A Beginner’s Guide to EOS

What is EOS?

It’s a layer 1, Generation 3 blockchain called “EOS” or “EOS Mainnet” and a cryptocurrency with the symbol $EOS. There are no miners. Instead, token holders elect groups called Block Producers who process transactions for the network. Using elections instead of competitive mining allows the EOS blockchain to be <1sec fast, have (super) low fees and high throughput capacity (10k + transactions/sec). The election system is called delegated proof of stake (DPOS). EOS uses the symbol of a chestahedron that reflects the sacred geometry of the heart.

Why EOS?

EOS is attractive because of its technology and community. It allows developers to build dApps (solutions to problems) that other platforms cannot support. After setting up an EOS wallet, the technology superiority can be felt through the user experience of posting transactions (doing things) on the EOS blockchain. There’s a moment when you realize it’s better than conventional apps because you get more from using it.

The EOS community has incredible leaders who adopt the values of transparency, openness, honesty, accountability, liberty, respect and other core values of blockchain. It’s a group of people dedicated to solving life’s hardest problems regardless of financial and regulatory obstacles. Joining the EOS community is like entering a new planet.

How did EOS start?

A company called Block.One (“B1”) issued an ICO during 2017-2018. They had the largest raise out of all the ICOs at the time at ~$4B in $ETH. The ICO used a reverse dutch auction that lasted one year. During the ICO, B1 converted their $ETH into $BTC and built the first version of the “eosio” software. Eosio is the open-source code that runs the EOS blockchain. Although there are other blockchains that use eosio, EOS was the first to adopt it and represents the largest community. After the ICO concluded, a group of people (not affiliated with Block.One) took the code and launched the EOS blockchain and the $EOS token. Block.One earned 10% of $EOS tokens (100M $EOS) vested over ten years as per the ICO agreement.

Who is the architect of eosio?

Daniel Larimer, former CTO of B1, designed the concept of eosio based on his previous projects called BitShares and Steemit. Those two projects’ blockchains are application-specific (DEX and social media, respectively). Eosio is a general-purpose blockchain engine that can support any type of dApp. After resigning from B1, Dan created EDEN on EOS based on his book called More Equal Animals. Dan’s life mission is to create solutions for securing life, liberty, property and justice for all.

What is a smart contract?

It’s a new concept in crypto. Funds are moved into a different location from one’s wallet for accounting, transferring and other purposes. It’s essentially a separate pool to aggregate funds, kind of like when you send your funds to an escrow agent. Here, the “agent” is a computer with code (logic) that determines what to do with the funds.

For example, when you are placing an order on a decentralized exchange, the crypto you intend to buy/sell goes into a smart contract. The party on the other side of the trade also puts their crypto in the smart contract. When the prices match, the smart contract sends the funds to the appropriate parties based on their order. The use of a smart contract enables the code to run on its own, with no third party operators.

What is staking?

Staking is a special use of smart contracts to help with reaching consensus on EOS and other chains. Staking is like posting collateral. It makes your tokens illiquid. In return, you get voting rights on EOS. The more you choose to stake, the more voting power at your disposal (more on voting later). When unstaking, you lose voting power, but your tokens become liquid. On EOS, unstaking takes 72 hours. The time delay is a security feature in case your keys get stolen (more on security later). dApps use staking to give rewards and other non-financial benefits like voting. They do so to encourage keeping tokens off exchanges, among other reasons. Staking shows “skin in the game”. It measures one’s dedication to a goal.

How do resources work on EOS?

EOS has gone through two phases in determining how to allocate resources (decentralized computational power) among token holders. Imagine an apartment complex with 1 billion rooms. In phase 1, living in the rooms represented your ability to post (or “sign”) transactions/do things on the EOS network.  From 2018-2021, staking 1 $EOS meant owning 1 room. No one could live in it besides you. In the fall of 2019, many rooms were taken and the network became “congested” for some. Whales (large token holders) owned a bunch of rooms that they didn’t utilize. So the network had given some free, unused rooms to people who wanted more, which was signaled by attempting to post more transactions than their stake allowed. Then an application came along that took up all the free rooms, causing no more for individual users which some described as “congestion”. It inspired the change to Phase 2, the PowerUp Model.

In the PowerUp Model, think of the same apartment. Let’s say you have 1 $EOS. It means you have the opportunity to own 1/1Billionth of the “equity” of the entire apartment complex. Equity benefits come from the fact that all rooms are available to rent for 24 hours for a fee. Having equity means earning from rental fees. By owning 1 $EOS and lending it in the REX smart contract, you earn 1/1Billionth of the rental fees. It effectively frees up all the rooms that were previously owned by whales who didn’t use them. You are “lending” your $EOS because it is used for others to rent rooms. After 24 hours, your $EOS comes back plus the rental fee. If you’d like free “room rentals”, check out the EOS PowerUp service. They will pay the rental fee for five to ten simple actions on EOS daily!

On EOS, “stake” to vote, “lend” to earn rental fees. However, all the $EOS in REX can also be used to vote. Therefore, it’s recommended to put all the $EOS you own for savings into the REX smart contract.

How does EOS handle user security?

On EOS, users have the option of using keypairs on their account that have multiple permissions (can do different things). The public-private keypair is the foundation of user security in cryptography that’s used like a username and password. In Bitcoin for example, you get one public and one private key. On EOS, best security practice is to have two sets of different public and private keys called “owner” and “active”. You can choose to have more than two keypairs that are limited to certain actions, like one keypair just for voting. Moving funds with the “voting” keys would not be possible, for example.

The owner and active key come with every EOS account as the same keys. It’s important to change one of the keys in order to reap the security benefits of EOS. The active key is meant to do everything while using EOS dApps. The owner key can do the same, plus the ability to change the active key. The owner key is meant to be stored offline in a safe place. If someone steals your active key, you’ll use the owner key to create a new active key. Here is where staking comes into play. If someone steals your active key, the first thing they’ll do is try to transfer your $EOS to a different account or an exchange. If you’ve staked or REX’ed your $EOS, the hacker will initiate an unstake command. Using EOS Authority’s email notification feature, you’ll get notified. Now you have a 72-hour window to use the owner key to override the unstake command and change the active key. This is the tip of the iceberg regarding the permission system on EOS, making it the safest blockchain system in the world.

EOS in a Box is a dApp on EOS that takes security and convenience to the next level because you never see the private keys. It utilizes the hardware security module built into most modern phones. When you want to send a payment or login to a dApp, all you have to do is prove to your device that it is actually you by showing your face or pressing your finger on the fingerprint sensor. The phone will sign the transaction without revealing the private keys.

Because the private key lives in your phone, EOS in a Box allows you to pick trusted people to mint you a new key if your phone is lost. When you set up the account, you designate one or more custodians. This custodian is a trusted account that will assist you in replacing the keys to your new phone if the old phone is broken or lost. EOS in a Box allows your grandmother to use the blockchain!

How can I build a dApp on EOS?

Start here and here.