What is EOS?
If you’ve been following the cryptocurrency news lately, you’ve likely come across EOS ‒ and in particular its ‒ shall we say ‒ ‘controversial’ ICO. But what actually is it? EOS is a new blockchain that enables decentralised applications to be horizontally scaled. The platform has a number of potential applications, including accounting, authentication, scheduling of applications, asynchronous communication and databases. The EOS token is the platform’s dedicated cryptocurrency, which operates on the Ethereum network. Make use of the platform, get rewarded with tokens: for anyone with even a passing knowledge of blockchain-based cryptocurrency, this should all be familiar territory.
Like many blockchain architectures, EOS aims to get around bitcoin’s issues with high transactional fees, slow transaction speeds and limited computational capacity. This is achieved by way of a decentralised consensus algorithm designed to meet the requirements of applications on the Delegated Proof of Stake (DPOS) blockchain. This allows for free, fast and frequent additions to the blockchain. Tokens are rewarded for adding blocks and can be widely traded on a number of popular exchanges.
So far, so unremarkable at this point. This is a solid blockchain based on the reputable Ether network, taking advantage of the security and verifiability of its well-established ledger. That being the case: why has EOS managed to get so many traders all riled up? Is the anger justified? And getting past all the righteous fury, is EOS a worthy investment opportunity, or just another Ether-based waste of time? Let’s have a closer look and give this coin a fair crack of the whip.
How Can I Mine EOS?
Blocks are added to the EOS chain by standard mining. The core EOS software can produce blocks every three seconds, with exactly one producer able to authorise a block at a given time. If no block is made in a set window, the block for that slot is skipped over, and when one or more are skipped, the gap opens to six or more seconds.
The EOS.IO software creates blocks in rounds of 21, with 21 unique block producers selected at the beginning of each round. 20 are chosen automatically after every round by approval, with the last chosen proportional to the number of votes received compared to other producers. These producers are then shuffled to ensure balanced connectivity between miners. If a producer happens to miss a block or fails to produce one within 24 hours, they will be removed from consideration for the top 20 unless they inform other users on the blockchain that they intend to start mining again.
This is a democratic mining system that gently incentivises users to remain active and keep contributing to the blockchain, with EOS tokens rewarded to the top 20 producers for every new block added to the blockchain.
Value of EOS
The ICO of EOS raised $185m USD, which surpassed the capital raised by the Bancor network during its ICO, despite the latter receiving the backing of Tim Draper ‒ this has given EOS the most successful ICO to date. This token got off to a flying start.
However, the market supply of EOS tokens is pretty limited ‒ and deliberately so (more on that later). The platform is really focusing on getting mass adoption by developers and big companies rather than hobbyists, as made clear in the whitepaper. More specifically, EOS is trying to cultivate a market for DAPP hosting platforms. The immediate problem with this is that it puts EOS into direct competition with Ethereum, which is plugging a lot of R&D resources into scalability solutions.
The long and short of it is that, if Ether beats EOS to the punch, it will be rendered worthless. At the moment, that has yet to transpire. While the value of the coin has dropped off steadily to around the $0.50 USD mark since the ICO, it appears to be levelling out. The market cap also stands at a very impressive $225,740,556 USD. However, one can feel the market baiting its breath to see whether adoption can outstrip Ethereum’s race to sort out its scalability: only time will tell.
How to Trade EOS Online - Step-by-Step Guide
If you missed the infamous ICO, never fear! You can trade for EOS tokens on a number of popular exchanges, including Kraken. Follow the instructions below for a straightforward guide to buying this cryptocurrency.
- Head over to Kraken.com and set up an account if you haven’t already got one.
- Click the “Funding” tab from the top bar, where you will receive a command line that must be copy-pasted into your Ethereum console before you can transfer some Ether for trading.
- If you want to make a quick trade, hit the “New Order” button. You can buy or sell by selecting EOS from a dropdown menu on the right of the field and selecting a price at which you are happy to sell up. Kraken will then take care of this automatically when your asking price is reached.
- If you’re a more experienced traders, you can select “New Charting and Trading Tools” that will offer a more detailed chart to inform your trades.
Why the Controversy During the ICO?
Much like the Bancor ICO ‒ which was both hyped, and highly controversial ‒ EOS’s practices during its initial distribution raised more than a few eyebrows. In short, EOS has been accused of contributing to an ICO bubble, inflated by traders seeking to make money off blockchain projects that lack viable products, codes or even prototypes.
In order to head off the accusation that initial investors were essentially throwing their money at hotly-anticipated thin air, EOS preceded its ICO with a document entitled Token Purchase Agreement, which offered advice to potential buyers and investors. The document stressed that investors based in the US cannot invest in EOS and that the EOS token (get this) “has no purpose” (we know). We quote:
“As mentioned above, the EOS Tokens do not have any rights, uses, purpose, attributes, functionalities or features, expressed or implied. Although EOS Tokens may be tradable, they are not an investment, currency, security, commodity, a swap on a currency, security, or commodity or any kind of financial instrument.”
In effect, the tokens were declared not to be cryptocurrency at all, but simply a means to fuel applications on the EOS network. The fact that a whole bunch of investors snapped up the tokens anyway was taken as evidence that they were doing so solely for profit, with no intention of doing anything with the tokens other than trade them.
Now, there are a few things to consider here. Firstly, there is nothing inherently wrong with picking up a token (any token) with the intention of edging the market if (and it’s a big if) there is still a viable community of users on a blockchain who intend to use the token for its express purpose. The value of the token depends on the applications developed for the blockchain, so it is to everyone’s benefit if at least some of the tokens distributed during the ICO are put to use beyond speculation.
However, the controversy did not end there. At the beginning of the sale, 20 per cent of the total 800m EOS tokens were made available for a five-day-window, with the remaining 80 per cent being evenly split across 360 one-day windows. Depending on how much money people put in per day, the more coin they receive ‒ but the precise amount is a mystery. So in effect, investors are expected to spend the next year plugging fiat into a black hole, hoping that it spits out tokens whose own dev team have essentially disavowed as worthless in order to head off a press controversy.
As you can imagine, a lot of people were upset (not that it stopped them from picking up EOS tokens…)
Will EOS Ever Fork?
All things being equal, the DPOS blockchain should not experience forks, because rather than a competitive mining process, users cooperate to create blocks. If there ever was a fork (voted for by the block producers), consensus switches automatically to the longest chain, so there is no wrangling over the ‘true’ EOS blockchain (is the manner of Ethereum versus Ether Classic).
This system works rather well, as the rate at which blocks are added to the chain is correlated exactly to the percentage of producers sharing the same consensus. This means that a fork with more producers on it will lengthen faster than one with fewer producers. Also, no block producers will be producing blocks on two forks at once: if anyone is caught doing this, they are likely to be voted out, and cryptographic evidence of any double-production can be utilised to remove such users automatically.
What Is Special About EOS?
The main purported advantage of EOS is its potential for scalability, which matters greatly in the case of mass usage of decentralised apps: we have seen the Ether network become highly congested after ICOs. The DPOS purports to be more scalable than POW, because token holders delegate the tasks of events in the ecosystem rather than having to reach total consensus with one another.
This continuous approval voting system gives nominated block producers the capacity to freeze accounts, propose forks and update smart contracts. The platform is entirely free-to-us: all you need is EOS tokens in your balance. Thanks to sequential performance, exchanges can use EOS without any issues, while parallel performance permits the platform to split up the workload across a network of machines.
By utilising vertical and horizontal scaling technologies, EOS should be able to scale millions of transactions every second: which is a pretty big deal. If EOS lives up to its promise, this could be a formidable competitor to other blockchains on the Ether network.
Future of EOS Trading
Let’s start with the good stuff. EOS comes from good stock: having founders of the BitShares and Steemit platforms onside is a massive draw. Also, this blockchain aims to fulfil a huge market niche for scalable blockchains to fill the void in the cryptocurrency market left by bitcoin ceasing to be any fun whatsoever ‒ thanks to absurdly low transactions speeds and prohibitive cost.
However, the value of the EOS blockchain depends heavily on whether other coins (particularly those on the Ether network) are able to implement scalability solutions of their own. If so, the niche for such a product will pretty much instantly vanish. Also, the fact that this blockchain is targeting developers is going to pose a problem, given the enthusiasm around Ethereum at the moment.
And of course, the fallout over the ICO (that gave Bancor a run for its money in the race for the dubious honour of ‘most dysfunctional’ initial offering) has already hampered the value of this coin right out of the gate. If we’re being honest, there are a lot of things working against this platform ‒ but if it comes through on the issue of scalability before more established blockchains can get their act together, then it’s in with a fighting chance. And at 50 cents a coin, this is a low-risk investment that could well be worth a punt.
How to Buy EOS with Credit Card
You can’t buy this cryptocurrency outright, but you can buy Ether on platforms like CEX.IO on credit cards or debit cards, which can in turn be traded for EOS tokens at an exchange. Simply select your chosen brand of card as your preferred payment method, and plug in your details. Any deposits made using this method will incur a small fee (3.5 per cent at CEX.IO).
How to Buy EOS with PayPal
If you are a US citizen, and have an account at Coinbase, you will be able to move cash from your PayPal account straight to your balance on the platform. All you have to do is manually link PayPal to your Coinbase account, and select it as a preferred payment method. Coinbase has promised to extend this feature to other territories in the near future.
Cryptocurrency Guide list
Enjoyed this Bitcoin guide? Then see our other cryptocurrency guides:
- How to buy and trade Bancor
- How to buy and trade Bitcoin
- How to buy and trade Bitcoin Cash
- How to buy and trade Dash
- How to buy and trade Dogecoin
- How to buy and trade EOS
- How to buy and trade Ethereum
- How to buy and trade Ethereum Classic
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- How to buy and trade Golem
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- How to buy and trade Steem
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- How to buy and trade Waves
- How to buy and trade Wings
- How to buy and trade Zcash