What is EOS – A Complete Guide
EOS is a Layer 1 blockchain designed to address scalability issues first-and second-generation blockchains face. As the longest-running blockchain after Bitcoin and Ethereum in the industry, it has been used by developers to build blockchain applications and ecosystems. This has, in turn, unlocked use cases in the supply chain, decentralized finance (DeFi), and gaming finance (GameFi) sectors, among others.
Introduction
EOS was launched in 2018 using open-source technology from Cayman Island-based company B1. In its early days, EOS was known to outperform other projects, thanks to its technical innovation.
However, development slowed, and the venture capital pledged to community projects building on EOS fell through. Faced with these challenges, projects on EOS no longer had the resources needed to continue operating on the network.
In solidarity, EOS Block Producers reached a consensus on creating a new entity called the EOS Network Foundation (ENF), which is now responsible for efficiently deploying capital and moving EOS forward. EOS Block Producers also passed a proposal to stop locking up tokens — or token vesting — for use by B1, and the EOS Network became a decentralized autonomous organization (DAO).
On September 21, 2022, to achieve absolute code independence, community engineers led by the ENF shifted away from EOSIO 2.0 to Leap 3.1, the C++ implementation of the new Antelope protocol. Today, with its new features, EOS continues to tackle scalability challenges faced by blockchains.
What Is EOS?
EOS token
EOS uses Delegated proof-of-stake (DPoS) as its consensus mechanism. Its native token, EOS, is a utility token used on the network to purchase system resources, participate in EOS governance, transfer value on native applications, and account for value by investors and speculators.
Token holders can also stake their idle EOS tokens to receive a percentage of the fees collected from users who wish to use EOS system resources through the EOS PowerUp Model.
Introduction to the EOS Blockchain
In many real-world situations, scalability is the most significant barrier to establishing public blockchains. Blockchains’ scalability issue typically emerges when a network grows and its transactions increase.
Commonly debated blockchain performance measures such as swaps per second, transaction throughput, and latency are have yet to achieve a sufficient quality-of-service level in many blockchains.
Through its aforementioned ecosystem features, EOS aims to address these limitations without compromising network security or developer freedom.
A WebAssembly C++ engine
At the core of the EOS blockchain resides a high-performance WebAssembly (WASM) engine that executes smart contract code. This engine is designed to meet the demands of blockchain applications that require far more from a WASM engine than web browsers do.
High throughput, faster confirmations, and low latency
A good user experience demands reliable feedback with a delay of not more than a few seconds. EOS achieves high transaction throughput because its DPoS mechanism need not wait for all the nodes to complete a transaction to achieve finality. This asynchronous style of validation results in faster confirmations and lower latency, i.e., the time taken for a transaction to be confirmed as accurate after it has been initiated.
EVM integration
EOS has an Ethereum-compatible Virtual Machine (EOS EVM) that allows Solidity developers on Ethereum to enjoy the EOS blockchain’s scalability and reliability. This includes nearly free transactions for their users, as well as access to the open-source code libraries and tooling to which they are already accustomed.
Permissions through access keys
The underlying design of the EOS blockchain incorporates a comprehensive and highly flexible permissions system to create custom permission models for various use cases. Account owners can grant specific authorizations to third parties while having the power to revoke these permissions at any time.
EOS supports hierarchical account structures, which enable any user to manage multiple smart contracts under a single parent account. Alternatively, an account owner can divide the authority required to modify a smart contract across various accounts.
Flexibility
Due to its protocol design, applications deployed on EOS are upgradeable. This means developers can deploy code fixes, add features, and change the application’s logic as long as they have the necessary authority to do so.
EOS also allows developers to deploy smart contracts that cannot be modified. These decisions are left to the discretion of EOS developers rather than at the mercy of the protocol.
Programmable resource allocation and governance
Developers can modify system smart contracts to create customized economic models and governance rules. Since the core layer of code does not always have to be updated for changes to occur, this on-chain mechanism can be modified using system smart contracts.
What Makes EOS Unique?
Human-readable accounts
EOS leverages human-readable accounts to make it easier for users to remember their own accounts, as well as those with which they interact. Instead of long strings of random characters, EOS accounts usually use recognizable addresses such as “Alice.gm”.
Affordable transaction fees
EOS offers its users nearly free transactions, making it ideal for sending or receiving micropayments. This addresses one of Web3’s greatest barriers to entry, since gas fees on other chains can add significant costs to a single purchase.
Near-instant finality
In cryptocurrency transactions, finality refers to the assurance or guarantee that the transactions cannot be reversed or altered after completion. The speed of a blockchain will impact its finality rate, as it determines how quickly transactions are confirmed and finalized.
Currently, EOS’s finality is approximately three minutes — much faster than Bitcoin’s 60 minutes and Ethereum’s six minutes.
In contrast with Web2’s finality, however, three minutes is still slow. Therefore, the ENF and its key technology partners — known as the Antelope coalition — launched the Instant Finality initiative to offer users instant and irreversible transaction settlement.
Energy efficiency
EOS’ DPoS mechanism allows its nodes to validate transactions more quickly and with fewer network resources. Because it does not involve mining like proof-of-work (PoW) networks, the EOS Network is one of the industry’s more energy-efficient blockchains.
Base layer insurance
Recover+ (R+ for short) is a cybersecurity portal and rapid incident response program designed to safeguard EOS DeFi projects and their users with bug bounties and white-hat incentives. With a response program, stolen funds can be recovered swiftly in the event of malicious hacks.
On November 5, 2021, blockchain lending platform Pando Rings was exploited for over $70m. While Pando Rings is not an EOS-based application, the attacker stole over $2m in EOS tokens. Thanks to this program, the Recover+ team was able to intervene and freeze the stolen funds, thereby protecting EOS DeFi users.
EOS Working Groups
Since the ENF was established in 2021, it has funded several EOS Working Groups for ecosystem improvements. It has also recommended a course of actionable items through “Blue Papers”, which offer suggestions for enhancements in several areas, including core infrastructure, APIs, SDKs, DeFi, and security analysis tooling.
EOS Network Ventures
EOS Network Ventures (ENV) is a $100m venture capital fund whose mission is to attract capital investment and deploy it to benefit the EOS Network. It also makes strategic equity and token-based investments into tech start-ups in the Web3 space. ENV’s scope includes — but is not limited to — GameFi, the metaverse, eSports, NFTs, and fintech.
EOS Network Foundation
The EOS Network Foundation (ENF) is a community-led non-profit founded by Yves La Rose in September 2021. Its mission is to identify opportunities for investment, seed funding, and collaboration in pursuit of Web3 innovation.
To do so, the ENF coordinates public goods funding and non-financial support for the growth, development, and worldwide adoption of the EOS Network. Since its establishment, multiple public goods programs have been organized and funded, contributing to key EOS developments.
On November 9, 2022, the ENF announced that it had initiated a proposal to launch a $100m ecosystem fund to be managed by ENV.
Closing Thoughts
As the longest-running blockchain after Bitcoin and Ethereum, EOS has overcome past challenges and adapted to present demands since its inauguration. It continues to move towards a robust system, using its performance, flexibility, and scalability to create native Web3 GameFi experiences for both developers and end-users.
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.
The ICO was the most fairly distributed, decentralized of its kind.
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.
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 do resources work on EOS?
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.
Start here and here.
What’s the story behind the Block Producers?
On EOS, there is no mining. Instead we have stakers and block producers (BPs). Stakers play the role of miner on EOS. The BPs are the mining pools. The formation of mining pools are a natural result of incentives in blockchain systems. They form because of pareto-distributed wealth differences. EOS factors them in inherently, achieving greater efficiency. Adding voting incentives enables transparency and accountability from the BP candidates.
The BPs hold the keys to make changes to EOS blockchain’s code and produce blocks. They make decisions based on ⅔ + 1 majority. They achieve incredible coordination and uptime. Since producing the genesis block, the BPs have invested and developed more sophisticated infrastructure that can support tens of thousands of transactions per second, half second block times (near-instant transactions) and 24/7 uptime.
What is the inflation rate on EOS?
The EOS token has a supply of around 1 billion. When EOS first started, the inflation rate was set to 5% with 4% funneling into a savings account and 1% for BP rewards. Without a way to decide who should receive the funds from savings, the EOS community voted to burn them and eventually shut off the 4% inflation. That changed as of 2021 when the EOS blockchain changed the inflation rate to 3% per year. A third of the inflation, 1%, still goes towards BP rewards. The rest of the 2%, 20M $EOS, funnels into an account for grants.
How does voting work on EOS?
When you have $EOS staked in your decentralized wallet, it gives the authority to vote for up to 30 BPs. The BPs who receive your vote will earn rewards from 1% of the network’s inflation. Votes are recorded and rankings are updated in real time, a type of “liquid democracy”.
The top 21 BPs who receive the most votes are the only ones who produce blocks for the chain. BPs outside the top 21 are paid “standbys”. BP pay is based on the amount of votes received and blocks produced. Because the top 21 produce roughly the same amount of blocks, their pay disparity is based on votes. From 21-22 there is a larger pay gap because 22+ does not produce blocks. From 22+ resumes the gradual decrease based on votes until pay stops around 70th place depending on various factors.
The incentives around block producers result in “vote buying”. It is when a block producer sends a voter $EOS in exchange for their vote. Many outside of EOS incorrectly state the vote buying “problem” is uniquely negative to eosio chains. However, it is the same concept as mining pools that use their customer’s computational and financial assets in exchange for mining rewards. Vote buying was not immediately apparent when EOS launched the chain. Within a year, however, cultural differences arose around vote buying. The BPs who engaged in it climbed the rankings. It was part of the reason that caused a major BP shuffle (solidified as of 2021) and a reimagination of governance expectations.
Voting for representatives using tokens (DPOS) allows exchanges to vote for themselves using their customer’s tokens. Because most $EOS holders are ignorant or apathetic of the voting mechanism, there is little incentive for the exchanges to develop a system that allows their customers to vote on their own, or pay them for their vote. However, the transparency of DPOS voting permits advocacy groups to form. Upbit, the largest exchange in Korea, has more than 100M of their customer’s $EOS tokens. Koreos, a BP representing the Korean speaking EOS community, is petitioning for Upbit to allow their customers to vote. The misalignment of incentives between exchanges and DPOS voting is a unique problem of eosio and has contributed to Dan’s motivation to complement DPOS with the EDEN consensus system.
How does EOS governance work?
On EOS, proposals are formalized on-chain and signed through multi-signature (“msig”) accounts. An msig account is one that is controlled by two or more other accounts with different “weights” and a “threshold” assigned. The threshold is like the amount of votes a proposal must receive before it passes. The weight of an account is how many votes it gets. For example, if there are three accounts on an msig with each having a weight of 1 and a threshold of 3, then all three accounts must sign for the proposal to pass. If one of the accounts had instead a weight of 3, then that account would not need the other two to pass a proposal. Configuring msig accounts through eosio’s flexible permission system is one of the benefits of using EOS. Any organization can set up an msig to move funds, change account settings and more in a secure, decentralized manner.
When someone mentions “EOS governance” they are probably referring to how the BPs make decisions, the most significant msig on EOS. When moving funds and changing the core code of EOS, the BPs must sign an msig with a ⅔ + 1 consensus. Because there are 21 active BPs, 15 (the threshold) need to sign for the proposal to pass while each BP has a weight of 1. Significant decisions are made in the open, allowing token holder voters clear view whether the BPs they vote for stand for issues they deem important. For example, in May of 2021 a major hack occurred on EOS, termed the “SX Vault Hack”. The BPs signed an msig to reverse the transaction, allowing the stolen funds to return. Later in the year, the BPs collectively decided to form and fund the EOS Foundation through the same process.
How did EOS become independent?
When EOS mainnet was launched in June 2018, there was a vesting contract that allowed B1 to claim 10% of the total token supply (100M $EOS) over a ten year period. The keys to the contract are controlled by the top 21 Block Producers. In December of 2021, the BPs decided, with 15/21 vote, to end the vesting of tokens to B1’s account.
Before the BPs ended the vesting contract, the EOS community was dependent upon B1 updating the codebase the EOS blockchain runs on. The community did not have access to make updates. Part of ending the vesitng contract meant forking (copy-pasting) the code for community control. This action made EOS independent for the first time.
Since then, many senior blockchain developers from B1 left to work for the ENF and the EOS community. A notable “Coalition” has formed with other blockchains that use similar core code to EOS. The Coalition will take on the responsibility of updating a shared codebase to add new features to EOS. Anyone can take the code to “spin up” a new chain based on EOS.
The EOS community has gone through three stages. The first is the hype stage. A new chain, new money and a promise of re-investment inspired many people to allocate their time into the EOS ecosystem. Projects announced a move from their chain to EOS. Thought leaders engaged in public settings, answering questions no matter minnow or whale. Price increased dramatically, then slowly simmered as the hype waned. The hype stage began in July 2017 and ended in the fall of 2019.
The second is the stagnation stage. With no investments into public goods projects, the teams who chose to stay on EOS struggled on shoestring budgets. Thought leaders became silent. Indecision caused inaction. Competition gained ground and FUD went unanswered. Price labored sideways. Stagnation began late 2019 and lasted through 2020.
The third, most current is the comeback stage. Beginning in 2021, solutions were announced to provide funding for public goods projects. Project Betas were unveiled from years of work. Excitement is muted, but hope has returned.
We are on the way to a fourth stage, prematurely called the orbital stage. We will reach orbit when we provide the world significant value found only on EOS.
When entering the EOS community for the first time, it’s best to recognize the baggage EOS OGs carry. They have suffered through stagnation through no fault of their own. But there’s a bright side. The hardships have made us strong because we can trust each other.
How is $EOS “green”?
EOS is green because of the way the BPs are selected. With delegated proof of stake (DPOS), the power sucking mining war needed for proof of work (POW) blockchains like Bitcoin is unnecessary. Instead the block producer is voted in. They take turns processing blocks rather than competing for the opportunity.
EOS is 66,4545 times more energy efficient than Bitcoin. It uses 630.72 MWh & emits 281 tonnes of CO2 per year, significantly less than the POW chains. With help from Climate Care, the EOS blockchain has offset its carbon footprint for a year’s duration (May 2020 – 2021)!
EOS uses less than .01% carbon emissions than Bitcoin
Sources from quotes
1-2 Decentralized Dispute Resolution by Daniel Larimer
3-4 Block.one Announces Settlement with U.S. Securities and Exchange Commission by Block.One
5 The Future of Blockchain is Sustainable by EOS Authority
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