Understanding EOS & EOSIO – Forbes Advisor

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EOS and EOSIO are two related blockchain platforms that support decentralized applications, also known as dApps.

Bitcoin, which was created as a store of value or means of exchange, EOS and EOSIO are part of the broader Web3 project to move the features and functions of computing, and even the internet itself, onto blockchain networks.

EOS, which is part of the EOSIO ecosystem, is the name of a blockchain platform and its native token. Meanwhile, EOSIO is a platform that provides the foundation for EOS and other blockchain networks.

What Is EOSIO?

EOSIO is an open-source platform that lets third-party developers create and run decentralized applications, or dApps. To simplify only a little, the EOSIO platform emulates the functions of a computer, and uses familiar computing concepts in its operations.

  • NET bandwidth. Network bandwidth is a measure of transactions (in bytes) that can be run on the EOSIO platform.
  • CPU bandwidth. This is a measure of computer processing power available on EOSIO, in microseconds.
  • RAM. Memory that’s available on EOSIO where a blockchain can store data.

The dApps that run on EOSIO are also referred to as “programmable smart contracts.” Think of these like computer programs that run on the platform when certain conditions are met. They execute an agreement or automate a workflow, like paying someone when a service is rendered or a product is delivered to a given location.

EOSIO provides a broad set of tools and protocols that ensure security, custody and permissions for other blockchain networks. It also helps accommodate evolving regulatory guidance from authorities.

What Is EOS?

EOS is one of several blockchains that run on the EOSIO platform. But more importantly, EOS provides the cryptocurrency tokens used to purchase the computing resources needed to run dApps on the EOSIO platform.

EOSIO states that it is free for third-party developers and blockchains to handle transactions on its platform, and that it offers free developer tools. That is true, however EOS is needed to purchase amounts of the computing resources outlined above to run dApps.

In that sense, EOS tokens are used to power the EOSIO network. The system uses a delegated proof of stake approach, and staking EOS gives users ownership of these resources proportional to the amount of EOS locked up in smart contracts.

How Does EOS Work?

EOS describes its consensus mechanism as delegated proof of stake. To secure the network, only EOS token holders on a blockchain that uses EOSIO’s software can vote for “block producers”—those responsible for validating transactions and creating new blocks on the blockchain.

Achieving consensus on a blockchain can be slow and cause bottlenecks. Proof of work, the consensus mechanism for Bitcoin, is known for being inefficient and requires tremendous processing power, which uses a vast amount of electricity. With delegated proof of stake, transactions are processed faster while using less energy.

EOS Block Production Time

Block producers are rewarded with EOS tokens for each block they add to a blockchain. Instead of miners, EOS relies on people and voting to secure the blockchain. This process happens quickly—EOSIO produces a block every half-second. By contrast, blocks are produced every 15 seconds and 10 minutes on Ethereum and Bitcoin, respectively.

That said, there can be bottlenecks with EOS. Many users that stake their EOS don’t take action, and therefore, a large part of the network’s resources remain unused. This can cause congestion on the EOSIO platform.

EOS Publishing and Voting

Block producers can publish the EOS rewards they expect to receive. The number of EOS tokens awarded for blocks produced is based on the median value of expected pay published by all the block producers. Token holders have the authority to vote for the amount block producers are paid.

But there is potential for the system to be used improperly. Some say the voting system hasn’t worked the way it was designed, with top block producers being accused of conspiring and voting with each other—keeping other blockchain producers out of the loop.

EOS Advantages

Before EOSIO arrived on the scene, Ethereum was the platform of choice for dApp developers. EOS aims to address the three main challenges faced by its predecessor: speed, scalability and flexibility. That’s why it’s been dubbed the “Ethereum killer.”

  • Speed. Whereas Bitcoin blockchain can process around four TPS, and Ethereum’s at roughly 15 TPS, the EOS network can process up to 10,000 TPS, according to Edgar Fernández, co-founder of finance and enterprise at EOS Costa Rica, which develops enterprise blockchain solutions using EOSIO . That means developers should be able to push dApps out faster, and front-end app users don’t have to wait hours, or minutes, to know if a message was sent or payment was processed.
  • Scalability. EOS provides developers a “web interface toolkit” for app development. This enables developers to easily create dApps for many users on a secure, decentralized platform. More than 400 applications have been built on the EOSIO-powered blockchains EOS and Telos.
  • Flexibility. Developers can use resources based on their stake in the EOS voting structure.

EOS Disadvantages

  • Competition. Besides Ethereum, the EOSIO/EOS ecosystem has several competitors, including Ontology (ONT), Cardano (ADA), and Lisk (LSK). More are born every day. While there is ample room in the marketplace for more than one open-source blockchain computing platform, there are no guarantees EOS will emerge victoriously.
  • Centralization. The delegated proof of stake model depends on stakeholders’ voting power, and voting power is determined by the number of tokens held by each stakeholder. Low voter turnout and a disproportionate distribution of tokens among stakeholders could create further centralization. In other words, having so few stakeholders making decisions could potentially compromise EOS’ integrity as a decentralized platform and cryptocurrency.

How to Buy EOS

To purchase EOS crypto, you’ll need to set up a wallet and an account on a cryptocurrency exchange. There are several options for crypto wallets. Just make sure the one you choose holds EOS tokens.

Your primary concern should be security when selecting a wallet for your EOS crypto.

Unlike physical wallets, crypto wallets don’t hold the coins themselves, but your tokens can be lost or stolen if your computer fails or your private access keys fall into the wrong hands. EOS crypto wallet providers include Ledger and Coinbase.

You’ll need to create an account on a reputable cryptocurrency exchange if you don’t already have one. Coinbase, Kraken and Binance are among the most popular. Depending on the platform, you’ll likely be required to purchase EOS using another cryptocurrency, such as Bitcoin or Ethereum. First, you’ll need to convert your fiat currency (ie, US dollars or euros to the cryptocurrency of your choice), then use that to purchase EOS.

If you want to use your EOS crypto to develop dApps, you’ll need to create an account on the EOSIO platform.

Should You Buy EOS?

The EOSIO/EOS platform is gaining substantive support from developers for various enterprise use cases, from logistics and tracking to social impact projects, EOS Costa Rica’s Fernández notes.

EOS’ wonky governance structure and centralization concerns may dampen enthusiasm, though, especially if one of its competitors creates a platform that eliminates those obstacles.

If EOS is on your radar, keep in mind that cryptocurrencies are volatile in general, and you could lose money. Do your research and thoroughly understand the risks before investing.

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