone, even those who do not have advanced computer skills, to understand how this platform works, it is in fact considered simpler than Ethereum.

The D-PoS

While Ethereum and Bitcoin are based on the Proof-of-Work (PoW) mechanism for transaction verification, EOS is based on the Delegated Proof of Stake (DPoS). The “Delegated Proof of Stake“, an evolution of the PoS, is more robust and secure. The DPoS algorithm is divided into 2 parts:

  • The election process, which provides control to the owners of the cryptocurrency;
  • Scheduling of production.

Daniel Larimer realised that mining bitcoin is too expensive and set himself the goal of creating an efficient and very fast system capable of processing a very high number of transactions per second: 100,000 tx/s. He called it Delegated Proof of Stake (D-PoS).

A cryptocurrency, a blockchain, a community, a set of computers and some rules.

In the PoS system, the entire network is involved in the confirmation of a transaction. In the D-PoS system, however, this responsibility does not fall on the entire network but is carried out by a limited number of delegates.

These delegates are elected by the entire network with a system of democracy representative of the consensus, which in turn has a weight that is proportional to the number of tokens owned by the voters. The delegates are then responsible for the secure validation of every single transaction on the network.

This last point is the most controversial: those who own more tokens have a higher vote compared to those who own less. A greater number of tokens means more influence. If one of the delegates for some reason begins to behave incorrectly, the community can at any time move their vote and then dethrone it by electing a new delegate.

The system works if the whole community is aware of the voting mechanism. That’s why it’s essential to understand and know the functioning principles of cryptocurrencies.

EOS, 21 block producers and the controversy over decentralisation

The system has 21 block producers who are responsible for validating each block. These 21 nodes (full-nodes) allow to significantly increase the number of transactions that are processed every second.

Each of these block producers can process only one block at a time. Each node in the network can become one of the block-producers but can also be removed from this role if for some reason they do not respect the rules of the blockchain.

Dan Larimer has proposed this mechanism to guarantee absolute decentralisation. In fact, the alleged decentralisation of EOS has been the subject of many discussions. With its electoral system, EOS has always claimed to be highly democratised because, just like TRON, it allows users to vote and to make decisions on what they want.

Consequently, the system should function a bit like a representative, but digital, democracy. However, the number of block producers, which corresponds to 21 users/companies, is quite small.

In October 2018 Block.one, the developer of the block-block EOS protocol, was accused of allowing voting manipulation on its network

The accusations were immediately denied by the CEO Brendan Blumer. Further controversy emerged when, last winter, one of the arbitrators of the EOS network reversed some of the transactions already confirmed by the network. The decision was taken following some unlawful actions carried out on the account involved in the matter.

EOS, the future and the most interesting projects

Block.One is working to improve EOS from various points of view. The company recently registered a new patent for a digital identity (DI) recognition system. Larimer is working on a solution to the scalability issue of the blockchain.

At the end of July, the first version of Eosfinex, the decentralised exchange based on the EOSio software, was released. It is a platform that allows trustless trading with full exclusive control of funds, based on an open-source technology.

In addition, it has very low fees and offers all major cryptocurrencies, such as BTC, ETH and EOS, which can be traded for a version of Tether based on EOS.

EOS has also generated several sisterchains with separate projects, an example is WORBLI, which recently announced that it has updated the number of its Block Producers (BP), from 32 to 15.

 

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