What is EOS ?

EOS Blockchain is aiming to become a decentralized operating system which can support industrial-scale decentralized applications.

That sounds pretty amazing but what has really captured the public’s imagination is the following two claims:

• They are planning to completely remove transaction fees.
• They are claiming to have the ability to conduct millions of transactions per second.

So, let’s see what is behind all this hype. In this guide, we will talk about everything EOS. However, before we do so let’s WHY we need something like EOS. Let’s answer the following question.

What do DAPPs require?

Or, to frame it more specifically, what does a DAPP require to be successful and a hit with the mainstream audience? What are its absolute minimum requirements?

• Support For Millions of Users

It should be scalable enough for millions of users to use it. This is especially true for DAPPs that are looking for mainstream acceptance.

• Free Usage

The platform should enable the devs to create dapps which are free to use for their users. No user should have to pay the platform to gain the benefits of a dapp.

• Easily Upgradable

The platform should allow the developers the freedom to upgrade the dapp as and when they want. Also, if some bug does affect the DAPP, the devs should be able to fix the DAPP without affecting the platform.

• Low Latency

A DAPP should run as smoothly as possible and with the lowest possible latency..

• Parallel Performance

A platform should allow their DAPPS to be processed parallelly in order to distribute the workload and save up time.

• Sequential Performance

However, not all the functions on a blockchain should be done that way. Think of transaction execution itself. Multiple transactions can’t be executed in parallel; it needs to be done one at a time to avoid errors like double spends.

So, what are the platforms available to us when it comes to DAPP creation?

• BitShares and Graphene have good throughput but are definitely not smart contract suitable.

• Ethereum is clearly the most obvious choice in the market. It has amazing smart contract abilities but the low transaction speed is a major issue. Plus, the gas price can be problematic as well.

EOS is thought of as a “best of both worlds” which combines the high throughput of Graphene and BitShares with the smart contract usability of Ethereum.

Now that we know why EOS was created, let’s look at the team behind the project

The Team Behind EOS Blockchain

The core team behind EOS is “Block.one”, which is based in the Cayman Islands. Brendon Blumer, the CEO, has been involved in blockchain since 2014. He has previously been involved in companies which dealt with currency exchanges in MMORPGs and in the real estate.

Dan Larimer, is the CTO. He is the creator of delegated proof-of-stake and decentralized autonomous organizations aka DAOs. He is the also the man behind BitShares and Steem.

What Does EOS Blockchain Bring To The Table?

Let’s check out some of the features of EOS.

• #1 Scalability

The biggest problem that the blockchain based space is facing is scalability issue

Visa manages 1667 transactions per second while Paypal manages 193 transactions per second. Compared to that, Bitcoin manages just 3-4 transactions per second while Ethereum fairs slightly better at 20 transactions per second.

The reason why blockchain-based applications can’t compute that many transactions per second are because each and every node of the network must come to a consensus for anything to go through.

EOS are claiming that because they use DPOS aka the distributed proof-of-stake consensus mechanism, they can easily compute millions of transactions per second. We will explore DPOS in a bit.

• #2 Flexibility

Ethereum’s entire system came to a standstill because of the DAO attack. Everything stopped and the community got split because of the hardfork.

Because EOS uses DPOS this is unlikely to happen again in their ecosystem. If a DAPP is faulty, the elected block producers can freeze it until the system is taken care of. This is simply an extension of the DPOS system, not every node has to take care of chain maintenance.

• #3 Usability

EOS allows well-defined levels of permission by incorporating features like web toolkit for interface development, self-describing interfaces, self-describing database schemas, and a declarative permission scheme.

• #4 Governance

In EOS the Governance is maintained by establishing jurisdiction and choice of law along with other mutually accepted rules This is usually done via the legally binding constitution. Every single transaction in EOS must include the hash of the constitution to the signature. This, in essence, binds the users to the constitution.

The constitution and protocol can be amended by the following process:

• The change is proposed by the block producer who obtains a 17/21 approval rate
• The 17/21 approval must be maintained for 30 straight days.
• All users are required to sign off their transaction using the hash of the new constitution.
• Block producers adopt changes to the source code to reflect the change in the constitution and propose it to the blockchain using the hash of a git commit.
• Block producers again need to maintain 17/21 approval for 30 consecutive days.
• After that, full nodes are given one whole week to adapt to the new changes.
• Any node that doesn’t follow the new protocol is automatically shut down.

So what happens if something like the DAO happens and the EOS system is forced to look for a quick change and solution to the protocol? In emergencies like that the block producers have the power to speed up the amending process.

• #5 Parallel Processing

In parallel processing, program instructions are divided among multiple processors. By doing this, the running time of that program decreases greatly. EOS provides parallel processing of smart contracts through horizontal scalability, asynchronous communication, and interoperability.

Let’s check out the meaning of each of those terms.

• Horizontal scalability: While in Vertical scalability scaling up is done by adding more processing power. Horizontal scalability on the other hand means scaling up by adding more systems and computers to the resource pool.

• Asynchronous communication: Communication that is not synchronized i.e. the parties involved need not be present in the same time to have a communication.

• Interoperability: Ability of a computer system to exchange and make use of information.

#6 Self-Sufficiency

Any blockchain based on the EOS software will have to generate a 5% natural inflation per year. This will be distributed to the platform’s block producers in connection with their confirmation of transactions on the platform and to the top three smart contracts or proposals that receive the most amount of votes from holders of such tokens.

The reason why this happens is to make sure that a blockchain is not reliant on any one single one foundation, organization, or individual for its growth, development or maintenance.

• #7 Decentralized Operating System

Probably the most critical feature to truly understand what EOS is all about is this feature.

Think of a MacOs/Windows with cryptoeconomic incentive.

Now, Ethereum is a decentralized supercomputer, EOS positions itself as an operating system. That in itself makes EOS, theoretically at least, a more focused product.

What is Delegated Proof Of Stake?

So, now we come to the consensus mechanism. As you are probably aware of, the most common consensus mechanism out there is proof-of-work, the one that is commonly used by Bitcoin.

Proof-of-work as a process has the following steps to it:

• The miners solve cryptographic puzzles to “mine” a block in order to add to the blockchain.
• This process requires immense amount of energy and computational usage. The puzzles have been designed in a way which makes it hard and taxing on the system.
• When a miner solves the puzzle, they present their block to the network for verification.
• Verifying whether the block belongs to the chain or not is an extremely simple process.

That, in essence, is what the proof-of-work system is. Solving the puzzle is difficult but checking whether the solution is actually correct or not is easy.

However, EOS is using the Delegated Proof of Stake (DPOS) for their consensus. So, how does it work? Before that let’s understand how proof-of-stake works

What is proof of stake?

Proof of stake will make the entire mining process virtual and replace miners with validators.

This is how the process will work:

• The validators will have to lock up some of their coins as stake.
• After that, they will start validating the blocks. Meaning, when they discover a block which they think can be added to the chain, they will validate it by placing a bet on it.
• If the block gets appended, then the validators will get a reward proportionate to their bets.

So, how is DPOS different from traditional POS?

Firstly, anyone who holds tokens on a blockchain integrated in the EOS software can select the block producers through a continuous approval voting system. Anyone can participate in the block producer election and they will be given an opportunity to produce blocks proportional to the total votes they receive relative to all other producers.

How does it work?

• Blocks are produced in the rounds of 21.
• At the start of every round 21 block producers are chosen. Top 20 are automatically chosen while the 21st one is chosen proportional to the number of their votes relative to the other producers.
• The producers are then shuffled around using a pseudorandom number derived from the block time. This is done to ensure that a balance connectivity to all other producers is maintained.
• To ensure that regular block production is maintained and that block time is kept to 3 seconds, producers are punished for not participating by being removed from consideration. A producer has to produce at least one block every 24 hours to be in consideration.

The DPOS system doesn’t experience a fork because instead of competing to find blocks, the producers will have to co-operate instead. In the event of a fork, the consensus switches automatically to the longest chain.

Confirming Transactions in DPOS?

A DPOS blockchain typically has 100% block producer participation. A transaction is usually confirmed within 1.5 seconds from the time of broadcast by a 99.9% certainty. In order to have absolute certainty over the validity of a transaction, a node need only to wait for 15/21 (i.e. a 2/3 majority) producers to arrive to a consensus.

So what happens in the event of a fork caused by negligence or malicious intent?

All the nodes will, by default, not switch to a fork which doesn’t include any blocks not finalized by 15/21 producers. This will stand true regardless of chain length. Each block must gain a 15/21 approval to be considered a part of the chain.

Because of the short block creation time, it is possible to warn nodes of whether they are in the major or minor chain within 9 seconds. The reason why that is so is simple. Remember, the average time elapsed between each block is 3 seconds.

• If a node misses 2 consecutive blocks there is a 95% chance that they in a minority fork.
• If a node misses 3 blocks, then there is a 99% chance of them being on a minority chain.

What is TAPOS?

Transaction As Proof Of Stake or TAPOS is a feature of the EOS software. Every transaction in the system is required to have the hash of the recent block header. This does the folllowing:

• Prevent transaction replay on different chains.
• Signaling the network that a user and their stake is on a particular fork.

This prevents validators from acting maliciously on other chains.

Eliminating Transaction Fees

EOS works on an ownership model whereby users own and are entitled to use resources proportional to their stake, rather than having to pay for every transaction. So, in essence, if you hold N tokens of EOS then you are entitled to N*k transactions. This, in essence, eliminates transaction fees.

The costs of running and hosting applications on Ethereum can be high for a developer who wants to test their application on the blockchain. The gas price involved in the early stages of development can be enough to turn off new developers.

The fundamental difference between the way Ethereum and EOS operate is that while Ethereum rents out their computational power to the developers, EOS gives ownership of their resources. So, in essence, if you own 1/1000th of the stake in EOS then you will have ownership of 1/1000th of the total computational power and resources in EOS.

As ico-reviews states in their article:

“EOS’s ownership model provides DAPP developers with predictable hosting costs, requiring them only to maintain a certain percentage or level of stake, and makes it possible to create freemium applications. Furthermore, since EOS token holders will be able to rent / delegate their their share of resources to other developers, the ownership model ties the value of EOS tokens to the supply and demand of bandwidth and storage.”