Key Takeaways
The EOS blockchain ecosystem represents a cutting-edge open-source platform that seeks to address scalability challenges faced by decentralized applications. Utilizing the EOSIO software, it operates on a Delegated Proof-of-Stake (DPoS) consensus mechanism to enhance scalability. The native token of this protocol, known as EOS, acts as both a utility and governance asset. The core attributes of any blockchain are scalability, security, and decentralization; however, achieving all three simultaneously presents a dilemma referred to as the blockchain trilemma. For instance, Bitcoin focuses on security and decentralization, which limits its capacity for high transaction volumes and, consequently, its potential for widespread adoption. The EOS ecosystem is designed to overcome this trilemma, facilitating the development of scalable decentralized applications (dApps). In this article, we will delve into the EOS ecosystem, its advantages, associated risks, and guidance on using it securely.
What Is EOS Blockchain?
EOSIO serves as an open-source blockchain software platform specifically engineered for the creation of scalable blockchain applications and networks. Essentially, EOSIO functions similarly to an operating system, enabling developers to utilize programming languages such as C++, Java, and Python to build blockchain applications. The pioneering blockchain network within this ecosystem is the EOS blockchain, which employs EOS as its utility and governance token. The EOS white paper was initially published by Block.one, a private company, in 2017. Led by former CTO Dan Larimer, who is also known for his work with BitShares and Steemit, and CEO Brendan Blumer, the team spearheaded the development of the EOS infrastructure. Following this, Block.one executed the most significant Initial Coin Offering (ICO) in the history of cryptocurrency, raising an impressive $4.1 billion over one year, culminating in the launch of the EOS blockchain in 2018.
The EOS Ecosystem: Explained
Now that we understand the origins of the EOS Blockchain, let’s explore the key components of its ecosystem. At its core, the ecosystem consists of two primary elements: the EOSIO software and EOS tokens.
What Is EOSIO?
EOSIO is a comprehensive open-source software solution that provides the necessary architecture for building and deploying scalable dApps. It functions in a manner akin to a computer system, employing concepts such as bandwidth, state storage, and computation. Bandwidth is essential for transmitting information throughout the network, state storage is required for maintaining on-chain data, and computation is vital for executing blockchain applications and dApps. Participants in the network can access these features as long as they stake EOS tokens.
What Is EOS Coin?
EOS operates as a utility token, signifying that it serves as the in-network currency for the EOS ecosystem. Besides facilitating bandwidth, state storage, and computation, the EOS coin also plays a crucial role in governance. Token holders are empowered to vote and engage in the decision-making processes that shape the future of the network. Notably, EOS coins are also used for staking within the network. This staking mechanism is crucial for securing the network, as it requires participants to lock up tokens, thereby acting as collateral to ensure validators maintain ethical behavior. Stakers can earn passive rewards, with potential annual yields reaching up to 33%.
So What About Its Tokenomics?
In line with expectations, block producers receive EOS tokens as rewards for generating new blocks. However, unlike many popular cryptocurrencies, EOS does not impose a maximum supply cap on its coin. Instead, a mechanism is in place to ensure that the total supply does not exceed 5% growth per year, resulting in a circulating supply of over 1 billion tokens at present.
How Does EOS Blockchain Work?
The operation of the EOS Blockchain is underpinned by several crucial technologies.
EVM Compatibility
One of the key features of the EOS blockchain is its compatibility with the Ethereum Virtual Machine (EVM). This compatibility allows Ethereum developers who use the Solidity programming language to create dApps within the EOS ecosystem. By leveraging EVM compatibility, EOS benefits from the interoperability offered by EVM chains, while also possessing the capability to execute complex codes via smart contracts. In May 2023, the EOS Network Foundation (ENF) made the EOS EVM open-source, enabling developers to establish their own RPC nodes and promoting increased decentralization within the EOS network. The EOS EVM is noted for its rapid performance, boasting double the throughput of Solana for token swaps.
DPoS Consensus Mechanism
For network security, EOS employs a Delegated Proof-of-Stake consensus mechanism. In a typical Proof-of-Stake (PoS) system, validators stake their tokens to authenticate transactions and generate blocks. The DPoS variant enhances democratic engagement by allowing EOS token holders to vote for block producers. Each voting round selects 21 validators responsible for producing blocks on the chain. DPoS employs a real-time reputation system, enabling EOS holders to vote out any malicious validators. Each successful block producer is rewarded with EOS tokens for their contributions. Unlike many blockchains that require every node to participate in consensus, EOS relies on a democratically chosen group of 21 block producers, resulting in faster, more scalable, and energy-efficient transactions.
Benefits of EOS Network
Every blockchain comes with its own set of advantages and disadvantages. So, what are the standout features of the EOS blockchain?
Designed With Blockchain Apps in Mind
EOS is strategically crafted to enhance transaction speeds and improve dApp performance through the utilization of parallel execution and asynchronous communication technologies. Asynchronous networks allow for independent data transmission, meaning not all nodes need to be operational at once for transaction validation. Furthermore, EOSIO-based dApps are highly adaptable, enabling developers to introduce new features, modify app logic, and implement code updates with ease. The compatibility with EVM and the EOS developer toolkit simplifies the app development process.
No Transaction Fees
A notable aspect of the EOS blockchain is its lack of transaction fees for users, greatly enhancing accessibility. However, while users are not charged for each transaction, they must stake a certain amount of EOS coins to execute any transactions. Thus, interacting with the network incurs a cost, though it is not directly linked to transaction volume.
Anti-Hacking Mechanism
The EOS community has established a formal response mechanism for hacking incidents, known as Recover+, which includes a framework for asset recovery. For instance, on November 5, 2022, a hacker exploited the Pando Rings lending platform, stealing $70 million worth of tokens, including $2 million in EOS. Recover+ acted swiftly to freeze the stolen assets, thereby safeguarding EOS users.
Human Readable Addresses
EOS distinguishes itself from other blockchains by utilizing human-readable account names comprising letters and numbers, along with dots (.). This design simplifies identification and usage compared to the complex hexadecimal strings used by other networks. For example, an EOS account could be named ‘Bob122’ rather than a random sequence of characters.
Risks of EOS Network
Despite its numerous advantages, the EOS network also has its challenges.
Centralization
While the DPoS consensus mechanism enhances scalability, it also renders the EOS blockchain susceptible to potential attacks. The ecosystem relies on 21 block producers, meaning that control of the consensus mechanism can be obtained with just 11 nodes (50% of validators). This centralization poses a security risk. Furthermore, a 2019 CoinDesk report labeled EOS as “excessively centralized,” noting that most block producers are located in China, which may lead to correlations between voting patterns and geographic distribution. A Binance Research report identified additional concerns, including low voter participation, vulnerability to Sybil attacks, and limited transparency.
Bot Activity
The absence of transaction fees combined with the network’s capacity for complex applications has created an environment conducive to bot activity. It is estimated that as much as 75% of transactions on EOS dApps may be generated by bots rather than human users.
How to Use EOS Securely
Having explored the EOS blockchain’s features, advantages, and risks, it is crucial to understand how to engage with the network safely. If you plan to purchase cryptocurrency, safeguarding your assets is vital—similar to how you would secure your fiat currency.
To protect your crypto effectively, it is advisable to use a non-custodial wallet, which grants you control over your assets. For optimal security, storing your private keys in a location inaccessible to others is essential. Many non-custodial wallets store keys on the host device, such as your smartphone or laptop; however, hardware wallets, like those produced by Ledger, are highly recommended for added security.
Once you have secured your hardware wallet, managing your EOS tokens requires some steps. To begin, follow this quick guide:
1. Update the firmware on your Ledger device.
2. Set up the Ledger Live App.
3. Navigate to ‘My Ledger’ and install EOS from the app catalog.
4. Your EOS wallet will now be ready for use.
5. Acquire EOS via cryptocurrency exchanges using a credit/debit card or bank transfer.
6. Transfer EOS tokens from the exchange into your hardware wallet.
Additionally, you can stake EOS coins within Ledger’s ecosystem, allowing you to earn rewards while benefiting from Ledger’s security features.
Get Involved in the EOS Ecosystem
To start utilizing EOS blockchain applications, you may need to connect your Ledger to a third-party wallet such as Scatter or Fairy Wallet. For detailed instructions, consult the support article on creating a Ledger EOS account with third-party apps. However, don’t be intimidated by this additional step. Once connected, you’ll have the opportunity to interact with a wide array of dApps while benefiting from the robust security of your Ledger. The steps to follow include:
1. Download Scatter EOS onto your computer.
2. Open the Scatter dashboard and import your keys from your Ledger wallet.
3. Visit eosx.io to create a new account.
4. Install and configure the Anchor Wallet app, selecting the EOS blockchain.
5. Choose ‘Import an existing Account’ from Ledger and select the desired accounts to load onto your Ledger device.
The Future of EOS Blockchain
From executing the largest ICO to proposing a “constitution” for blockchain governance, EOS has pioneered numerous initiatives within the cryptocurrency landscape. Notably, the network gained mainstream attention when it was featured on the HBO show “Last Week Tonight” with John Oliver. However, this high-profile exposure also attracted regulatory scrutiny, leading to the suspension of its coin sale in the United States and China. Despite its proactive approach to compliance with local regulations, the EOS chain has experienced a decline in active users. Additionally, there is currently no formal roadmap outlining future updates or innovations. Nonetheless, various EOS developers continue to support the chain, providing unofficial roadmaps and community updates. Ultimately, the future of EOS remains uncertain, with the community’s efforts determining whether it will thrive or fade into obscurity.
